San Francisco Chronicle - (Sunday)
Restaurant thrives without tips or service charges
Talk to any of the diners at Zazie, the tiny, 32-year-old Cole Valley restaurant known for its lengthy weekend brunch line, and you’ll uncover a general sense of relief. And, no, it’s not just because of the breeze that slips through the ivy-clad walls of the back patio or the bossa nova soundtrack that somehow gels perfectly well with the overall French bistro vibe.
Eating at Zazie is so relaxing and so seductive because the price you see on the menu is the price you’ll pay when your check comes.
No fees, no tips — just that plain number.
It’s a basic principle that any American child playing with a toy cash register can understand: The plastic can of beans is $1, so give me $1. And yet, the Bay Area restaurant scene has for a variety of reasons — some legitimate, some questionable — departed significantly from it.
A savvy San Franciscan toddler might now say, those same beans are $1, but to cover my increased overhead, the cost of energy, health care for workers and other bells and whistles, I’ll need to tack on 20 more cents after the fact. Oh, and don’t forget to tip.
For the past few years, local restaurants have been engaged in a cold war with diners over this idea, with one camp struggling to keep up with costs and the other, in this time of intense inflation, also doing the same.
Diners have long grumbled over increasing expectations over how much to tip — especially as more places, like convenience stores and supermarkets, have started hitting up customers for gratuities. But the conflict has become most ferocious over the service charge, an additional fee on food service that purportedly covers the cost of doing business. It’s usually expressed as a percentage: For example, Pho Ha Noi in Cupertino, the charge is 18% of the bill. At Michelin-starred Aphotic in San Francisco, it’s 20%, plus a 5% fee for the city’s mandated health care benefits.
On the one hand, these charges supposedly allow restaurants to pay for, and perhaps even exceed, minimum labor standards and wages. On the other hand, diners have become frustrated with the gap between printed menu prices and the final cost of dining, broadly castigating the trend as “bulls—.”
“You sit on a throne of lies,” one Reddit commenter put it.
Now this conflict has come to a head. Beginning July 1, restaurant service charges will be banned in California, thanks to pro-transparency legislation that also bans hidden fees for event ticket sellers, hotels and other businesses.
In response, many Bay Area restaurateurs have sounded the alarm, positioning the move as a lead-up to an extinction event for independent restaurants.
A representative of the Golden Gate Restaurant Association, which represents San Francisco businesses, told the Chronicle, “Ending the ability for restaurants to use service charges (even if clearly and legibly listed on their menu) will have a very negative impact on the survival of this still struggling industry. Diners will not pay less, instead, they will see significant menu price increases, which we believe will further cause them to pull back on dining out. … Not only will restaurants struggle, but workers will lose hours and jobs.”
Another restaurateur called it “terrifying.”
Some hold out hope that they can kill the rule before the July 1 changeover. But dare I say this could instead be an opportunity to, like Zazie, get ahead of the curve?
Restaurants with service charges have clearly lost control of the narrative, wherein the outrage of diners has drowned out the do-good aspect of the concept. It’s OK to acknowledge that the separate charges, while championed by some as a mark of transparency, were an experiment that failed to hit the mark. More importantly, there’s plenty of anecdotal evidence that these fees make some people not want to go out as much.
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Zazie regular Pamela Hoffman, a San Francisco native and dog groomer, told me that the mental calculation of dining out has caused her to order less food than she might otherwise.
A $14 appetizer sounds good on paper, but you’ll need to do the math to figure out how much it’ll really be with a tip or one of the many possible surcharges out there, like a San Francisco Health Mandate (about 5%) or a general service charge (18%-20%).
“Calculating that much stresses me out,” she said. “But (at Zazie), it is what it is.”
A 2014 study of service charges and value perception found that diners did, in fact, see prices with separate service fees as a better deal. However, this changes when the charge exceeds 15% of the bill, which generally corresponds to the average tipping percentage in the United States. When the service charge was higher than that, people responded much better when it was fully integrated into a single price. “If larger than 15% gratuities are necessary, our results suggest that restaurateurs should build all or part of the service gratuity into menu prices,” they wrote.
In the case of the Bay Area, most service charges fall in this category. Perhaps that’s one explanation for why diners have been so vocal about it.
Instead of fighting for the ability to keep pissing diners off, restaurants could try the same narrative-building that Zazie, arguably a model for a posttipping world, has been so successful with.
Zazie’s model, explained at the top of the menu, is treasured by fans, and not only for the cognitive benefits. Staffers receive health and dental insurance, a 401k with a company match and paid time off. On top of hourly wages, employees get a share of the profits: Servers get 12% of their personal sales, while backof-house staff divvy up 12% of the restaurant’s overall sales. The costs of these benefits are integrated into the menu, which isn’t that much more than what you’d see at peer restaurants.
A burger and fries at Zazie: $26. A burger (no fries) at Zuni Cafe: $22 plus a 20% service charge ($4.40) and a 5% employee benefit fee ($1.10), totaling $27.50.
Zazie co-owner Megan Cornelius, who worked as a server for years at the business before buying it with her co-workers in 2020, regularly fields inquiries from aspiring and established restaurateurs who want to know how they do it. However, she noted that she’s yet to receive a follow-up from anyone who’s made the leap.
I asked if there was anything special about Zazie that would make its model the exception that proves the status quo. But Cornelius didn’t paint a picture much different from what I’ve heard from other restaurants. Raw materials are just as expensive as anyone else’s: Industrial-size foil used to be $30, but now it’s $120. The prices of bacon, butter, cream and most proteins have doubled. They’re as subject to PG&E’s price hikes as the rest of us. Rent, too, goes up with every lease renewal: It’s now $13,000 a month.
With the profit-sharing benefit, Zazie’s servers can pull down $40 to $70 an hour, depending on how busy the day is. After taxes, the full-time dishwasher takes home $4,500 to $5,000 a month. Most of the staff live in San Francisco, albeit with partners or roommates. The majority have been at Zazie for at least 10 years.
“If a tiny restaurant in the most expensive city can do this, don’t tell me you can’t,” said Andie Sanchez, Hoffman’s dining companion.
As the two women sipped on their mimosas on the back patio, they admitted that they could talk for hours about how much tipping sucked (though they tip 25%-30% elsewhere, they noted) and how ridiculous it was to expect patrons to guarantee that the staff receive a living wage.
“It’s not our job,” said Sanchez. “I don’t want to have to deal with that.”
And they — we — shouldn’t have to.