Restaurant tipping is at a tipping point — and in Southern California, it may be the City of Los Angeles’ proposed minimum wage hike that pushes it over the edge.
The big question seems to be: What comes next?
The alternatives appear to be limited and each has its own problems, says Mike Lynn, a professor at Cornell University’s School of Hotel Management who has studied American tipping customs.
“There just doesn’t seem to be whole lot of options: You either pay people a wage, pay them a commission, or you just keep paying them a tip,” he says.
That means that restaurants seeking an alternative to tipping have only two options — all-inclusive pricing, or a service charge.
All-inclusive pricing is the system used in most of Europe, where tipping is discouraged and servers are paid a salary.
The service charge is a set tip that's automatically added to all meals that helps to underwrite servers’ and cooks’ salaries (unlike tips, service charges can be used however the restaurant chooses).
The problem with the current practice of voluntary tipping, as critics see it, is that because tips can’t legally be shared with kitchen workers, it creates a pay disparity between servers and cooks.
At the fine dining level, where customers may be paying $100 or more per person for dinner, that can result in the workers who bring you your food making three or even four times as much money as the workers who cook it.
This is controversial, particularly in today’s restaurant world where most restaurants are identified by the chef and where many restaurant owners have come from the kitchen rather than the waitstaff, as has historically been the case.
But identifying a problem and solving it so far have been two different things.
While many restaurant owners say they’re looking at the all-inclusive model, they’re hesitant because it requires adding as much as 20% to menu prices to offset the lack of tips.
When Ludo and Kristine Lefebvre and Jon Shook and Vinny Dotolo opened Trois Mec, they didn’t have a problem with using a sweepstakes method for reservations or for charging people for dinner as if they were buying tickets to a play — but going all-inclusive was one jump too many.
“We talked about it at one point,” says Kristine Lefebvre. “I think the education gap may have been just a little too much. We went to tickets, and I don’t know if that many messages all at once was something everybody was ready for.”
Instead of the all-inclusive plan, the Trois Mec team opted for a flat 18% service charge.
Quinn and Karen Hatfield also considered going all-inclusive when they opened Odys & Penelope this spring, and also ended up opting for a service charge.
“Ultimately, like everyone who has thought about it, we passed,” says Karen Hatfield. “Customers even at fine dining are very price sensitive. They know a $35 entree is very expensive and adding on to that is hard. The difference between a $9 and an $11 dessert is huge.”
There’s also a practical business consideration. Many restaurant leases are calculated based in part on total sales — tips and service charges don’t count toward that, but increased menu prices would.
Not that that the service charge has been trouble-free; the City Council is still entertaining a motion to limit how it can be used. Some customers aren’t crazy about it either, complaining that while a tip is at least in theory voluntary, a service charge is obligatory.
“It’s just the matter of their sense of control being taken away,” Karen Hatfield says. “It’s only been a small percentage of our customers, and I understand that. Change is hard.”
The service charge system is also unpopular with some servers, who could see their income cut.
“We have had some people who weren’t interested in working under that structure because they wanted the opportunity to make $700 in a night if one of their tables is feeling super-generous,” says Kristine Lefebvre.
There have been a couple of outside-the-box alternatives tried as well.
When Gary Menes opened his 10-seat haute farm-to-table restaurant Le Comptoir, one side benefit of the sushi bar approach was that all of his staff can share tips, since there are no pure servers — the cooks hand you the food.
“Every single person in the restaurant has skin in the game,” says Menes. “So if they want to get paid more than their minimum wage, let’s make sure we all have a great service.”
Zach Pollack went even further when he opened his Silver Lake restaurant Alimento a year ago: He added an optional tip line specifically for his kitchen workers. He says about half of his customers use it.
“It’s hardly a solution to the problem,” Pollack says. “I always thought of it more as a Band Aid that sort of temporarily balances out a broken situation until a more enduring solution is found.”