As a disclaimer, I personally have only ever been on the consumer side of the restaurant business. Even then, I don't eat out that often. But that doesn't change the fact that the current system is inefficient, awkward and unsettling. Let me explain.
Now what specifically am I talking about? Well, after listening to a Freakonomics Radio podcast about one of the most famous restaurants in NYC, I'd like to share with you some of the concepts that were discussed, and spin my own opinion into how this may affect smaller class restaurants like the ones the average person goes to (like me!).
First off, restaurants are not great businesses. By that, I am referring to their profit margins. Without doing a ton of research, I can say with 90% confidence that 7% is above average and most probably only make around 5%.. meaning, for every dollar I spend, they earn only 5 cents. Furthermore, there are two distinct services that a restaurant provides, wait staff which are referred to as front of the house, and kitchen staff, referred to as back of the house.
Alright, we're getting there.
Now this information will absolutely change from place to place, or even from restaurant to restaurant. But we'll speak generally. And please, with a clam head, feel free to correct me if I am wrong, or if your experiences are different. I think I need to get to the point now.
It's unfortunate how the restaurant business has evolved. Back 100 years ago, which was common practice, front of the house employees did not make a base income. Their only income was tips. The kitchen staff do make a base income, but it was way more back then compared to modern times. Now let me ask you this, do customer tips ever reach the back of the house? Some restaurants have tip sharing to ensure that anyone dealing with customers have an relatively equal tip income for a night. Did you see it? Let me quote myself..
"Anyone dealing with customers". Right. When's the last time a chef brought you food and drinks and asked how your meal was? Some laws say that only those dealing with customers for more than 80% of their shift are allowed to benefit from tip sharing. Sorry kitchen staff...
You may be wondering why I stated that the restaurant experience was awkward. Don't you feel like there's this mutual bubble that hangs over you and your server? "Are they only being nice to me because they expect me to pay them a tip?" There's always that tension, and it sucks.
So, as my title says, how can we improve this? What can we do to avoid this awkwardness and ensure the kitchen staff get fairly compensated for their work?
It's called "Hospitality Included". Now, immediately, this seems like a garbage deal. You charge customers more, wait staff don't make tips. And kitchen staff increase their pay for doing the same work. But is it really that simple?
Nope.
To understand this, let's ask what a tip is.
"What's a tip?"
People seem to have some misconception that when I buy a chicken entree that costs $20, I'm paying $20 out of my pocket (let's ignore tax right now). And for some reason, the tip (whether its 10%, 15%, 20% or more) isn't part of the overall meal's cost. Somehow, it's part of a 'different pocket'. Well no, with a tip-based model, if my meal costs $20, I'm expected to pay $24 (or whatever you decide to tip). You may be thinking, well Jay.. it's only $4! And I'd say... The meal was $20, not $24! The example changes, and I'm borrowing this from the podcast mentioned above, if a table gets a $100 bottle of wine, the tip is $20 and the waitress earns that for herself, assuming no tip sharing. But her coworker working a different table who had a customer buy a $20 bottle only earns a $4 tip. That's a $16 difference right away, which isn't fair at all. This then compounds over a night, week, month, year etc. The law of averages states it will balance out, but that could take time, where someone who needs that income today doesn't benefit in the short term.
This stigma is exclusive to the restaurant business. For example, If I go to a grocery store and buy an apple for $1, I don't pay $2 at checkout because the worker properly weighed my apple to calculate its price, and smiled at me. I pay $1!
Your next argument is: "But they don't get paid less because of tips". And there in lies the problem.
Despite my reservations on tipping, due to its discriminatory nature (trust me, there are studies on race and attractiveness relating to higher or lower tip rates), front of the house employees do not automatically deserve and should not expect a 20% tip every time. If their service was bad, I am not obligated to tip them. Hell, I'm not obligated to tip them if their service was good. I do that out of the kindness of my own heart. But the dirty looks and possible spit on your food forces the opposite to be true. If you don't tip, you're a bad person.
So how do we improve this? Do away with tipping all together.
With a hospitality included model, the only charge is the cost of my meal. No tips or other charges. Sure, my meal price jumps a few percent to cover what would have been made with tips, but that extra revenue can be shared among all restaurant employees that night instead of just those dealing with the customer, resulting in a fair to everyone model. No more awkward bubble, no more worrying about being labelled a bad person for leaving a small tip. To me, it just makes sense. And as evidence, it also makes sense for that high class restaurant in NYC I mentioned earlier, which had profits rise month after month after changing to the new hospitality included model and continues to be a success. (It's called The Modern if you're curious).
The model has proven to work, and soon, more and more of these restaurants will be popping up. I'm happy to do away with the old and bring in the new. But, it's early still, meaning there may still be bugs to work out (not actual bugs since that is never good for a restaurant).
Let me know what you think! Can you see yourself going to one of these new Hospitality Included restaurants over a tip-based one? What problems do you think may occur?
Thanks for reading!
And to my avid readers...
Sorry it's been a while since my last post, I will continue to bring new posts in the future.. once I can find some good stuff to write about. As always, if you have suggestions for new topics, leave a comment or send me a message!
Until next time,
J
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