Would You Prefer Restaurants Without Tipping?

Picture of a dollar and cents.

No more passive aggressively spreading change on the table?

The title was a subtle hint.  Here’s a more obvious one: this piece might go over the head of our non-North American readers.

The most underrated blogger in all of Finance, our friend Nelson at Financial Uproar, has come back to one under-explored topic a few times: tipping at restaurants.  In theory, tipping is supposed to incentivize servers, hostesses, and waitstaff at restaurants to provide superior service in order to merit a reward in the form of a tip.

In practice?  Tipping is mostly arbitrary.  As waitstaff wages are often negligible while societal pressure has driven tipping rates up to a customary 15-20%… the incentive isn’t to provide superior service to a single table – it’s to wait on as many tables as physically possible, service notwithstanding.

The Devolution of Service

A lot of the problem can be traced back to a simple phenomenon – the stigma against leaving no tip.  On the surface, tipping appears as an optional step in eating a meal… well, as long as your party doesn’t pass 6 people.  In reality, small tips can be a black eye on the generosity of a diner, regardless of the service provided.  (Don’t believe me?  How about a list of “worst tipping celebrities”, often based on a single incident.)  And yes, when it comes to a bad tip you’re innocent until proven guilty – regardless of service.

Another salient point?  We tip based on the behavior of our waiter or waitress.  We don’t often see who cooks (or microwaves!) our meal, who clears our plates, or any of the other behind the scenes functions that come with us avoiding cooking at home.  Well, we do, but only when we eat at places which delete the host/hostess and the bus-staff – for whatever reason (perhaps because we can see any shady practices?) we don’t tip at fast food places.  Strange.

Even evaluating our wait-experience is often arbitrary.  Want proof?  The simple act of drawing or personalizing a receipt can land you larger tips.  At least that’s generic… females receive larger tips than males, especially when the diner picking up the check is male.  And yes, attractiveness is a further bonus.  Try working around that one.

How About an Alternative?

Parties of 6 aside, what if there was an alternative to tipping?

Well, in most countries in the world… there is.  Namely, the price of labor is built into the meal.  Could it work in America?

According to Jay Porter, who owned and ran the San Diego restaurant The Linkeryyes, yes it could.

Mr. Porter eliminated tipping in his second year of running the restaurant, instead tacking an 18% tipping charge onto each party’s bill.  And, no, you couldn’t leave more – excess payments led to ‘change’.  What a concept!

Far from a dystopian dining experience, The Linkery‘s scheme worked.  In the words of Mr. Porter, “By removing tipping from the Linkery, we aligned ourselves with every other business model in America. Servers and management could work together toward one goal: giving all of our guests the best possible experience.”  How about that?  Far from needing a Rube Goldbergian system of checks and balances ensuring diners were treated with the right amount of attention, not pressuring waitstaff to rush to serve more tables nor encouraging them to stereotype diners upfront based upon what they might tip… the incentives were properly aligned.

What Would You Prefer?

So, North America – would you prefer we joined the rest of the world… or do you like the current tipping scheme?

I mean, we’d have a bit of certainty on cost up front – for both sides.  We’d probably eliminate most of these “worst celebrity tipper” lists.

And, best of all, there would be no more suns with smiley faces drawn on our receipts.

Thoughts?

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Comments

  1. says

    I LOVED that story. Kind of mind blowing really, that doing a flat 18% service fee and splitting it with the kitchen staff actually ended INCREASING the amount of take-home pay for servers. I really thing this is the future of restaurant dining and I only hope more restaurants follow suit. The way the current system exists doesn’t work.

    • says

      I read a few of the articles on The Linkery – fascinating. Too bad I never got out there to eat!

      I have seen a few pieces which suggest more flat rate meals are in our future, including a piece in the WSJ today. Fine with me, haha.

  2. says

    While I don’t think the flat fee would really change how much we spend (we tend to be generous tippers), I’m not sure if it would really make us “happier”. I’ve been doing some reading lately on how the feeling of control makes people happier, so it might actually decrease the happiness of diners if they had to relinquish that control. It at least sounds plausible when you see how people react to fixed minimum gratuities for groups (not well) even when they tend to be generous tippers on their own.

    • says

      Mr. Porter also wrote an article at Slate I’m sure you’d find interesting. He dedicated a paragraph to that specific point – and found that, yes, some people didn’t like the fact they lost control. His only suggestion on that point (I’m sure he was word-limited) was to talk to/email the manager to express pleasure/disappointment. It’s an alternative, for sure.

      Personally, I’ve only talked to management a few times… when service was particularly bad. I usually let my tips do the talking.

