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)

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COMMENTS: 42


  1. nborlaug says:

    There’s an obvious question… If this restaurant idea was so successful, why did it close down?

    Also, has anyone ever tried pre-tipping at restaurants? I travel a lot for work and one of my co-workers always made sure to give the chambermaids the tip on the first night to incentivize good behavior.

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    • Knight Craft says:

      nborlaug is right. I pre-tip too. Bar tending staff, janitorial staff at hotels, the wait staff who bring drinks on the casino floor. I’m a generous tipper, just because I’ve been on the other side of the tip and know what its like to be stiffed.

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    • joe c says:

      You did read the article didnt you? Your notion of pre-tipping to “incentivize good beavior” just completely validates the restaurant owner’s reasoning. The core of his reason was that customer’s use tips to try to buy good service – which causes an inconsistency in service.

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  2. Caleb B says:

    If the policy and restaurant were so successful, why did it close?

    Well-loved. Like or Dislike: Thumb up 7 Thumb down 0
    • J1 says:

      There’s a fairly recent article here: http://sandiego.eater.com/archives/2012/12/06/jay-porter-on-moving-to-san-francisco.php#more

      It looks like a few trends came together, including high raw material costs, semi-absentee management, and failure to remain trendy after (to paraphrase the owner) becoming a luxury good. In a market segment where trendiness is crucial to success, those are heavy burdens to carry. That they stayed that way as long as they did is testament to how well the place was run. In any case, it doesn’t sound like the tipping policy had anything to do with the closure (note that the related restaurant shut down as well). They should have spoken with Phil Romano.

      The owner appears to believe locavorism is good for the environment and that small scale organic agriculture is more sustainable than large scale commercial agriculture.

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  3. Caleb B says:

    Isn’t 3-5 years the typical run for any unsuccessful restaurant?

    Interesting to note in his post, the typical restaurant only clears 4% of revenue, meaning that usually there is only enough money to pay clear payroll and that is about it. So

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    • Caleb B says:

      For all the folks that just want higher prices in trade for no-tipping, you are going to have a lot fewer restaurant choices. The theory is that consumers would be indifferent to the change in pricing structure, but theory and reality don’t always mix. This closed restaurant seems to be a prime example.

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      • Bilbo Baggins says:

        I prefer how things are done in Japan. Japan has no tipping and the best service in the world.

        I think that tipping makes service worse in the end not better. There is some invariable randomness in the tipping process. Some servers will feel they are being treated unfairly. You cannot know how much you will be making in tips before you start your work. It is better to have a service charge so that the servers know exactly what they are getting and don’t have to feel like dogs to a fickle consumer.

        Besides, this idea that one has to tip 15% all the time in America or you risk being insulted and ridiculed by the staff is just ridiculous. In Japan if you leave money at the table they will run out of the store to give it back to you.

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      • Traveller says:

        Umm In Australia, tipping is not part of our culture, and yet the number and variety of restaurants is wonderful. Sure, people tip if they want, but it’s not expected, and is rare. Frankly, we’d rather people were paid what they are worth by their employers.

        Personally, one of the most frustrating things I find about the USA when I travel is the maths exam at the end of dinner and drinks.

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      • Scandium says:

        uhm, so America is the only place in the world with restaurant choices? Since more or less everywhere else tipping is rare, minimal or unheard of?

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      • Sean says:

        I also prefer how things are done in Japan, but the great service is NOT a direct result of the no tipping practice, so using it as an example of what we should do in America is misleading (at best).

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      • Oliver H says:

        Only if you ignore that higher prices work like a charm when they are the norm.

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  4. Knight Craft says:

    “Once established, the tipless/service charge model made us more successful in every dimension.”
    Ummm… but they’re out of business, right? Remind me not to be successful.
    (from a former bus boy who always got his fair share from the waitress’ he worked with)

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  5. SandyEggan says:

    In my experience the food was overpriced and the quality of service was much worse than comparable restaurants in the area. I think no tipping is a promising idea. The Linkery’s execution was pretty poor and the owner’s account is, considered in the best light, inconsistent with what the rest of us experienced as customers.

