BLOG Part 2-3

Rustic Social Blog

Transparency in Tipping: Abolishment of Tips {Part 2 of 3}

2nd in a series of informative Blog written on the tricky subject of Tipping in the restaurant industry. Read-on, it’s very informative.

tipping blog post
Transparency in Tipping Blog

Our Culture

Tipping is part of North American culture, and many cannot even fathom a service world where we don’t tip. However, the concept of abolishing tipping is something many have strong opinions about. While some of us can’t imagine not tipping, there are various factors to consider.
The Star wrote an article about tipping in 2017 which lists some interesting points. That said, I don’t know a single server that would be happy with $15-18 an hour to replace their current wages.
More and more businesses are now tip based. These include: your hairdresser, hotel doorman, hotel housekeeper, taxi driver, food delivery, massage therapist, barista to name a few.

Mandatory Service Charge

Earls has introduced a mandatory 16% “hospitality charge”. Side note: when a tip is mandatory, Ontario law state, it’s subject to be taxed, adding cost to the consumer. This isn’t really “no tip”, this is a tip that is mandatory and controlled by the company – split between back and front of house employees 40 / 60. This is something that restaurants can choose to do, which avoids inflating menu prices to compensate for paying employees a higher base wage.

Tax & Tip Included

Let’s look at how tax and tip included would work. A menu item that is $25 under the current North American system would have tax ($3.25) a 16% mandatory service charge ($4) and the tax on the service charge ($.52) bringing the total to $32.77. A restaurant would charge you $33-34 inclusive. A customer is not saving any money, and the server has been capped at 16%, and tips out $1.60 of the $4 tip to the kitchen, keeping $2.40 (less a tip out to a hostess, service bar etc.). (Check out my next blog post on Tipping out the Kitchen!)
In retail, you don’t tip because the employee is likely on commission – but let’s not pretend that is not a cost that the company builds into their pricing. Is this something that restaurants could do? Of course, and outside of North America, many do.

Percentage Rent

For restaurant owners who pay percentage rent, this hospitality charge means that actual sales don’t go up, but the sales appear inflated for the restaurants who pay their landlords percentage rent. Owners should look to contract their food & beverage sales only as the percentage that applies to their rent.

Tipping is like a Commission

I have spent the last 20 years in sales, in most cases working in commission-based roles. Surely this contributes to my opinion that if the average tip is between 15-20%, and in theory, the better service I provide, the higher the tip, I would not appreciate a cap of 16%. In retail, you’re (often) on commission and make a percentage of your total sales; the more you sell, the more you make. In restaurants, the more you sell AND the better the service (in theory) the more you make. Leaving the decision in the hands of the customer has its perks if they tip 18-20% regularly, however that is certainly not always the case. Here is a list of reasons that tipping is not working. Interesting read, and yet in the 15-18 or so servers & bartenders that I’ve spoken to recently about this topic all have said they prefer to leave this in the customers hands to decide. When Union Hospitality started their “Hospitality Included” policy in 2017, the majority of their strong serving staff resigned. While there are obviously many reasons to remove tipping, there are many to keep it.

What do you think?

Leave a comment below. – Lisa

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