Restaurant guests getting tightfisted about tips

RH Editors

Because quick-service restaurants have been the primary target of minimum wage advocacy groups and their political allies, they have been taking most of the heat over restaurant worker compensation issues of late. But the tipping policies and practices of other segments are coming under scrutiny, too. What we’re learning: Customers tip less than they used to, a few more operators have opted for a built-in “service charge” model and Starbucks hopes to replace the tip jar with an app. 

Starbucks customers who pay with their phones now have a digital option to tip baristas.

 conducted by website vouchercloud examined the tipping behavior of 2,612 U.S. consumers and found that full-service restaurant customers now leave smaller gratuities than they once did. Roughly three-quarters of respondents said they now tip less than the “customary” 20 percent. Within this group, 57 percent said they simply couldn’t afford to tip that much and one-third said it was a merit-based decision. Twenty-nine percent said they would not tip 20 percent, period. 

Here’s how restaurant customers routinely tip, according to the vouchercloud survey: 

• 20 percent or more of the tab: 23 percent

• 10-19 percent of the tab: 29 percent

• 10 percent of less of the tab: 35 percent

• “Nothing”: 11 percent

Nearly half of respondents—46 percent—said they leave a smaller percentage today than they did five years ago. How come? 65 percent said it was because their financial situation had changed.

But customers won’t be leaving smaller tips at restaurants that impose a flat service fee or simply build the tip into the price of the meal. It’s a practice some of the country’s most prestigious restaurants have had in place for years.

The legendary Chez Panisse in Berkeley, CA collects a 17 percent service compris fee from its guests. The funds are used to ensure that everyone, front and back of the house, gets a living wage and generous benefits. Guests can still tip on top of this amount. 

Customers who ask what the fee is all about are told that “service compris is a 17 percent charge included on the bill which goes to pay wages and benefits to the front and back of the house. It is not a gratuity that goes directly to the service staff.” Many guests choose to add a tip.

So do patrons at The French Laundry in Napa Valley, where Thomas Keller has built a service charge into the restaurant’s costly prix fixe since the late 1990s. He adopted a similar policy at his Per Se in New York City in 2005 after starting out with a straight tip format. There’s a line on the bill now where an additional tip can be added. 

Last summer, New York City restaurant Sushi Yasuda switched to a fixed service fee and now bans tipping altogether. It explains its position to customers this way: “Following the custom in Japan, Sushi Yasuda’s service staff are fully compensated by their salary. Therefore gratuities are not accepted.” 

It’s easy to impose mandatory tips and/or service charges at expensive, prestigious restaurants like these, where customers are high rollers or are prepared to pay a bundle for a once-in-a-lifetime dining experience. But at least one restaurant where price points are much lower has put a similar policy in place. 

Austin, TX, brewpub Black Rock co-op tacks a gratuity onto each customer’s bill and allows no further tipping. It tells customers, “We insist on paying all workers a fair living wage. We believe in owning and working for an establishment that supports the people who keep the organization running. Therefore, all workers are paid fairly, and do not have to work for tips. We encourage you to consider turning your tipping money into a co-op membership and support businesses who pay a living wage!”

Doing what it can to make sure its employees earn enough to have a decent lifestyle is also a concern at Starbucks. Beginning this week, customers who use its iPhone app pay for their purchase can digitally tip baristas $.50, $1 or $2 for up to two hours after making their transaction. Previously, customers using the app could pay their tab, but not add a tip.

It matters because more than 11 percent of all in-store transactions at Starbucks are made using this app. As with tip jar proceeds, digital gratuities will be pooled and distributed by management. Starbucks baristas say this tipping method helps add as much as $2 per hour to their pay.

There’s no question that fast food wage activists have put the spotlight on restaurant worker wage scales and kept it there, although the effect on full service has so far been minimal. But the push for a much-higher minimum wage and better benefits could have an impact soon. It may be time for full service operators to start thinking about whether the stream of tip money that flows through their restaurants can be used to address these issues.