  3. says

    When I lived in Germany, we only rounded up to the nearest Mark (I just dated myself, huh?). For the most part, service was fine, although we didn’t expect to be waited on like is typical in U.S. restaurants. I don’t know what we would have done had service been substandard, but we never really faced the issue. In a sense, it made the calculations easier, as I didn’t have to account for tip, a pernicious problem after several good German beers.

    • says

      What’s a mark!?!?!? (Kidding)

      Nash equilibrium (in movies) aside, not much useful math is ever done while drinking. (“That seems like a big enough tip. Meh, better round up!”)

  4. says

    I’m mixed. I don’t care for tipping really, it’s often a hassle. However, I do feel it leaves the option for “balancing” things out if I receive subpar service. While it doesn’t happen often, I’ve left less than a 15-20% tip. To me, it communicates “you need to do a better job.” Who knows if the server receives the message or just thinks I’m a jerk, but at least I feel somewhat vindicated.

    • says

      It does remove the element of control, but the next step is still there – talk to the manager. Like the link pointed out, a low tip can just be pocketed by the server, with the manager never finding out why the tip was so low. I’ve certainly left some very stingy tips when I felt they were warranted (I haven’t done the scattering change thing since high school, however).

  5. krantcents says

    In Europe, they pay a more reasonable wage and you just a small amount. I think service has become a method to subsidized the restaurant’s payroll.

  6. Andy Hough says

    If it were up to me I would rarely or never eat in a restaurant that requires tipping. I don’t think it is worth paying 20% more to have someone bring me my food. I’m easily capable of doing that myself. Since it isn’t just up to me I do eat at restaurants with table service fairly often and I do tip 15-20%.

  7. says

    In France the 15% service is built in the price but waiters rarely get the full 15%, only a few restaurants do calculate how much you billed and pay your share. Most pay you minimum wage and let you expect a tip on top, and the French suck at it, at most you get $3 for a $100 meal.

    It doesn’t encourage you to provide good service but in less popular places it ensures waiters do get at least minimum wage even if the restaurant sits empty the whole night.

    I don’t like having to tip, for me the price I see is the price I should pay, I’d rather eat a $13 burger than a $10 burger and have to tip $3. In Guatemala the modern restaurants are starting to include 10% tip that also almost never goes to waiters and seems more like an added tax free bonus for the owners…

    • says

      Conceptually, that’s supposed to be the practice in the United States too – if you work during a lull, theoretically the business tops you up to minimum wage. In practice, I know that some workers avoid asking for the difference because they don’t want to get on the negative side of management.

      So… in Guatemala do you have joints which let you order at a counter and sit down with the food, avoiding tip? I’m thinking ‘mostly healthier than fast food’ here.

      • says

        Ok so they should adjust to minimum wage but doesn’t that mean people working rush hour should chip in too? and be frustrated because they work more so making more should be normal. That seems really complicated.

        There are a few food courts where you find McD as well as healthier options in big malls and there you don’t tip. Then middle to high range restaurants that add 10% to your bill even if service was terrible, and a few with optional tipping. In lower range restaurants no on tips, at best you round up to the next dollar.

  8. says

    I don’t particularly like tipping. But I do like the ability to reduce or eliminate a tip when the service is awful. If no one is taking my order for 45 minutes or my water glass is sitting empty, then the sever needs to do a better job.

    I guess I would like some kind of hybrid system. Give the servers minimum wage and still encourage tipping, but maybe at a lower percentage. There needs to be some motivation to actually provide service if you’re in a service industry. Otherwise you wind up with the DMV. Government workers who will never lose their job with no motivation to help you – and it shows.

    • says

      Haha, yeah, like I was mentioning in some other comments – there is a threshold you have to cross before I talk to the manager. For normal bad service, I don’t bother.

      Think of the normal private sector, though – no one tips me, and I do a pretty solid job at work. (Although, let’s be honest – it would be hilarious if engineers asked for tips: “C’mon, no bugs!”)

  9. says

    Last year, my wife and I stayed at a hotel that had dining included, and all gratuity was built into the cost of your stay. Tipping was not allowed and any worker was expressly forbidden to accept a tip. Quite honestly, it made for a much more relaxed experience.

    • says

      Sometimes I feel like that too – remember the Seinfeld episode where Jerry is asking about tipping all the service workers in the new apartment? “What da ya tip a “wood guy”?”

  10. says

    Honestly, in Europe, the service was terrible.

    We don’t eat at restaurants often, but when we do, I don’t mind the extra fee that typically comes with attentive service.

    After all, I’m there to enjoy myself and relax.

    • says

      Funny that the negative comments are related to non-North American restaurants, haha. Europe, and Central America – what do you have to say for yourself?