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    • Bob Lablaw says:

      I tried it a couple of times and agree. Service was poor even on the slowest day and the food was good at best. I liked the idea and wanted to give it a try but the food wasn’t worth returning for.

      To the non-San Diegans voicing in, they really failed due to stronger competition popping up in the area. The neighborhood they were in really bloomed over the last couple of years and I can’t think of the last time I heard anyone even mention The Linkery even though they are in an area where people now go to go out. Freakonomics aren’t necessary to tease apart their downfall, normal economics will suffice.

      If anything can be learned from their experiment, it’s that a great philosophy can’t replace a good customer experience and that pineapple mustard is far superior to honey mustard for your sweet mustard needs.

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  6. rdk says:

    The tipping = service model is so successful in the United Sates that the rest of the world is rushing to emulate the same wage/price structure (not).

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    • Scandium says:

      To be fair, I’ve more often gotten slow, rude and unprofessional service in Europe than in the US. Specifically norther Europe I guess. Norway and Holland for example. Is it because of no tips? I don’t know, maybe it’s a cultural thing. I saw amazing service in China and Iceland though, where there is no or little expectation of a tip

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      • Oliver H says:

        I’ve seen very good service in the Netherlands and bad service in the US. The problem is not the least sampling and the fact that we tend to remember negative experiences better than positive ones. It certainly is in part a cultural thing, but that also includes considering a waiter who is falling over himself to stand at your table every 5 minutes as obnoxious rather than great. And that’s the downside of the suggestion that tipping-only or high importance tipping gives an incentive for “good” service – it’s an incentive to provide occasions for the customer to take note of the personnel, when the personnel should clearly not be the centerpiece of the experience. Whether I have a candle-light dinner with a girlfriend or a business dinner with a customer – it’s about me, my guest and our food. The waiter might have provided a good service, but for my overall experience, the work of the cook is at least as important.

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      • James says:

        Anecdata is not data

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  7. Phillip says:

    Tipping should just be eliminated altogether. It doesn’t serve any useful purpose. End laws on wage differentials and ban tipping. All it does is push people to eat fast food where they don’t have to worry about tipping.

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  8. Reagan says:

    My first three jobs were as a server and then again in college and grad school.
    I didn’t mind working for tips. In nicer or more popular restaurants were alcohol is served, wait staff can make a lot of money. Standard pay or min wage may be a good idea at IHOP, but not everywhere. We are not Japan. The ees will only be as good as mgmt adheres to company systems and controls. I for one do not want the same service I get from McDonalds when I go to a nice restaurant. I have gotten stiffed on a check before and it sucks, but the next table usually makes up for it. The better you are, the better your shifts, the better your money.

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    • Jaje says:

      Did you listen to the pod? The “better” your race, age, and breast size, the better your money.

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      • John Glenn says:

        If you tip based on your overall experience instead of just “service”, then it makes sense to leave more tip for beauty. TBH, I do tip beautiful waitresses (and even waiters) more, but only if the service was good. On the other hand, I also give a much a better tip to waitresses who went out of their way to give good service.

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      • Scandium says:

        @John
        Does your wife agree? If she prefer you stare at a less beautiful waitress she would then tip her less, and even things out.

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  9. bob says:

    I like it. I think more restaurants should consider this. The pay difference is a great result of switching to no tips. Employees have a more predictable salary, have less to worry about when it comes to money, can work to get a raise, and I believe this leads to more productive servers and the “experiment” shows it leads to better service. I always wondered why restaurants could get away with terrible wages and use tips to try and make up the difference. Now I wonder why restaurants allowed themselves to get into this hole.

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  10. Timster says:

    For those who wonder how the community felt about their policy, and not just the owner, maybe try looking at their Yelp review. http://www.yelp.com/biz/the-linkery-san-diego It was pretty much universally hated.

    The staff didn’t care about service because they were getting the tip/service charge regardless. Add to that, that the food was overpriced and soon made to look pretty mediocre by the other restaurants in the area, and you can see why The Linkery Shut down.

