Dark Side of Food: Tipping
The U.S. system of tipping is vastly different from how other countries operate and has been a part of our dining experience in the United States since the late-1800s. It has been a cultural tradition since then, but is it becoming a moral problem in our industry? In this short post, we will just be discussing the traditional system of tipping, what we know as diners in the restaurant industry. While I am by no means an expert on this topic, I have taken a lot of classes in the Hotel School around food and beverage, and the topic has interested me since I first took Foodservice Operations my first year with Professor Adalja.*
Nearly 650,000 restaurants in the United States use a tipping model where they pay their employees a lower hourly rate and rely on customers’ tips to bring employees’ pay up to the required minimum wage. This can cause problems because as restaurants compete for tips, they are often then forced to lower menu prices as a competitive lever, thus reducing revenue according to a Forbes survey.
Beyond just impacting the profitability of the operation is that this system complicates the hierarchy in the restaurant because in some operations, the front-of-house staff (servers and sometimes hosts) get paid tips yet the back-of-house (line cooks, dish-machine operators) don’t. There is disparity within FOH staff positions but it is not generally as severe as the difference tipping causes between FOH and BOH. Some states like Massachusetts don’t allow BOH staff to be tipped while in other states it is even illegal to do so. Some restaurants have found a way around this though, and have applied an automatic “admin fee” which acts like a gratuity in order to compensate their employees. The system is nuanced and delineated, and there is a wide variety in pay across sectors of the restaurant industry, but scheduling also plays a large role in this disparity: working a Friday or Saturday night shift is likely going to bring in more tips than a Monday lunch shift.
Normally, restaurants would have to pay higher wages to kitchen staff to account for wage increases. The issue is that restaurants run on very, very low profit margins (somewhere in the 5% range), so they would need to raise prices to maintain staff. Because of tipping, however, every increase in price would cost the customers 15-20% more than a restaurant may intend to charge, and any excess would go straight to servers as tips.
Some may argue this issue is even a legal and ethical concern because of the mass discrimination it creates. For the same performance on the job, typically female servers get tipped more than men, younger servers get tipped more than older servers, and white servers get tipped more than any other ethnicity. This is further perpetuated by the “customer is always right” mentality which leads to an imbalance in the treatment of employees by guests. In any other scenario, paying a young white female employee more than any other doing the same job would be grounds for Title VII discrimination lawsuits. Research conducted by The Hotel School’s own Professor Lynn found that nonwhite servers make less than white servers for equal work. He says that this data qualifies tipping as a discriminatory act and calls the legality of tipping into question. In a restaurant, it’s routine because the restaurants allow the customers to decide how much each employee makes with no standardization or regulation to prevent discrimination, but this tipping model can have implication on an employees sense of belonging, leading to high rates of turnover and that may even cost the restaurant more to re-hire.
Is there a positive spin we can be taking to how we tip in this COVID world? Many restaurateurs depend on tipping now more than ever as the industry struggles to maintain business. Tipping in this time is seen as a favour to many businesses that have suffered during the pandemic and help keep their employees employed. While it is an individual choice, sometimes considering the broader scope your tip can have may change this decision. Companies who publicly announce their shared tips have seen an increase in the number of guests who tip up to 20%. Especially now, in a world where dine-in is either not as common or not offered, tipping for takeout has become a new phenomenon that has helped guests give back to the businesses that put themselves at risk every day.
But how have restaurants moved away from this model and adopted a more sustainable method? Some restaurants have implemented an equal split in tips where every server and back-of-house employee receives the exact same amount in tips. This means you report this as revenue, meaning it is taxed on, however, this creates equity amongst employees, removes this hierarchy in the restaurant, and creates a dynamic that moves away from a discriminatory system. Other operations have no-tip models through the method of “Hospitality Included” created by restaurateur and founder of Union Square Hospitality Group Danny Meyer, but they may have an automatic gratuity of around 18% to each check. This allows for a more equitable approach to tipping employees and moves away from pinning them against each other or feeling like they need to fight to make enough money in tips.
Danny Meyer used HI to close the gap between tipped FOH workers and non-tipped BOH workers, yet this method was eventually abolished because of the negative impacts it was having on stakeholders. If you would like to learn more about Hospitality Included, check out this letter directly from Danny Meyer. I believe this raises an interesting question in our industry: if this was proposed once, it likely means there is an issue with the current popular tipping model, so should we find a way to revisit this and find a new solution?
So where do you stand on this debate of tipping? As future leaders in the hospitality industry, is this an issue of importance to us? What can we do to change this U.S. system of tipping that removes the negative stigma?
Yours in service,
Elizabeth and The 180 Team
*If you are interested in learning more about this topic, the Hotel School has faculty who are recognized worldwide for their research in this topic and are veterans of the industry. You can find out more about their research and perspectives on this topic here.
References
Meyer, Zlati. “The Ugly Truth about Tipping Waitstaff during COVID-19.” Fast Company, Fast Company, 23 Oct. 2020, www.fastcompany.com/90564662/the-ugly-truth-about-tipping-waitstaff-during-covid-19
SinglePlatform. “To Tip or Not to Tip? For Restaurants, the Debate Is Just Beginning.” SinglePlatform, 22 Dec. 2018, www.singleplatform.com/blog/restaurant-industry/trends/to-tip-or-not-to-tip-restaurants-debate-just-beginning/
Widdison, Geoffrey. “Why America's Tipping Culture Is Actually Bad For Restaurants.” Forbes, Forbes Magazine, 15 Aug. 2017, www.forbes.com/sites/quora/2017/08/15/why-americas-tipping-culture-is-actually-bad-for-restaurants/?sh=769b7dfd13d1