      I don’t mind leaving the small tip myself when warranted – but it is what it is… ex post facto. If anything, you improve the service for future customers who remind the server of you… the tip doesn’t do much to improve your service on the spot.

  11. freeby50 says

    I’d be plenty happy without tipping.

    I’d actually be OK if we go halfway. Increase wages and decrease tips and make tips less mandatory. With no tips the service can get poor as there is less incentive for the server to provide good service. But right now our tipping is way too high and wages are way too low for servers so its gone too far to the extreme of tipping. Plus our tipping system has gotten to the point that people seem to expect 20% for anything but horrible service is appropriate tip level so its not really working as an incentive but more an expectation / entitlement.

    But I do agree with others that have commented that service in other countries without tipping hasn’t been as good as in the US. So if we did do away with tipping entirely then service may suffer. Or maybe Americans are just really awesome at serving food.

    • says

      Where would you expect the wage for servers to end up?

      I don’t know if you’ve seen the statistic about how the IRS estimates 84% of tips go under-reported (I’m looking for a primary source on that for a follow up – it might be that 84% of tipper employees under-report; it’s unclear). If you just raise waitstaff salaries to their ‘tipped average’, you’d actually be looking at a pay cut, for that perspective.

      I definitely agree on the foreign countries part – I have heard many tales of poor service, especially in ‘touristy’ areas (oh look, more Americans!). The question – is this one of those fundamental differences we have here in America, or is tipping really incentivizing our better service?

      Can we get some split testing up in here, haha?

  12. Jacob @ iHeartBudgets says

    I’d be cool with doing away with tipping. But not allowing MORE tip seems extreme. If the service is outstanding, let me give more!

    • says

      I think the reason they don’t allow more tipping, is because it only would continue the server to treat customers differently. Knowing that they can’t get any extra money from anyone, they’d treat the table of teenagers just as well as the table of investment bankers. If one really likes a sever, telling the manager how great they are in a restaurant with flat tipping probably does wonders!

    • says

      You’re not worried about the extreme – the flat rate becomes the new baseline, and people start to tip on top of that? In 10 years we’re back in the same situation?

      Tip-ception?

  13. wealthinformatics says

    I would rather have the service workers paid fairly and do away with the whole tipping. But at this point in NA I don’t think that is practical, even if the tipping went away, out of practice folks will continue tipping. And that will become the new norm – higher price due to restaurants having to pay their workers fair wage PLUS tipping. So for practical reasons, I would prefer to keep the system as it is.

    • says

      I hear you – but any industry shake-up is going to, well, shake things up. If we ever flip to un-tipped work, I assume restaurants would either give the change back (like The Linkery fromt he article) or find some other way to disallow the larger tips.

  14. says

    I’m not from North America, but I will be honest and confess that I recently turned down a business trip to US due to tipping culture. Seriously.

    For my last trip, I spent more time researching tipping dos and don’ts than preparing for my meetings. I was also stressed out trying to convince my team, who are pretty well traveled, but who have never been to North America, that yes, we have to tip in excess of 20% here. Oh, and also the Australian travelling with us who kept protesting that we don’t have to do it , because they don’t need to in Australia and so he never tips when he visits US.

    I didn’t even care whether we got good or bad service, or even no service at all. Just made everyone tip at least 20% every meal, to make sure the servers didn’t label us “those cheap Asian tourists”. For the part of the trip that I spent alone, I had fast food take out every day so that I didn’t need to worry about tipping. And thank god that since it was a business trip, we didn’t need to worry about other service people, like hairdressers and the like. And even then, we still ran into trouble…

    Anyway, I will be one person who will be very glad if North America ever eliminates the tipping scheme…

    • freeby50 says

      Wow. Its not really that big of a deal. You don’t need to tip over 20%. Tipping 20% is just fine.

      Every nation and region has various cultural differences and they aren’t always easy to get used to.

    • says

      First, let me say FreeBy50 is right – 20% is still on the high side of tips. If you tip 20%, your waiter or waitress will be very happy.

      I don’t blame you – one of the things the article brought up was that tipping promotes waiter and waitress stereotyping. White males often benefit by this system – especially if they are served by a white female (remember, tips only come after service). Eliminating tipping would definitely bring better service to demographics considered ‘cheaper’ or ‘bad tippers’.

  15. Travis Pizel says

    I hate what tipping has become, and would LOVE to see it disappear. I don’t tip the cashier at the grocery store for being fast….he/she is being paid by the store to do a job. So why do I have to tip the guy that brings my bags up to my hotel room? All the rules of who to tip, and when, and how much….ugh. Hey businesses…if you’re going to employ people…YOU pay them. Raise the prices of your products a little if you have to, just don’t make me try to remember all this crap.

