Restaurant Tipping System Transformation

Danny Meyer is a successful restaurateur and owner of Union Square Hospitality Group (USHG), which is a series of restaurants, cafes, and taverns that has developed a strategic plan to eliminate the tipping system. Mr. Meyer started its implementation at one of his best eateries – The Modern, and if this ambitious idea succeeds, the rest of USHG will stick to the ‘no gratuities policy’ as well. His idea may seem surprising, since many people think that tipping is an integral component of the modern decent restaurants. This dedicated professional is famous for his sensible decisions and the desire to provide the clientele with the top-quality services. His actions are always strictly determined by the laws and his own moral values. As the previous experience shows, Meyer is not afraid of criticism or disapproval. For example, the case with his Union Square café, where smoking was prohibited, although some people considered such an action to be a discouraging for the customers who smoke.

The basic idea of the innovative, for Americans, system should include a comprehensive service without additional tip line on the check. It indicates that customers would not need to leave the waiters any tips, but the prices would slightly rise. Average price increase might vary from 30 up to 35%. “A 35 percent increase is huge. It would mean, for example, that Maialino’s famed devil’s chicken would jump over $10, from $29 to $39.10, not an insignificant amount in the eyes of a price-discriminating diner” (Sutton).

Modern, as the first USHG restaurant, where the general system entitled “Hospitality Included” is being implemented, would serve as an example for Meyer’s competitors. In his view, “Hospitality Included” does not mean a simple word game, where the tip is just superseded with outrageous prices. On the contrary, it must involve a service of a better type, in order to improve the current situation. Furthermore, as far as the service staff’s bottom line is concerned, every person that is employed by the restaurant will be in a more advantageous position.

The reasons for such drastic changes could be different. Danny Meyer aims at establishing European model of restaurants with all-inclusive menu prices for a customer and fair wages that can serve as an incentive for workers. “Because our country has a longstanding tradition where a server’s income is determined by guests’ tips rather than a weekly salary set by the restaurant”, he says, “we are at a disadvantage when it comes to recognizing and promoting outstanding service”. He considers the American method of tipping “awkward for all parties involved”, and concludes that it is much easier to pay for the service, when the price is already catered for. In his opinion, elimination of tips and implementation of the merit-based wages would be more beneficial than the existing system, since it would promote better performance among workers. According to Sutton, many working class salaries, particularly in the hospitality industry, have remained stagnant, since 2008. Moreover, the waiters’ salary is usually lowered for the fact they might get tips from the satisfied clients. In reality, it does not motivate other workers who conscientiously do their fair share of work, but their income is lower, as they do not get tips. It is a problematic issue that people who are preparing food can often earn less than people who are serving it. Obviously, it should also eradicate the pay disparity between the kitchen and the dining room. With the stabilization of waiters’ revenue, as compared to cooks, dishwashers, bartenders, people would be inspired to work harder. As Charisse Jones informs, “…restaurant employees are supposed to be paid at least the federal minimum wage, and some cities and states like New York have approved minimum wages of $15 an hour”. Sutton writes that on September 10th, Governor Andrew Cuomo suggested raising the minimum pay for all workers to $15 by 2018 in New York City. I tend to believe that it would indeed compensate back of house staffers.

Undoubtedly, as any innovation typically requires, the decision to terminate the gratuity system involves numerous risk factors. Among the major risks we can state, is the fact that such policy of elevated prices may discourage consumers. As a result, the restaurant, together with other food institutions, will be in a crisis. Meyer does not deny the fact that he is the person to shoulder the responsibility for the abovementioned implementation. He admits, “…in addition to the 20 percent you would’ve tipped, we’re also trying to right what has been a labor of wrong, and that’s going to cost a couple more points on top of that. So it’s riskier, what we’re trying to do” (Sutton). To minimize the risks, Meyer tries to change a system gradually – step by step, that is one restaurant at a time. After the system’s trial run for two months at The Modern, the USHG team will carefully analyze the data, customers’ behaviors, working staff’s feedbacks, and the results of income. If this plan succeeds, all thirteen USHG full-service venues will become absolutely devoid of tip money, approximately by the end of 2016.

All in all, Danny Meyer could be named a dedicated professional for his open-mindedness and readiness to bring significant changes to the established system he works in. The time will show the results, but as for now, customers may take advantages of a new service without leaving any extra money and without feeling guilty.