No Tipping Restaurants: Weighing The Pros and Cons During COVID-19

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In light of COVID-19, some restaurants (like this one) are wholeheartedly embracing the no-tipping movement in an effort improve paychecks for their workers. Yet at the same time, other restaurants (like this one) have abandoned the idea, citing the same concern for employee pay. So how does a restaurant decide if adopting a no-tipping policy is a good move, or if it will only cause more problems than it fixes?

While there’s no concrete answer, there are some key factors to consider when weighing the decision:

PROS

Stable Pay During Uncertain Times

The most obvious benefit of being a “no-tipping” restaurant is the ability to provide staff with steadier paychecks. Even if a restaurant can accommodate dine-in business right now, it’s tough to predict how many customers are willing to venture out on a given day. And since great service isn’t always rewarded by customers equally, adopting a higher hourly wage could provide a new sense of stability to a restaurant career.

Builds Staff Unity

It’s no secret that there is often a divide between the front and back of house staff. The disparity of pay created by tips only exacerbates that issue, since tips can often boost servers’ pay to almost double that of the kitchen on busy nights. One can argue that the back of house performance has just as much of an impact on the customer experience, especially now that carry-out is more popular. Creating a pay structure that spreads compensation evenly may create a stronger team atmosphere. Theoretically, this could boost service and reduce turnover.

Addresses the Rise in Non-tradition Dining

Technology has enabled even traditional dine-in restaurants to seamlessly incorporate carry-out and delivery into their business model. But, when the customer places an order online for contactless carry-out, who should that tip go to? As restaurants change up their service structure, establishing an equitable method of handling tips can be tricky. By setting a livable hourly rate, every employee will have a decent paycheck regardless of how a customer chooses to order.

An Opportunity to Re-envision Business Models

Restaurant operations could see some long-term changes from COVID-19. So, having a pay structure in place that can provide flexibility and stability for the future can help retain staff. Some companies have been able to find success with concepts like revenue sharing which can help the entire staff feel invested in the restaurant’s success.

CONS

Limits Earning Potential

Tips can provide large earning potential, especially in high volume or high price point restaurants. Many servers enjoy knowing that their hustle and service can have a direct impact on their paycheck, and may resent losing that control. Eliminating tipping might also make front of house staff less willing to take on the high-stress, busy shifts.

Menu Prices Might Increase

No-tipping restaurants will need to offset the rise in payroll expenses somehow. The simplest way to handle the extra cost without sacrificing quality is to increase menu prices. While guests probably won’t pay any more than usual in the end since they will no longer pay extra for tips, there will undoubtedly be some sticker shock when they look at the menu.

Difficult to Create Buy-in

The tipping culture in American restaurants runs deep. Customers are accustomed to being able to reward outstanding service and servers enjoy seeing their hard work acknowledged. If a restaurant does not have the support of their customer base or staff, a no-tipping structure could potentially backfire.

Having the right management in place is key to implementing any change in a restaurant. The restaurant recruiters at Horizon Hospitality can help you find the leaders who can execute plans and keep staff motivated. Contact them today to learn how.

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