    • says

      Again, since I said it before – “Whatta ya tip a “wood guy”?”

      I don’t tip my UPS driver. However, I do tip when something is delivered here on a pallet. I’m so confused!

  16. JT says

    The good tippers are just subsidizing the meal of a poor tipper. I rarely leave a bad tip, so sure, I’m all in favor of a restaurant that takes tipping out of the equation.

    Tipping has made a very good business out of a low-skill job. Work at the right place and you can easily pull $25+ an hour. Bartenders can do double that on a busy night, which is pretty good money given the low barriers to entry.

    • says

      And the restaurant regulars? You better leave a good tip if you’re going to show your face often!

      $25 an hour? At a busy place on a Friday or a Saturday, triple digit hourly rates aren’t unheard of – I know that’s unsustainable (and if the 84% under-reporting stat is true – no one would admit that in writing) during the week, but who cares if you can make hundreds of dollars in tips over 2 days (again, sans-degree or training).

      I do feel bad for the kitchen, though. The busboy, chefs, dishwashers might be having the day of their lives, but they don’t have as much effect on a tip as a smiley face drawn on a receipt.

  17. Lindsey@ Sense & Sensibility says

    I don’t know that I love mandatory tipping (like 18 percent) but I think it’s better than trying to guess at a good tip amount. At least you know what to expect.

    • says

      Absolutely true – I go into a restaurant with 5 other people, tack on California’s usury, tack on 18% and have some certainty!

      (Then I just have to worry about splitting the bill)

  18. The College Investor says

    I hate the concept tipping, but it does feel nice to leave a poor tip for a bad server. The sad part is I never go higher – I stick to 20% for average to good service, and less for poor service. I can see where no tipping can bring alignment into goals, but it should be replaced with like a receipt survey or something to see real service trends.

    • says

      On the taxed portion or before tax? How about with drinks?

      There are so many variables with tipping it’s a bit ridiculous. I also feel it’s great that you can provide the feedback with a bad tip, but it pretty much stops there – the waiter or waitress just pockets the 1% tip and never tells anyone about it. That feedback probably never makes it back to the manager, and they probably won’t change their behavior.

  19. Your Daily Finance says

    Sure take tipping out but man poor service would end up being even worse in my opinion. Half of the servers already don’t care about the service they provide. If you now say they are getting 18% no matter what I am not sure they are going to work harder unless the place of employment really enforces poor service.

    • says

      Maybe, but let me play devil’s advocate for a second.

      Do you work at a tipped job? Do you provide crappy service?

      I can’t imagine how writing code would work for me with tips – but I do know that slacking off and not paying attention could eventually get me fired. Performing well, on the other hand? Promotions and increases in salary.

      With the right incentive structure (i.e. better than Europe, as this thread points out!) I think it could work.

  20. Afford Anything says

    I love going to other countries that don’t have a tipping culture … you know upfront exactly how much your meal will cost (labor included), and you don’t have to stress or crunch numbers at the end of the meal.

    • says

      Haha – I take exception to the crunching numbers. Although, maybe I shouldn’t – 15% or 20% should be easy to do in a person’s head. I could go for a bit of certainty, however!

  21. says

    Well, I don’t know…

    I don’t eat out, partly because I can’t afford to pay 20% more than the advertised price of a meal, which to begin with costs about three times what it would take for me to make it myself, in a much tastier, healthier version, and to serve it up to myself in a nice child-free, Muzak-free, racket-free venue.

    Would I eat out more if what you paid was what you were charged? Probably not: the fact still remains that most restaurant food is pretty bad.

    On the other hand, my associate editor at the Great Desert University once informed me that she earned more in three hours of waiting tables at Applebee’s than one of the largest and most self-aggrandizing universities in the land paid her in an entire week. One of my community college students quietly revealed that during the previous year he made 90 grand waiting tables at an upscale Scottsdale (AZ) resort. I personally think each of these people fully deserves to make a living wage and then some, given the excellence of each person’s work skills and the panache with which they deliver those skills. So, knowing what restaurants pay — and what they would continue to pay if they blocked tipping — I think maybe I would prefer that those who wish to dine in restaurants help to underwrite the livelihoods of those who wait on them.

    • says

      I don’t doubt it. And I don’t doubt that a waiter/waitress (and especially a young pretty waitress) can make more in a 4 hour shift than one of the cooks or busboys could make in an entire week. Add that to the fact the waiters/waitresses generally are under-reporting tips and the kitchen staff is on salary and you’ve got (ahem) heat in the kitchen.

      Agree with you on the ingredients. How am I supposed to stay on my pseudo-Paleo-approximation-if-you-squint diet without sticking to steak houses? Ain’t nobody got money for that 3 times a day.

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