‘Hospitality Included’ – What does it mean and is it catching on?

Last night, we ate at a restaurant which told us their ‘Hospitality Included’ policy before we got our menus.  It was our first exposure to a ‘no-tipping’ trend which includes Danny Meyer’s famous NYC restaurants and a number of standouts like Camino in Oakland, Alice Waters’ Chez Panisse in Berkeley, and Dahlia Lounge and Barnacle in Seattle.

No tipping does NOT mean that the diner pays less for a meal.  Each item on the menu is offered at a price which is about 20% higher than you expect.  The tip is, in effect, included in the price of the food.  The restaurant takes this revenue and gives it as income to both the wait staff and the kitchen staff.

Tipping began when slaves working in restaurants could not earn wages but could be tipped.  In England, weekend guests would ‘tip’ their hosts’ house staff as an acknowledgement of their efforts. This is charming as a ‘thank you’, but it is too unreliable to be a living income.

The case for ‘no tipping’ includes a desire to pay restaurant workers better and reduce discrepancies between servers, and ‘back of the house’ staff – in short, treat workers better.

Restaurant owners can offer a steady, reliable wage to employees who have previously lived with ‘feast or famine’ income based on busy nights like New Years’ Eve and ‘dead’ nights during a snowstorm.

Tipping, by definition, is optional, which makes it a variable and unreliable source of income when compared to wages.  With a reliable salary, restaurant workers are more able to get credit, take out a mortgage and plan financially.  Restaurant service becomes a job with an income people can live on.

Information from PayScale, 2013

A 2013 PayScale report shows that on average waiters and waitresses have low base income ($5.10/hour) and earn 58% of their income from tips.  If the restaurant has a slow period, they suffer no matter how hard they work.

In cities with high minimum wages, it is not practical to pay $15 per/hour and have the wait staff keep their tips, so the no-tipping policy makes sense.

Tipping is influenced by many elements outside the control of the staff.  I have read that Millennials tip at about 16% while Baby Boomers leave 20%.  There can also be racial and gender bias in tipping.

Danny Meyer’s op-ed in the Washington Post making his case for ending tipping.

While the no-tipping movement has powerful adherents, some restaurants have tried it and gone back to tipping.  They cite diner ‘sticker shock’ at menu items that have 20% added to the price of the entrée and some problem in retaining top service staff who are willing to gamble that their outstanding efforts will earn them so much more in a tipping environment that they are willing to give up the certainty of a higher salary.

Some diners prefer the old model – get great service and leave a generous tip.  There is a case for tipping which some diners think of as ‘reward’ for good service.  Without tipping, maybe the incentive to give extraordinary service is reduced.   In restaurants without tipping, managers need to be omnipresent and watchful to ensure that service is excellent.

It is an adjustment for diners to look at a menu with a $24 entrée that they think should cost $20.  They need to remember that the  20% tip has been added to the price of the food.

Because outstanding waiters and waitresses might routinely earn more than 20% in tips, a no-tip policy not only caps their income, but more of it is being shared with kitchen staff.  No-tip restaurants might find it challenging to retain top wait staff.

There is a risk that the higher prices do not mean better pay.  The restaurant management controls staff wages.  Higher prices and no tipping might mean larger profits without greater income for employees.

The bottom line?  Diners will pay the same amount for a meal in a conventional restaurant and a no-tipping restaurant.  If by making ‘Hospitality included’, restaurateurs will pay more workers a reliable, living wage – it sounds good to me.  The risk is that it removes the incentive to the wait staff to give great service.  It will require careful management.

Do you have experience with a no-tip restaurant to share with ASE readers?