Ban Tipping, Improve Service?

Jay Porter banned tipping in his high end restaurant and found that customer service and profits improved.

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Jay Porter banned tipping in his high end restaurant and found that customer service and profits improved.

In the second year of operations at The Linkery, he instituted an 18 percent service fee and refused to accept further payment.

Our service improved, our revenue went up, and both our business and our employees made more money. Here’s why:

  • Researchers have found (pdf) that customers don’t actually vary their tips much according to service. Instead they tip mostly the same every time, according to their personal habits.
  • Tipped servers, in turn, learn that service quality isn’t particularly important to their revenue. Instead they are rewarded for maximizing the number of guests they serve, even though that degrades service quality.
  • Furthermore, servers in tipping environments learn to profile guests (pdf), and attend mainly to those who fit the stereotypes of good tippers. This may increase the server’s earnings, while creating negative experiences for the many restaurant customers who are women, ethnic minorities, elderly or from foreign countries.
  • On the occasions when a server is punished for poor service by a customer withholding a standard tip, the server can keep that information to himself. While the customer thinks she is sending a message, that message never makes it to a manager, and the problem is never addressed.

You can see that tipping promotes and facilitates bad service. It gives servers the choice between doing their best work and making the most money. While most servers choose to do their best work, making them choose one or the other is bad business.

By removing tipping from the Linkery, we aligned ourselves with every other business model in America. Servers and management could work together toward one goal: giving all of our guests the best possible experience. When we did it well, we all made more money.
I’m not sure if this would work as well at different price points or in different communities but the logic is unassailable. I tend to tip 20 to 25 percent of the bill, going above that only for extraordinarily good service or on small checks. I can’t remember the last time I tipped below 20 percent for bad service. When waitstaff are slow or inattentive, which happens occasionally, I tend to chalk it up either to bad management or assume the poor bastard is just incompetent but still needs to get paid. In the case of outright maltreatment, I’d raise the issue with management; but that hasn’t happened in years.
FILED UNDER: Economics and Business, Quick Takes
James Joyner
About James Joyner
James Joyner is a Security Studies professor at Marine Corps University's Command and Staff College and a nonresident senior fellow at the Scowcroft Center for Strategy and Security at the Atlantic Council. He's a former Army officer and Desert Storm vet. Views expressed here are his own. Follow James on Twitter @DrJJoyner.

Comments

  1. Anderson says:

    Instead of a “service fee,” just pay your staff decently and factor that into your prices. Good lord.

  2. michael reynolds says:

    The part that stands out as wrong is this:

    the server can keep that information to himself.

    Not really true given that 90% of tips are on credit cards processed by the management.

    I worked a place that had this deal. Automatic tips which we (the waiters) split evenly, with payouts to bar and busboys. Service was good.

    But this isn’t really a fix for anything. It just removes the uncertainty over a tip. In either system if you want your restaurant to give service you have a smart, hardworking and ruthless headwaiter, maitre d’ or assistant manager out there working the floor. There’s no shortcut. Someone actually has to manage, which means in many cases that the manager needs to get his fat ass off his barstool and work the floor.

    Also helpful if you hire people who are good at their jobs, as opposed to common industry practice of hiring A) Men or women who might sleep with you, or, B) Men or women who just happen to wander in when you were desperately short-handed because it turns out that hot girl you hired last week kind of hates you.

  3. Rob in CT says:

    @michael reynolds:

    LOL, great post Michael.

    I wouldn’t mind at all if tips went the way of the Dodo, but I doubt that would improve service.

  4. Mikey says:

    I lived in Germany for nearly seven years and have visited several times since then. There, the gratuity is included in the bill, and the only custom of “tipping” involves rounding the check up to the next Euro. In my experience there, service was just as prompt (if not more so) than it is here.

    The major difference is cultural, and something I wish we’d also adopt here: the server doesn’t come to your table unless you call him/her over or they’re bringing you something. It’s simply glorious to go through an entire meal without being compelled to tell your server how your food tastes while it’s still in your mouth.

    But as far as service goes, not having to add on the tip after the check shows up makes no difference in the quality of the service. It’s a silly and outdated custom and we should dump it.

  5. Anderson says:

    It’s simply glorious to go through an entire meal without being compelled to tell your server how your food tastes while it’s still in your mouth.

    That works if the server is gliding around quietly, monitoring the tables. Not so much if you’re looking for him and he’s nowhere to be seen.

  6. Mikey says:

    @Anderson:

    Not so much if you’re looking for him and he’s nowhere to be seen.

    That happens to me a lot more here than it ever did in Germany, although the fact German restaurants are generally smaller may have something to do with it.