    Jay Porter may think that he was the Messiah when it came to the San Diego food scene, but the results show something different. San Francisco is welcome to him.

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    • Oliver H says:

      Funny how France is considered the pinnacle of gastronomy and the number one tourist destination in the world, yet French restaurants usually have on their menus “service compris” – “service included”.

      The truth is that the notion of financial incentives is a typical economist view based on the belief that people care for nothing but money. Nowhere is that notion more disastrous than in the service sector. It completely ignores the passions of the people involved. No financial incentive will turn someone who hates people into a great service personality, while someone who burns for ensuring others have a great time can easily feel demotivated by a low base salary, feeling there is little recognition for their work by their superiors.

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      • Keith Carter says:

        It’s not about the money – it’s about showing appreciation for making one’s meal a positive, memorable experience.
        In France, I still tipped – not as much, but for the experiences where the staff went ‘beyond expectations’ I tipped a good amount.
        When I was a waiter, I provided the best experience I could provide – once a blind customer asked if I could provide him with a wide mouth jar – a prized commodity with the staff. I combined 1/2 empty jars to make an empty one, and when I delivered it, he gave me a $20 tip – in the 70′s. His caretaker – servant – complained, but he was adamant. He appreciated the recognition and accommodation and gave me the $20 spot. Class act!!
        And that is what service is about, not just lining a restaurateurs pocket with an extra 20% boost in income!

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  11. Steve Seamans says:

    If the resteraunt was successful, why isn’t it still in business? Hopefully that will be addressed. The downturn in the economy didn’t take down all the other resteraunts. If it was a better working model, I would expect the previous owner could have found a buyer. If it was closed due to the landlord deciding to utilize it for other purposes, I would think you could move a successful business model to another location.

    As for me, I prefer the tip model. However, I do not frequent strip clubs and find the comparison both an interesting alternate point of view and ridiculous.

    -Steve

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  12. Caleb B says:

    Higher prices and no tipping will reduce the pay of waiters. Owners will pocket the difference and only pay minimum wage. Guaranteed.

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    • Oliver H says:

      You miss that owners have a strong interest in having motivated employees so that the customers have a good experience.

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      • Keith Carter says:

        Nonsense, pure nonsense!
        Owners have an interest in putting money in THEIR pockets. They talk to accountants, they talk to their investors – you really think they ask what their dishwashers want ???
        In SF restaurants were required to provide for health care for their workers – the restaurants put a “health care” surcharge on the tabs – and guess where that went? Yep – doesn’t even take a guess – it went into the owner’s pockets. City attorney is still charging the restaurants to recoup the charge for it’s intended and stated purpose. Same thing will happen with this charge.

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    • ERLW says:

      Caleb, I think there’s a typo in your post. It should say “Not guaranteed”. This is Freakonomics; I don’t think it is right to deal with sweeping absolutes unless you have the statistics to back it up.

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    • Keith Carter says:

      Absolutely right! Based on experience in San Francisco where restaurants were required to provide health care. Owners pocketed the “surcharge” – and the City Attorney (bless his soul) went after them. And has extracted judgments against them.
      To presume anything you pay for a meal, outside of an actual, on the table tip, is going to be distributed in any predetermined way, is absolute fantasy. Push come to shove, he owners of the restaurant will always take that money and apply it how they see fit – usually to their bank accounts. Rationalizations are dime a dozen – but that money is in the owner’s pocket. And if they haven’t been paying their workers sustainable wages in the past, they have no motivation to change their pay in the future.
      Restaurant business is an EXTREMELY competitive business – probably the highest failure rate out there. To fantasize that owners are going to pay more to the dishwasher, etc., out of their own volition – pure fantasy.

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  13. Pauline @ Make Money Your Way says:

    Interesting that the guests are angry about not tipping. In France, 15% service charge is included in the price but most waiters make minimum wage, whether they bill more or less than their wage. It is frustrating as a waiter in a popular place when you work a lot, and see your patron pocket the 15% but it is fair that from the cook to the waiter everyone makes the same money. People rarely tip on top, you can expect $1 or $2 occasionally, even for a $100 meal.

