Waiting for change
restaurant officer at Meyer’s Union Square Hospitality Group (USHG). He says each place that’s converted to no-tipping has done better as “normalization” has taken hold over time. “Overall, as a whole, we are pleased the way it’s going. [But] it’s not without hiccups,” he says.
Owners who abolish tipping must raise menu prices between 20 and 30 percent — although this usually spares “hospitality” items such as coffee and bottled water. Sagaria says USHG menu items were marked up 22 percent on average, “But each place is different. There’s really no formula.”
Then, how much employees should be compensated has to be calculated. Meyer’s management team studied how much employees in various jobs made in the past. It then set up a compensation “equation” to equalize the pay in each position, irrespective of shifts worked. If servers averaged $28 an hour including their hourly rate and tips, they’d average $28 an hour without tips — instead receiving their hourly rate plus a cut of the revenue share. However, this is based on staff, not individual, averages. Thus, a waiter who takes home $28 an hour under the new system might have made more, or less, when tips were the rule.
Such complex calculations are beyond most smaller restaurants, which operate on extremely low margins, usually around 7 percent, and testing the no-tipping waters can wreak havoc on a fragile business model.
In April 2016, Freek’s Mill opened as a no-tipping eatery in Gowanus. Four months in, it had to quietly revert to a tipping model.
“It was difficult,” says owner J.T. Stewart. “As a new restaurant, we didn’t have years or months of a traditional model to reference to help project how a new system should be run.”
In theory, a no-tip system helps to level the playing field among workers who have traditionally been compensated all over the map — from kitchen staff who might make as little as $500 a week to waiters raking in up to $1,500 a week.
But, for some tipped workers, that’s not necessarily a good thing. A friend of mine has made $500 in a single night, mainly in tips, as a bartender. If her place were to go hospitalityincluded, the gravy train would likely be over.
On the other hand, no-tipping is a boon to hardworking kitchen staff who, under state law, can’t be cut in on tips because they don’t have regular face-to-face contact with customers.
And, paying the waitstaff based on a predictable formula set by management also eliminates the front-of-house scramble to be assigned to the most lucrative shifts. Pay that’s based mainly on tips often promotes ugly bullying, favor-currying and sexual harassment.
For owners, charging the higher prices that come with notipping is a way to blunt the impact of state minimum-wage hikes. For those who receive tips, the minimum wage rose from $5 an hour to $7.50 an hour last December, will rise to $8.70 an hour this Dec. 31, and will rise to $10 an hour by the end of 2018.
Some owners say it wasn’t their employees, but customers, who revolted. Longtime Italian favorite I Trulli in the Flatiron District eliminated tipping in favor of a 20 percent “administrative fee” — equivalent to a mandatory, built-in gratuity — in November 2015. Last May, it switched back to a traditional tipping model.
“Our staff was happy. It just seemed like a very vocal minority of guests didn’t like it, especially our old regulars” who preferred tipping based on quality of service, says general manager George Hock.
Colicchio saw a similar reception when he experimented with no-tipping at lunch at his flagship Craft starting in late 2015. After six months, he dropped it.
He says that while younger customers “were more open to no-tipping,” his older clientele “was still not ready” for higher menu prices and losing the freedom to tip based on the experience. And while the waitstaff was fine with no-tipping at lunch, servers were “less enthusiastic about dinner,” with some fearing they’d make less than they did before.
The hospitality-included policy hasn’t been an issue at Meyer’s new Union Square Cafe. Tables are tough to come by at any hour. Most customers seem to love not having to tip — and in fact, love being strongly dissuaded from doing so.
“The light-bulb moment is when they try to buy back their coats,” Sagaria says with a chuckle. “They’re told, ‘thank you, but hospitality is included.’ They’re like, ‘Wow, I never realized I was paying you to guard my coat.”
“[Younger customers] were more open to no-tipping [but older clientele] was still not ready.” — Tom Colicchio on why he brought tipping back to Craft