  7. Franklin says:

    My tipping pattern is very similar to James’ although it’s slightly less generous. But I still have a roughly 5% difference depending on service quality and assumed most people did, so I’m surprised that researchers found the opposite.

    I guess I’m okay with tipping going away as long as I’m not sitting there for 10 minutes looking for the server. That drives me nuts.

  8. al-Ameda says:

    Every so often we get these articles about tipping, and how so many people seem to be offended that they are somehow coerced into tipping – not only at restaurants, but at coffee places, hairdressers … you name it.

    I always tip well, my only exceptions are when: (1) the staff is rude, and (2) the staff is rude. Most restaurants do not pay well and frankly tips make it happen for many of those people. I do not begrudge any of those staff their tips. And what is the result of my tipping 18% to 20%? I support generally young people who are usually there for a short time before moving on to other things – and that’s not a bad thing at all.

    Really, if you don’t like tipping, don’t go out, stay at home, you’ll be happier, and you won’t make other people unhappy.

  9. Liberal Capitalist says:

    Hey… Wait a minute !!!!!!!

    This whole tipping thing became entrenched as a way for the business owner to avoid having to pay their help.

    How about they pay their help, raise that minimum wage up, bump that up to pay a living wage and be done with all these shenanigans!

  10. James Joyner says:

    @al-Ameda: While I agree, at least vis-a-vis restaurant waitstaff, I’m with @Liberal Capitalist more generally. With restaurants, it’s really no big deal in that I’m used to the practice and it’s not particularly hard in the credit card age. But it’s a giant pain in the ass with taxis, hotel bellman, valet parkers, and others who expect tips but with whom there’s no universally understood amount and/or requires me to have an unlimited supply of small bills on hand. I don’t tip the guy who sells me shoes at Nordstrom’s and he gives me great service. It really makes no sense that I’m expected to tip the guy driving the filthy cab who I’ll never see again and who spends most of the ride jabbering in a foreign language on his cell phone while veering in and out of traffic. I do it, because I’m vaguely aware it’s expected. But it’s bizarre.

  11. michael reynolds says:

    @Liberal Capitalist:

    The wait staff at a good restaurant would spit on your minimum wage. What do you think waiters at top-flight restaurants earn? A waiter at some place like Alinea in Chicago or The Inn at Little Washington makes six figures. And they deserve it. Even waiters at family restaurants would laugh at minimum wage. When I was waiting tables in the 70’s and 80’s I was earning $75 a night at tourist restaurants, the equivalent today of $212, if handy internet inflation calculators are to be trusted.

  12. michael reynolds says:

    Oh, and those were tax-free tips, by the way, since every restaurant staff entered a conspiracy to wildly understate taxable tips. Reagan, the great tax-cutter, jacked the tax rates up on waiters by assuming a certain percentage in tips. Waiters still get hosed for that, so if you don’t tip them, they still get taxed as though you had.

  13. al-Ameda says:

    @James Joyner:

    I don’t tip the guy who sells me shoes at Nordstrom’s and he gives me great service.

    I always tip the baristas at Peets and Starbucks, in fact, almost anything having to do with food service, I even leave a tip when I pick up a Papa Murphy’s pizza, or when I get some take out from a Food Truck in the Civic Center plaza. I tip the person who cuts my hair, taxis and airport shuttles? Sure why not – it’s always been the case. The staff at Macy’s or Nordstrom? Never, but then again it’s never been the case that sales people in department stores have been tipped, so that doesn’t bother me at all. Is it (tipping) inconsistently applied? Of course!

    Finally, it’s good for karma.

  14. anjin-san says:

    @ James Joyner

    there’s no universally understood amount

    If someone takes care of you, be generous. It’s always a classy move.

  15. anjin-san says:

    Recently, there was some chatter in here about not having to tip on take out. The last bar gig I had, If I ordered food, to go or not, it was under my name, and I got taxed on it. So if someone stiffed me on a takeout, I ended up paying for the privilege of waiting on them.

    There is also the matter that time spent on a takeout was time I did not have to spend taking care of my own customers. I will throw out a few more of my dad’s nuggets of wisdom for everyday life:

    If you can’t afford to leave a decent tip, you can’t afford to eat out.

    If you can’t afford to pick up the entire check for any group you happen to be with, you are in over your head.

    If you can afford to be generous, be generous. No one likes a tightwad. Likewise, if someone else wants to be generous and treat you, and they can afford it, accept graciously.

  16. anjin-san says:

    I used to work for a guy who always had the best parking spot whenever there was valet parking. It never failed, his car was always in the catbird seat. Always had the best table in the house.

