Setting the Table Stakes: US Restaurants Debate No Tipping Move

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Danny Meyer - The Modern Restaurant

Danny Meyer, brand builder of Shake Shack fame, has announced that he will abolish tipping at all restaurants by the end of 2016, hoping to lead the way by doing the right thing and shake up the industry to do so as well.

He won’t be the first New York restaurateur to do away with tipping (Thomas Keller has done so at Per Se and Tom Colicchio has abolished tips for lunch service at Craft), but it will certainly be the largest and most ambitious changeover in scope so far, affecting some 1,800 employees of his restaurants, including popular eateries such as Gramercy TavernMaialinoUnion Square Cafe, and The Modern at the Museum of Modern Art.

The Union Square Hospitality Group CEO is counting on “fair share” being the new “organic” or “locally sourced” or “ethically raised” as a brand differentiator, and as an imprimatur of social responsibility that will preserve and drive demand for diners and consumers alike—using their dollar to advocate and rally behind what they believe in.

As Meyer stated in his letter to customers, “Once these changes are implemented, the total cost you pay to dine with us won’t differ much from what you pay now. But for our teams, the change will be significant. We will now have the ability to compensate all of our employees equitably, competitively, and professionally. And by eliminating tipping, our employees who want to grow financially and professionally will be able to earn those opportunities based on the merit of their work.”

Considering reports that people may choose not to do business with a company where CEOs are paid over 100 times the median worker, restaurant maverick Meyer may be on to something.

Danny Meyer - Union Square Hospitality Group

Feeling the pressure of federal regulations to raise fast-food workers’ wages in New York, and the US cities already raising their minimum wage across all industries, Meyer is taking this moment to right what he sees as some wrongs in his industry, while fending off competition from the McDonalds and Burger Kings of the world (all the way up to the Per Ses and Crafts) to gobble up talent.

Hedging against disenfranchising servers, who, after tip, belie their below minimum wage with generally disproportionately higher wages than their back-of-house colleagues, closing the gap between front-of-house and back-of-house, and not scaring away diners with new high prices and an abdication of the price power they could leverage over their meals, the plan will juggle stakeholders across the whole business, and strive to strike a tricky balance between strategic imperative and its good will.

This isn’t the first time Meyer has passed price pressure onto diners—he raised prices to support sourcing local greenmarket produce and ethically raised meat—he’s banking on his diners caring not only about a local, organic and sustainable menu but also about the fair treatment of the employees who are making and serving it to them, not to mention cleaning up before and after.

Of course, if Meyer’s new mandate does begin a sea-change in the industry, it will affect the landscape and jolt standing perceptions of value and fairness in critical ways. Meyer mused that tipping was never very good at providing valuable feedback or data beyond very simple assumptions based on dollar amount. And whether or not the practice actually derived from the desire To Insure Prompt Service, it’s such a subjective practice at the discretion of the customer that it doesn’t provide a reliable or guaranteed income for workers.

Now he’s looking for the mobile payment and hospitality apps (OpenTable, PayPal, Reserve, ApplePay, Tock, et al etc.) to fight it out and for a leader to rise to provide a platform for better, more useful customer feedback, with options to refund money or other renumerations for dissatisfied customers. A stronger voice for customers, and better data for restaurateurs would be a win-win situation for all, assuming we ever get there.

Danny Meyer - Setting the Table - restaurant book

For the author of setting the table, the move is also setting the table stakes for his peers and competitors in the restaurant industry.

Other implications of his move involve how much of a catalyst will fair treatment prove as a driver of choice and preference? Organizations are finding that socially responsible initiatives and behaviors are succeeding as customers use brands to align with their personal and political codes of behavior.

While the “no tipping” move will affect the restaurants beyond his Shake Shack fast food empire, which is now found in the UK, Turkey, Russia and the Middle East, it’s Shake Shack’s coffers that will cushion the shock and turbulence of the transition—something that other restaurants don’t have to count on.

Others may argue that Danny should look first at cutting his own salary and other corporate restructurings before instituting such a radical policy. Still others wonder about how this will effect servers, who often find the incentive of a tip as a motivation to perform well. What profits for the balance sheets such a scheme may raise is also yet to be fully determined (it is a business, after all). But this is as much as a move motivated by his group’s brand of hospitality as it is a business strategy.

The tipping ban will launch at The Modern, where the final section on each check be changed to have only one line, for a signature. Underneath will appear the words “Hospitality Included”—a shrewd piece of wordwork (different than Per Se’s “Service Included”) that is an ethos, tactic, and brand promise all in one after-dinner package.


Justin Dean is a New York-based verbal identity specialist who cares deeply about great food and great words. Follow him as he explores the latter: @ambienttweets

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