No-tip restaurants fight to gain traction

“But I think we’re on the cusp of looking at it differently.”

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Referring to tipping as a “broken business model,” David Jones, owner of the Smoke and Water in Parksville, B.C, told the Vancouver Province that when his restaurant opens up this June, customers will not be allowed to tip.

He will instead increase the menu prices by 18 per cent and jack up the average wage servers and cooks make. His servers will receive between $20 and $24 an hour while cooks will earn $16 to $18 an hour.

Many consider the approach, few adopt it

By eliminating tipping, Jones said, he will attract more qualified servers and cooks and narrow the wage gap between the two occupations. Wait staff can make up to three times more than those in the kitchen.

“There’s lots of people who are thinking about it,” von Massow said. “There are a few places that have actually done it.”

Tipping is mostly a North American phenomenon, and some restaurants in New York and California have instituted strict no-tip polices.

From a restaurant owner's point of view, eliminating tipping could diminish some of the operational challenges of the business. The great divide between how much people in the kitchen make and how much servers get can be a source of tension.

"When tips are going directly to the server, it’s difficult for the manager to get some allocation to people who are creating value in the kitchen," von Massow said

Some managers implement tip pooling — taking a share of tips from the servers and allocating them to the staff in the back. But that too can be problematic.

Trust and transparency can become factors, as pooling raises questions as to whether the manager is pocketing some of the money and whether the tips are being allocated fairly. Eliminating tips makes wages more predictable.

"So if [you] get a lousy shift or a lousy table you're not going to get hurt — or get lucky if you get the person who just won the lottery," von Massow said.

Pressure to tip

While a no-tip policy may make life easier for the mathematically challenged consumer, it also removes the anxiety that comes at the end of the meal. 

“We feel this guilt, this social pressure to tip, and in many cases we don’t feel it’s warranted," von Massow said. "At the end of a beautiful meal, our last experience with the restaurant is uncertainty. How much should we tip?"

"I think a restaurant that doesn’t require me to do that will be a more comfortable experience for me," he said, adding that research shows the quality of service rarely affects the amount of the tip.

But von Massow said there is the risk that a no-tipping policy could affect the overall effort by servers, who may no longer feel an incentive to work harder for a tip. Studies have suggested that servers will work harder for customers they believe will leave a bigger tip, von Massow said.

"Is there risk that individual effort goes down? Probably, it becomes a performance management issue. However, there may also be opportunity to foster a team environment, reduce the competition and even out the service experience, he said. 

Garth Whyte, president and CEO of Restaurants Canada, said that although the servers' wages would be higher, they would also be dinged for pension and employment insurance deductions.

"Lots of people in university, they want the cash. They want that direct relationship [with the customer] because tips is where they’re going to make their money."

"Will [the B.C. restaurant owner] be able to entice staff with that higher salary versus tip?"

As well, the no-tip restaurant may mean higher costs, a real challenge in such a hyper-competitive industry, Whyte said, 

"So will the customers come at a higher price?" he said. 

Reaction by consumers will most likely be mixed, von Massow said. 

"I think there will be people who say, 'You’re taking power away from me and I don’t like it.' I think there will be people who say, 'I love it because it takes the pressure off me,' and there will be a large group in the middle who will be indifferent."