    I finally asked him what his secret was – “Tip going in, and tip well”

    I never saw anyone get service like he did. It makes sense, Frank Sinatra, a legendary tipper, was his idol.

  17. Lib Cap says:

    @michael reynolds:

    The wait staff at a good restaurant would spit on your minimum wage

    But that’s not what we are really addressing here… we are talking about the masses.

    (… and I did say a living wage above minimum.)

    So, yes, I would say that many of us here were smart enough to figure out how the system works, and get into areas where less work equals more money.

    But not everyone (for whatever reason) makes that leap.

    Don’t get me wrong: I’m not Mr. Pink saying that I don’t tip because society says I have to… What I am saying is that the premise of tipping is structured to benefit the owners, not the employees.

    I’m saying that the gap for people to leap is much wider (income inequality far greater) than it was back in the day.

    Your $75.00 then… or $212 now still does not add up to enough money to have a nice life. Closer to subsistence. The “unpoor” class, maybe.

    (Which likely explains why you are not doing it today.)

    And today: fast food workers are going on strike even without union organization, and Visa is cooking up propaganda trying to show the working poor on how to make ends meet (when they mathematically can’t).

    So, I’m saying: Don’t find ways to institutionalize a bad process… fix the problem.

  18. bill says:

    nice, we’re turning into freakin’ europe. don’t be fooled by this bs, America rules, that’s why we’re all still here.

  19. bill says:

    @anjin-san: your place should have a “take out” line for that, it wouldn’t show as your “revenue” at the end of the day.

  20. Andre Kenji says:

    @Mikey:

    The major difference is cultural, and something I wish we’d also adopt here: the server doesn’t come to your table unless you call him/her over or they’re bringing you something. It’s simply glorious to go through an entire meal without being compelled to tell your server how your food tastes while it’s still in your mouth.

    Here in Brazil, in the churrascarias, there is a kinda of a buttom in the tables. If you want the waiters to bring you meat, you put a green button. If you don´t want more meat you you use the red button.

  21. Franklin says:

    @bill: Did I miss the news about Europe disappearing?

  22. J Bo says:

    The example of The Linkery is actually counterproductive to the argument that ending tipping improves service and profits. Jay Porter’s The Linkery had a reputation in San Diego for below average service (see its yelp review: http://www.yelp.com/biz/the-linkery-san-diego). To top it off, it closed suddenly in July (see its website http://thelinkery.com/blog/).

  23. anjin-san says:

    @ bill

    A lot of restaurants stick hostesses and bartenders with doing take out orders, they do not want the costs associated with a dedicated staffer for takeout, and they, for the most part, do not give a flaming crap if their employees eat it on takeout orders.

    It’s easy to talk about what a business “should” do, making it happen in the real world is a different thing. A lot of restaurants systematically rip off their own employees, they “should” stop doing that.

  24. anjin-san says:

    It’s worth noting that Australia has a minimum wage that is roughly $14.75 US, and they have low unemployment and the service industry has not had a meltdown.

  25. michael reynolds says:

    @anjin-san:
    Preach it brother.

  26. michael reynolds says:

    @Lib Cap:
    I agree that is in effect a way for employers to pass along labor costs to customers as a sort of hidden tax. I can’t justify the system. I was just in Japan where there is zero tipping and excellent service. By contrast no one in the UK can wait a table though they do take tips. And France pays a living wage, eschews most tips and, um, well … They’re French.

  27. Davebo says:

    When waitstaff are slow or inattentive, which happens occasionally, I tend to chalk it up either to bad management or assume the poor bastard is just incompetent but still needs to get paid.

    I’d say that you’re part of the problem James. Being a good waiter isn’t an easy job and some folks just aren’t up to it. But as Michael pointed out, those that are good can earn a very good living and not just at the higher end eateries.

    By encouraging failure under the notion that they “still need to get paid” you’re just encouraging incompetence, apathy or both.

    I too tip at a minimum %20 for good service and usually more. But when some apathetic wait staff member ignores me making me wait 30 minutes to give a drink order, or if I fill a six top for a business dinner and an incompetent one misses the sixth meal I have no problem tipping $2.00 on a $350.00 tab.

    I’m sending a message. Find a new hobby. Is it mean? Perhaps but it could also be doing the person a great favor.

    I tip well mostly because I waited tables in my younger days. I appreciate good service, but I’m not about to reward bad service. It’s not for everyone.

  28. Andre Kenji says:

    I confess that I find bizarre a country where you MUST tip, because if you don´t tip the server is not going to bring enough income home to eat.

  29. Ebenezer_Arvigenius says:

    I confess that I find bizarre a country where you MUST tip, because if you don´t tip the server is not going to bring enough income home to eat.

