On The New No-Tipping Wave

Since we moved to the Bay Area about three years ago, my answer to the question “if we could eat one meal at any restaurant in San Francisco, which would it be?” has been answered more often than not with Heirloom Cafe. I like to say it’s SF’s best restaurant that doesn’t get much attention; it’s not impossible that it may just be the City’s best restaurant. Every time I go there, the food, wine, hospitality and vibe are immensely enjoyable. Notably, it’s small (50 seats), and owner/chef/sommelier Matt Straus is deeply involved in all aspects of the restaurant, from the back door to the front.

Matt recently posted an essay “In Defense of Tipping”, which is worth a thoughtful read. I’d encourage you take a few minutes to check it out.

I tend to agree with almost everything Matt wrote in his piece. The only difference I have is that, based on my experiences replacing tipping with a service charge, I suspect he’d find it easier to achieve his goals for his restaurant and service team if they operated in an industry where tipping wasn’t the principal method of compensation. That said, 1) I could be wrong, and 2) he knows more about the dynamics of his particular restaurant than I ever can.

More importantly, Matt is correctly, I think, sussing out what the new wave of no-tipping models means for the industry, and, like most sea change in the contemporary world, the results will not tend to favor people on the ground.

When Union Square Hospitality Group or Joe’s Crab Shack adopts a no-tipping model, their prime motivation is not to create a more humane industry; their motivation is to create a business model that will scale to a quite large level.

Large businesses depend for their success on the fundamental unimportance of each employee. It’s just the math of the thing. If you’ve ever worked in a large business you don’t need an explanation of it.

By eliminating tipping, the large business can exert fine-grained control over the take-home pay of front-of-house employees. Yes, partially that allows the businesses to accommodate raises in the minimum wage and redistribute money to the back of the house; more importantly to larger companies, this model allows them to have many more “entry-level” (low paid) employees per higher-compensated (managerial) employee.

The giveaway here is that these bigger companies are not eliminating tipping in favor of a line-item service charge which will be distributed to their team on top of the minimum wage; instead they are choosing a “service compris” (service included) model where they raise prices by 15-20% and request that the diner not tip. The principal change here is to eliminate all transparency, so that neither the diner nor the server has any insight into how the money is being distributed.

Note that it is the transparency of the tipping (or service charge) system that is the real problem for capital here. The minimum wage increase, and wage inequities between cooks and servers, are providing cover for big players in the industry to assert control over a revenue stream they’ve coveted for a long time; their first order of business is to remove this revenue stream from public view. I think it’s clear that the endgame here will have most restaurant jobs be comparable to working at Wal-Mart. That’s just how profit is maximized; and companies beyond a certain scale don’t really know how to do anything but attempt to maximize profit.

I don’t want to be misunderstood to be saying that service compris is itself bad; it’s just that larger companies are using it as a tool to change the industry in ways that will prove to be negative. For that reason, I hope that, as tipping recedes, more restaurants choose the service-line item model that Comal and The Advocate use, instead.