From the Food Nation Radio Archives:
There are quiet revolutions going on in the restaurant world right now. One of them involves the touchy subject of tipping. Until the last couple of years, most upscale dining establishments in the United States had a voluntary gratuity for the service staff. I don’t think anyone (including me) minds giving a generous tip in the range of 18 – 20% for good service. According to a recent Zagat survey, however, most (including me) would much rather do it of our own accord and greatly dislike being forced to tip via a “service charge” attached to the tab.
The “normal” exception was for parties of eight or more, in which case there might be a mandatory charge in the range of 15 – 20% (understandable due to the extra amount of work involved for the server, not to mention the fact that they have to give up other tables in order to manage the one large table).
The first major issue arose when it was revealed that some restaurants did not allow servers to keep the tips they earned. The tips were pooled and then redistributed to the servers at the whim of the restaurant. Reasons for this practice varied. Some owners claimed it was the only way to give benefits such as health insurance to the staff. Okay, that’s a pretty good reason. Others simply pooled the tips and gave them back to the staff to allow for some equilibrium in what servers were paid week to week. It was a way to even out the highs and lows, so to speak. All right, I’m still marginally with them on that one, although it compensates the less competent servers by giving them some of the exceptional servers’ tips.
But there are three practices that are very offensive to me going on at some of the top restaurants in the country.
1) Distributing servers tips to all of the staff in the restaurant, and
2) Distributing only SOME of the tips to the servers and the establishment pocketing the remainder for whatever reason.
3) Charging a blanket service charge. (I don’t really care if that’s what they do in France.)
All of these practices are wrong and can be misleading to the consumer. Here’s why.
The consumer should not be responsible for subsidizing the restaurant’s payroll through these practices. I disagree with Chef Charlie Trotter, particularly his opinion that method #2 is a more “refined” approach. Another way to look at it is you’re like the guy at the top of the multi-level pyramid with the money trickling down to the staff at the bottom. There are some even less appealing similarities, but let’s not go there. Restaurants hire qualified people. Pay them what they have rightfully earned.
In college, I learned a lot about food and labor costs in restaurants, among other things. One thing I figured out was that a correctly run restaurant makes a huge amount of money. People don’t realize that restaurants can buy a filet mignon for around $2.00 – $4.00 and sell it for $25. A bottle of wine purchased for $4.00 can be sold for $15.00 or sometimes more. There is a very large profit margin even when fixed and variable costs are taken into account. Please keep in mind; I’m referring to very high-end establishments with high volume and not the mom-and-pop operations.
The bottom line is, I really don’t want to hear about restaurants like Charlie Trotter’s or Per Se doing creative Enron-like accounting with their servers’ tip money anymore. Just pay your hard working staff what they should be earning. Don’t talk about how changes in immigration would shut down our nation’s restaurant industry while you are nickel and dime-ing these loyal disciples of yours and making huge profits. And, please, please don’t tell us it’s “all about the food” when pursuit of the almighty dollar is really what’s at stake.
Not too long ago, Charlie Trotter’s was sued by three servers for its policy of having the tips put into a pool and giving only a portion of it back to the servers. According to the plaintiffs’ law firm, in one week of December, 2001 the servers took in over $58,000 in tips one evening (which, I’m guessing here, means the restaurant grossed about $300,000 that night), but were paid less than $12,000 collectively. Quite a disparity, don’t you think? Charlie Trotter is famous for his charitable contributions to those less fortunate. It’s easy to be overwhelmingly philanthropic when your staff is paying for it and you are getting all the associated tax breaks, isn’t it? Since then, he has changed his policy to a blanket “service charge” listed on everyone’s restaurant bill. So again, we are making his payroll in addition to paying the listed prices on the menu, only now we have to pay even if we have bad service also. By the way, calling it a service charge allows him to distribute the money any way he wishes. Nice touch.
Thomas Keller is also charging a service charge at both the French Laundry and Per Se, his newer restaurant in New York. His rationale is that the chefs were earning much less than the servers, so the charge was necessary to distribute the money equally among the staff. How about giving them a raise, instead of forcing us to pay for it? Nahhh, that might cut into profits too much.
A lot has been written for and against service charges. I basically don’t accept the premise of either argument. Nearly every other business making huge profits pays their staff a decent salary with benefits and the like. Why should the top restaurants in the country be any different?