The Price of Service

More restaurants are opting to eliminate tipping entirely — but will the strategy work in the long term?




July 4, 2017



When Café Linnea opened its doors in July 2016, it wasn’t the food that initially caught people’s attention — it was the no-tipping policy. Linnea was the first restaurant in Edmonton (in recent memory, anyway) to do away with tips. It was a gamble, says chef and co-owner Kelsey Johnson.

“We wanted to find career servers: People who wanted to do this for, hopefully, the rest of their career,” she says. “To do that, we realized we needed to offer higher wages, like actual salaried wages that hopefully could provide people the stability to go ahead and take this as a career.” 

Café Linnea offers wages that are higher than industry standard. Bussers and dishwashers start at Alberta’s proposed 2018 minimum wage, and then wages go up based on experience, knowledge and time with the company. The menu pricing includes all overhead costs, rather than just factoring in an extra percentage to cover the wage increase, Johnson explains. She notes that Café Linnea has had to make continual adjustments along the way, but plans to continue the no-tipping policy.

Grain of Rice was the second to adopt a no-tipping policy when it opened in December 2016. Instead of applying a standard markup to its prices, owner Tony Phung opted for a commission-based sales approach. He will also negotiate higher base salaries if employees take initiative to improve upon various aspects of the business. But servers aren’t pressured to up-sell or force extra food on people; he says they are there to build relationships, provide useful menu information and prove why the restaurant is different from others. This model also avoids the high overhead cost that comes with offering higher salaries.

“I’m kind of treating this restaurant industry more like a technology start-up — I come from a technology background,” Phung says. “It really encourages the staff to learn more about the product because they don’t want to look foolish in front of the customers.”

That seems to contradict feedback that both Johnson and Phung have received from some customers, who questioned how they’d receive good service with no tips involved.

“I almost find it an offensive question because it’s like, well I take pride in what I do and I consider myself professional in what I do and I think all of the service industry does as well,” Johnson says.

And people don’t actually tip for good service, confirms Susan Lauder, a hospitality management instructor at NAIT. Lauder wrote her thesis on tipping and says the research shows people tip for various reasons, but good service isn’t at the top of the list. 

“People like to tip — they enjoy tipping,” she says. “They don’t tend to scale it up and down the way they say they do, for good and bad service. People tip because it’s a social convention. They tip to, in some cases, show off. They tip out of pity. But they don’t tip for good service.”

Lauder admires the restaurants that are exploring alternatives to tipping, but admits she’s afraid of what the change might mean to the industry. Many servers are able to earn the equivalent of a very high per-hour wage when tips are factored in, but she also admits this isn’t the case for all servers, as the type of establishment heavily dictates the amount that people tend to tip.

There’s also no legislation around ownership of tips in Alberta, Lauder notes, which has the potential for negative consequences. Businesses can use tips to reduce wages, she says, which was even entrenched in provincial legislation until Alberta abolished the lower minimum wage for liquor servers on October 1, 2016. Lauder notes that many restaurants require servers to “tip out” — give up a percentage of their tip, even if the actual amount received was lower than the tip-out percentage. It’s often not clear how those amounts are allocated either, she says, and whether they are shared amongst staff or if owners are also taking a cut.

“It got kind of exploited in the sense that business owners saw that they could now pay their staff less,” Ben Staley says. “The business owner could kind of take advantage of that and now these people are working for less — less security, less stability and then they’re also getting un-taxable money — which they should technically be claiming, but nobody does.”

Staley is the chef and owner of ALTA and Alder Room, both no-tipping restaurants that opened in February and May, respectively. The higher-than-average prices on the menus offset the higher living wages he pays employees, as well as the high-quality ingredients. He also offers full benefits for both full-time and part-time staff, paid vacation and a bonus structure that’s planned to be implemented on an annual basis. 

“You’ve got to start somewhere,” he says. “To me it’s more of a societal issue. It’s more raising the awareness and the level of appreciation and the respect for this industry as a whole.”

Despite their choice to practise no tipping, all three owners agree that it isn’t going anywhere. Tipping is just too entrenched in our culture — some customers will even hide money on the table. 

Still, as Edmonton’s dining scene continues to seek inspiration beyond its borders to places where tipping isn’t the norm — international experience was partial motivation for all three owners to ditch tips — we’re bound to see more restaurants try new business models.

“I think the world is moving towards that no-tipping model,” Phung says. “The restaurant industry, it’s been around for a very long time and I feel just because it’s been around for a really long time doesn’t mean it has to stay the same.”


This article appears in the July 2017 issue of Avenue Edmonton. Subscribe here.

 

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