The decision by Danny Meyer’s Union Square Hospitality Group to transition to “Hospitality Included,” a gratuity-free service model, at their 13 restaurants made ripples in business and culture news, but it sent serious shockwaves through the service industry. Since the announcement, many groups have joined the movement with mixed results. Some have even backed away from the change, reverting to earlier tipping practices.
The decision raises some obvious questions about how tipped-employee paychecks will fare, and what will happen to the bottom line of the restaurants. The hospitality business is a people business, and there are deeper issues than just dollars and cents. The media at large has, unfortunately, taken a very adversarial approach to this concept. They use phrases like “restaurants ban tipping” and other negative language. I’ve been outspoken against this approach because the change is being driven for positive reasons and is a movement toward something, not away from it. We want to shed some light on the finer points that are being overlooked. What is clear, however, is that gratuity-free establishments may not be the right fit for everyone — and that’s okay!
Traditionally, servers and bartenders are often seen as a bit loose, transient employees that do this work because it’s flexible and pays the rent while they pursue whatever else interests them. For sure, every single guest-facing employee has been asked at least a handful of times, “What else do you do?” For the actors, students, artists and others of that nature, this is a fine question. As the restaurant business becomes more sophisticated, however, there are millions of people that have chosen the restaurant business as their career. This is especially true of kitchen staff; many have spent a great deal of money to learn how to cook with proper technique. For those of us that have chosen this profession, the question of “What else do you do,” is actually incredibly degrading and demeaning. It is to suggest that this isn’t a worthwhile pursuit, and for those of us with the passion and the bug for hospitality, it isn’t only untrue, it’s unacceptable.
What does this have to do with the gratuity-free question? This compensation structure is a way of professionalizing, legitimizing, and validating the choice to work in this business as a life pursuit. In restaurants that adopt this system, the professional food and beverage employees finally have a home. Servers who will stick around for this model will be team-oriented, conscientious individuals who are willing to invest time and energy into the big picture of the restaurant and their career in hospitality. There will be clear metrics, better training, and defined promotion pathways for people to succeed and advance.
Of course, those employees will also be the ones who have an appreciation for the security that comes with a regular paycheck. Ultimately, for businesses that want to provide exceptional, high-value experiences for their guests, this could bring the right kind of staff to deliver on your mission.
As with too many conversations about restaurant operations, the impact on management has been overlooked in the gratuity-free/no-tipping conversation. Without any doubt, hourly staff will be impacted, but arguably the biggest impact would be on the managers. The notable change is that managers are now empowered to strategically develop their employees in a way they weren’t able to before. They now have more control over rewarding loyal and hardworking employees through raises; they can leverage a stronger sense of accountability, as well as more meaningful methods of performance evaluation. The gratuity-free model creates a structure for advancement by taking the guesswork out of the promotion path for staff people to grow, but demands that managers responsible for running a business can actually make strategic decisions about employment in a way that they never could before.
All of that is really great, but that requires strategy, discipline, and training that not all restaurant managers bring to the table. And this is the caveat:
How does a manager implementing this change learn what they need to execute it?
How do they even know what they need to learn?
Ultimately, training is the key that will enable managers to make this happen. They either need the support of a training team, possibly in-house or outsourced HR services, or they need to bring their own professional training skills. They will need to be able to develop a strategic plan for managing their employees in this new paradigm, and then a system designed to help execute the plan. And let’s be clear, this is significantly easier said than done. Using tools such as those we’ve built at Restaurant Reason can help, but without the skills and/or support, the gratuity-free model is doomed for any restaurant. I would venture to say that for many businesses that have backed away from this model, it was because of this caveat, and not because the model is inherently a bad choice.
In the world we dine in today, good service is the expectation and not a delightful surprise. Perhaps exceptional service is a bonus, but most of us expect that our experience is to be a minimum of “good.” This tendency or behavior trend is actually a major reason why restaurants are deciding to move to gratuity-free compensation models. Building in the cost of compensation for the employees whose express task it is to craft our exceptional experience, says that good service, not just service itself, is now an implicit part of the dining equation. It says that quality service is something that has a quantifiable and justifiable value, and it has rules. By asking guests to pay that higher price tag, the restaurants that adopt this system are signing an invisible contract that a certain quality and level of service will be rendered
Now, the rhetoric against the gratuity-free model is most often based on diners’ fear that they are now disempowered to “comment” on the service they get. Here’s the deal though: guests never really had any meaningful power to change service in a restaurant by tipping in the first place! What they had was the power to hide behind the compensation, like a drone operator — you drop a bomb from afar, and those who are impacted have no meaningful way to understand why you did that or what they could have done to prevent it.
By moving to gratuity-free models, guests now have true power to rate their service with helpful, actionable feedback that managers can actually use to improve the experience. We are seeing an ever-increasing shift towards the power of the individual, of choice and of immediate feedback, but also increased anonymity. Shifting to gratuity-free brings the restaurant industry one step deeper into the evolution of personal customer evaluation as a means for changing and growing a business, but also requires true investment from our guests.
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As I said, the gratuity-free model is not for everyone, and that’s okay. There are a multitude of businesses that will never adopt this model, and will never need to. The decision to go a gratuity-free compensation structure, while raising a lot of interesting and relevant questions, leaves a few things clear:
- Erasing tipping from the dining equation validates the cost and expectations for guests
- It elevates what we do as industry professionals from line employees through management
- It shines a new light on exceptional service as a valuable skill and commodity
When everything goes the way it's supposed to, this move will impose a level of caring, attention to detail, knowledge, technical skill, and communication to the dining experience that is non-negotiable. And perhaps most importantly, it transforms tipped employees from “mere” servers, bartenders, and busboys into verifiable hospitality specialists, managers into leaders, and guests into investors.