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Fine dining is about to be flipped on its head.
Danny Meyer, founder of Shake Shack and CEO of Union Square Hospitality Group (USHG), recently announced that in November, the 13 restaurants under USHG will start to roll out a no-tipping policy. His "Hospitality Included" policy will first be implemented at The Modern, and then put in place at the other restaurants over the course of the next year.
Meyer plans to have all 13 restaurants operating completely tipless by the end of 2016. But at what cost? It turns out that menu prices across the board are set to increase by 21% to 25%. However, pricing strategies are still in the drafting process, and Meyer himself has noted that not everything on every menu will increase by the same percentage.
There's plenty of speculation about the effect such a huge move will have on the industry in general, and on USHG's restaurants specifically.
The biggest anticipated benefits are ones that might not be obvious to those outside the food service industry. A no-tipping policy will theoretically free servers from the concern they will be stiffed. (Anyone who has worked as a server knows tips usually depend mostly on the disposition of the customer, not on the service provided.) At the same time, customers can enjoy their meals and focus on more important things — like their dates. Not to mention avoiding the potentially complicated math problem at the end of the meal.
Sticker shock is definitely a concern. Many customers might not be aware that the higher food prices will translate into a bill that's about the same as they would have paid before. But Meyer isn't just tacking on a tip — he's also planning to factor in a little extra that will go a long way toward eliminating what has historically been a pretty hefty wage gap between kitchen staff and front-of-house employees. He knows it's more risky than just adding on a gratuity, but as he tells Eater, "we're also trying to right what has been a labor of wrong, and that's going to cost a couple more points on top of that."
Forbes contributor Micah Solomon points out a possible downside, though. "If you're employing a waitstaff that you've selected without care, trained only minimally, and [often left unsupervised], you may need to continue to depend on your customers to keep them honest, because nobody else is."
This also raises another question: What about bad service? With current tipping policies, unless you're part of the 56% who tend to tip even if they receive terrible service, you aren't going to want to shell out extra money in that situation. For those that see the ability to tip as a way to wield power, Meyer's Hospitality Included philosophy is a serious detriment. Some diners will always prefer to reward an excellent experience with a healthy tip. They could also wish to let their server know by way of a $1.83 tip on a $100+ bill that the attention they received was subpar — at least, in their opinion.
When gratuity is included in menu prices, some are inevitably going to feel that they do not have a way of voicing that opinion. Although I'm sure Yelp is always willing to hear them out.
Meyer has been a leader in the dining industry for decades: He supported the move to a casual fine dining scene in the '80s, and helped to pioneer the split-format restaurant (pre fixe in one dining room, a la carte in another) in the '90s at his own Gramercy Tavern. He is not unaccustomed to making big moves. He set a precedent against smoking in restaurants by having his Union Square Cafe go smokeless long before New York City banned restaurant smoking officially.
Meyer's actions carry a lot of weight. Where he leads, others naturally want to follow. He's been against tipping since the early '90s, writing in 1994 that the "American system of tipping is awkward for all parties involved." So is anyone really surprised that Union Square Hospitality Group is the first firm to implement such a sweeping no-tip policy?
With such a highly influential figure at the helm, it's likely that over the course of the next year or two, restaurateurs everywhere will take a cue from Meyer. Depending on his success with this venture, many of your own local restaurants could reveal similar trends even sooner.
So has this kind of move ever worked? Yes... and no. Packhouse Meats in Newport, Kentucky opened in January 2014, and right out of the gate it employed an unusual menu (all-meatball) and a no-tipping policy. Owner Bob Conway noted that it wasn't an easy start: Packhouse Meats was ripped apart in Yelp reviews, with people accusing the restaurant of taking advantage of employees. Conway made it clear he did it to protect the servers, taking the "whim of the customers" out of the equation by providing reasonable compensation to servers based on sales.
Bar Marco in Pittsburgh also takes a unique approach. In addition to doing away with tipping, Founder Bobby Fry has instituted policies that include giving every employee at Bar Marco a base salary of $35,000 (plus bonuses based on the restaurant's profits, health care from date of hire, 500 shares in the business, and paid vacation. The move had some very unexpected results: After one month, revenue exceeded expectations by 26%, and overhead costs dropped 8%. After two months, the restaurant had tripled its profits.
Not everybody sees those kinds of successes, though. Mark Bodenstein, chef and owner of Nuvo At Greenup in Covington, Kentucky, tried to implement a no-tipping policy earlier this year, but dropped the policy after many customer complaints. Similarly, Aster, a relatively new restaurant located in San Francisco, experienced similar reactions. They did away with that system after only a few months of sticker-shocked customers.
So what do you think, readers? Is a no-tipping policy something you want to see in more restaurants? Or do you prefer being able to compensate your servers based on their performance? Sound off in the comments below!