Lessons From a No-Tipping Restaurant

Our recent podcast about tipping mentioned a San Diego restaurant, the Linkery, that adopted a strict no-tipping policy. The Linkery has since closed its doors, but owner Jay Porter (who was featured in the podcast) has been writing about the effects of a no-tipping policy. Here’s Part 1 and Part 2 of his blog posts. A summary of his takeaways:

1) Due to poorly cohering laws in many Western U.S. states, using a service charge has typically been the only legal way for a restaurant business to balance wages between servers, bartenders, cooks, and dishwashers. That’s why restaurants like Chez Panisse instituted such a [service charge] policy. Subsequent court decisions in the Western U.S. have opened up the possibility that other arrangements are legal, but the service charge is still the safest model.

2) Because tips cannot legally, in most cases, be controlled by the employer, they are typically distributed (or not distributed, as the case may be) according to a social compact between the employees. That social compact is either unenforced or enforced through social means, like ostracization. In either event, the systems for both acquiring and distributing tips are easily gamed by members of the compact who are intent on doing so.

3) The Linkery’s most transgressive act was not in implementing a service charge. Our most transgressive act was refusing to allow our guests to pay our servers anything more beyond the service charge — this is where the angry came out. A certain small number of very vocal men (and it was always men) resented that we were not letting them try to exercise additional control over our team members. This was true even though compelling research has shown that servers do not adjust quality of service as a result of tips; instead the idea that the restaurant was not offering our servers up as objects of control, was heresy. For these people, the primary service they wanted from the restaurant was the opportunity to pay for favors from the server — much like the patron at a strip club pays the club for the opportunity to dangle bills in front a dancer for individual attention. The idea that a restaurant could legitimately want to be in a different business than a strip club, was not an idea these guests could countenance. Thus, I was ever subject to witty takedowns like you are a douche, along with other well-thought-out gems.

4) Our ability to make sure team members in all parts of the house were taken care of, and to remove tip-related squabbling from our business, gave us a huge competitive advantage in the marketplace; this in turn allowed us to serve a much higher quality of food and take lower margins on it. Basically, it was because of the much-lower-friction monetary flow through the company that we were able to survive as a true, deep farm-to-table restaurant in San Diego for so many years. Other operators in town, fully aware of how tips poison restaurants, knew we were enjoying an edge. Some of our colleagues resented this, and lashed out in some ways, including that of telling local journalists and bloggers that we were lying about the food we were serving. I assume that this is because those restaurants couldn’t serve the kind of food we did and still take tips, because tips are so wasteful. And if they couldn’t do it, than they assumed/said we weren’t doing it.

5) Once established, the tipless/service charge model made us more successful in every dimension. Having a sister restaurant that used the traditional model was helpful in evaluating this — at our second restaurant, for instance, we could never achieve a consistently high quality of service. We believed the block came from the sense that, once the guest delivers a tip, the quality of service has been validated — even though studies clearly show that, across a large sample, guests tip basically the same regardless of quality of service. Meanwhile, our revenue was always higher at the tipless restaurant, I think because quality of food and service were both better due to the more consistent pay system (which at the Linkery was much closer to that of a normal, non-hospitality business than that of most restaurants, where server pay varies with a lot of randomness). With higher revenue and a more consistent pay system, our retention was better. This continued to be a “virtuous circle” of benefits we saw from having a tipless/service charge model. On a personal level, it was much more fun to work with the non-tipped team; in that environment it was easier to build a focus on doing great, worthwhile work, and doing it well, when those thoughts weren’t being interrupted every couple minutes by a guest deciding how much to pay a team member for their last few minutes of services rendered.

(HT: Michael Jones)