    Agreed. Just like with outsourced toilet service I resent the fact that the owner effectively nickles and dimes me by guilt-shaming me into supplanting his inadequate staff pay.

  30. al-Ameda says:

    @bill:

    nice, we’re turning into freakin’ europe. don’t be fooled by this bs, America rules, that’s why we’re all still here.

    Bill, I’ve never tipped for my frites when I’ve been in Europe – I don’t see that as a deal breaker.

  31. Mikey says:

    @Andre Kenji:

    Here in Brazil, in the churrascarias, there is a kinda of a buttom in the tables. If you want the waiters to bring you meat, you put a green button. If you don´t want more meat you you use the red button.

    We have those here, too–there are several chains of Brazilian-style meat restaurants, but the most prominent seems to be a place called Fogo de Chao. You get a round card that’s red on one side and green on the other.

  32. Tyrell says:

    Profiling is common in restaurants. I get that. What I do not go for is when you have the rule that 8 or more people in your group and the tip is automatically added to the bill. Invariably, we get worse service with that. If you have a lot of little kids, you will probably get worse service. If you do not order drinks or appetizers, you are pegged as cheap and most likely won’t even get a water refill. Some people are recommending 20% tips now as standard minimum. That’s okay, I will head to Cook Out and 5 Guys before I pay that.
    I once took a group of 6th-7th. graders to a restaurant (bad idea you are thinking). This was a “half” sit down, since you order your food and pick up your drink at a counter and then someone brings your food to you. Small tips are given by some people, but a lot do not leave anything. The kids not only cleaned off their tables, but many left tips!!

  33. Buffalo Rude says:

    @Davebo:

    …I have no problem tipping $2.00 on a $350.00 tab.

    Wow. Even if the service was super crappy, I would have no problem watching the waitstaff curb-stomp you after something like that. Hell, I’d tip them for the privilege.

  34. Liberal Capitalist says:

    @Andre Kenji:

    Here in Brazil…

    Oi Andre! Tudo Bom?

    Eu era um carioca por dois e meio anos… foi maravilhoso !!!

    Em meu coração, eu me tornei um brasileiro e eu não posso esperar para voltar.

    Tchau!

  35. Andre Kenji says:

    @Liberal Capitalist: Cara, eu estou em Itatiba, não muito distante de São Paulo. Se você quiser um guia para a cidade mais maluca do Hemisfério Sul, estou a disposição. Mas pensando bem, faz tempo que eu não vou para o Rio, estou precisando voltar.

    Seu português parece muito bom, e isso é dificil para quem fala inglês como uma língua nativa, em especial por causa dos tempos dos verbos e dos gêneros das palavras.

  36. Liberal Capitalist says:

    @Andre Kenji:

    Com a linguagem, eu tenho sorte … Minha família é linguagem Lituânia, então eu tenho um fundo de gramática.

    Brasil é enorme, mas eu acho que você sempre vai me encontrar em uma praia :). Agora, eu estou nas montanhas do Colorado. Se você deseja snowboard, venha me ver!

    Diga-me, quando a economia entra em colapso novamente … para que eu possa dar ao luxo de comprar uma casa lá !

    Eu já tenho o meu cartão CPF!

    LOL 🙂

  37. Andre Kenji says:

    @Liberal Capitalist: Acho dificil a economia entrar em colapso novamente, mas eu acho que a moeda brasileira vai se desvalorizar um pouco, e isso deve ajudar estrangeiros.

    Se você fugir das grandes cidades acho que dá para encontrar casas mais em conta. Se você gosta do Colorado uma dica que pode interessar é a região sul do Estado de São Paulo. É a região mais despovoado do estado e é muito bonita, e tem um clima mais ameno. Mas também é a região mais pobre.

    Dá para achar chácaras na região por menos que cem mil dólares. Em Cananéia no litoral sul dá para achar casas em frente da praia pela mesma faixa.

  38. Just Me says:

    I don’t skip tips for bad service (there other servers who also are til dependent who aren’t involved in the service) but I will complain. I have also spoken to managers when the service was excellent.

    I like the idea of a no top environment.

    Not sure this would work well for other occupations where tipping is common but for restaurants I think this would work to everyone’s benefit.

  39. Matthew says:

    @Mikey: I also have anecdotal European evidence — try getting a pint off a non-tipped bartender who is watching a football match in Ireland. He has no incentive to serve me, someone who he’ll never see again after today.

  40. There is no tipping in Japan, but service is excellent there.
    Here’s something I wrote ages ago:
    http://www.jochnowitz.net/Essays/Tipping.html