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  14. Kris says:

    So you go with a friend to a restaurant. Your friend orders a hamburger with fries, a salad, and iced tea. You order an appetizer, a steak with mashed potatoes and vegetables and a glass of wine. The server brings your wine and the glass of tea. They then bring your appetizer and your friend’s salad. Finally, you get your plate with your steak, potatoes and veggies, and your friend get their burger and fries. The server provided you both with identical amount of effort, of ‘service’. Your friend’s bill: $9. Your’s: $24. For the identical service, you’re expected to reward the server with more than double the tip of your friend. Tipping could not possibly a stupider monetary transaction. More American exceptionalism.

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  15. Oliver H says:

    An interesting text on perception of service quality:

    http://www.myparistrips.com/frenchcultureandcustoms.html

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  16. stewart says:

    Most customers hate the tipping system, I certainly do. Service charge is almost as bad, I want to pay what it says on the menu without having to do math. But what can be done about it? I try to eat at restaurants that are buffet, self serve, etc as much as possible but even these places usually hit you for tips for bringing even an ice tea with your meal. That leaves just fast food and eating at home. What we really need to do to break the cycle is a Federal law that the minimum wage laws apply to all workers and restaurants are not excepted, and also to have the minimum wage raised to a living wage.

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    • Joe says:

      Stewart. Most customers like the tipping system. But most customers can do math in their head. Stayat fast food places. You should also tip at Buffets also. Cheapskate.

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  17. Crazy talk says:

    It won’t work. It will in the minds of ppl who have never served before. So to you I say start a restaurant it’s easy. Lol. Owners pay less wage to a server because it’s super busy or dead. When it’s dead you cut servers to save on cost. Then BAM you get full. But if I’m a server not getting tipped why take 7 tables when the normal is 4 tables. There’s no more $ in it for me. And if you want to fire me. That’s fine I’ll go down the street to the next restaurant. You’r schedule will be now
    f#*< up and you'll force the girl who booked time off to work. ( maybe she will just quit to) Cause it's not like every restaurant in the world couldn't use an experienced server. Or you could pay us less and have me work as hard as I can to make more money which doesn't effect the owner whatsoever. It would work if you had a consistent restaurant. With high prices.
    But in a world where everyone wants the most for the least , and more and more food places are opening up. It will never work. Besides if you want to eat out and not tip then go to a place called Tim hortons, Mcdonalds, Subway. Taco Bell, or make it yourself you lazy cheap piece of I deserve everything but can't afford it.

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  18. Keith Carter says:

    This is a totally bogus article -
    “freakonomics” should be based on services received. Instead this restaurant decided to shirk it’s management responsibilities and instead look for a legal loophole to rip off the customer.
    No surprise this restaurant is out of business !!!
    Tipping is one of the last vestiges of an individual employee being rewarded for their personal efforts – much like a salesman receives commission on their sales. This tipples model is completely oriented toward stealing an employee’s recognition based on their individual performance and taking that monetary recognition and using it to cover their operation expenses. Not that I embrace the communist model, but this is a complete antithesis to the model espoused by the founding fathers of this republic. Not to mention it is a complete antithesis to the business model competing restaurants have been successful with.
    Forcible distribution of tips is illegal in California – and this is little more than attempting to circumvent the law. Either change the law, or face the consequences – since this restaurant is out of business, obviously they have faced a consequence – but this should be a red flag for other restaurants considering this as a way to circumvent the law.

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  19. Keith Carter says:

    goes to employees. NONE. It is simply an unadvertised hidden charge for a product.

    To think a restaurant owner is going to distribute this charge anymore fairly than a waiter is pure fantasy. Waiters have a motivation to distribute their tips – it helps them provide the service they’re tipped on. Restaurant owners don’t have that motivation. Restaurant owners in SF added a “health care” surcharge and just pocketed it – to think they wouldn’t do this with the 20% surcharge ?????

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