Monday 13 October 2008

The Tipping Point

Soon after, customers began tipping in London coffeehouses and other commercial establishments. One frequented by Samuel Johnson had a bowl printed with the words “To Insure Promptitude,” and some speculate that “tip” is an acronym for this phrase.
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Guanyu said...

The Tipping Point

By Paul Wachter
11 October 2008

One day in November 2006, Jay Porter, the owner of a small restaurant in San Diego called the Linkery, scheduled a staff meeting. Less than two years old, the casual farm-to-table restaurant had already won praise from national magazines. Nonetheless, Porter was troubled. The staff was squabbling, mainly over money: Waiters were angling for better shifts and tables, and the kitchen workers didn’t feel they were getting a fair share of the profits.

The bickering was typical of the restaurant business, but Porter, who is 38, had no previous industry experience. He had been a computer consultant, one who made good money but derived few other satisfactions from his job.

After much thought, Porter arrived at a possible solution, which he presented to his staff on that November afternoon. “How do you feel about eliminating tipping?” he asked them.

Porter’s question strikes at the very heart of the dining experience. Each year, according to the economist Ofer Azar, diners in the United States hand over some $42 billion in tips at full-service restaurants, which employ 2.6 million waiters, most of whom rely on tips for the bulk of their incomes. Studies show that Americans overwhelmingly prefer this discretionary system to a set service charge, which is common in many other parts of the world. At the few U.S. restaurants that have adopted a fixed gratuity, diners often leave additional tips.

Porter’s staff agreed to go ahead. The Linkery would be more than just a restaurant; it would become perhaps the nation’s only anti-tipping laboratory.

There was a time, not so long ago, when the Linkery’s no-tipping policy would not have stood out. While the precise origin of tipping is uncertain, it is commonly traced to Tudor England, according to “Tipping,” Kerry Segrave’s history of the custom. By the 17th century, it was expected that overnight guests to private homes would provide sums of money, known as vails, to the host’s servants.

Soon after, customers began tipping in London coffeehouses and other commercial establishments. One frequented by Samuel Johnson had a bowl printed with the words “To Insure Promptitude,” and some speculate that “tip” is an acronym for this phrase.

Tipping began as an aristocratic practice, a sprinkle of change for social inferiors, and it quickly spread among the upper classes of Europe. After the Civil War, wealthy Americans began traveling to Europe in significant numbers, and they brought the tip home with them to demonstrate their worldliness.

Europe later reconsidered its devotion to the custom. The 1943 Catering Wages Act in Britain established a minimum wage for service employees that helped decrease their reliance on tips. And in 1955, France passed a law requiring its restaurants to add a service charge (“service compris”) to each bill, a practice that has become the norm across most of the Continent.

These days, waiters in the United States typically receive an hourly wage - as little as $2.13 in some states, though California law mandates at least $8 - plus tips, some of which they may pass on, or “tip out,” to their support staff.

The laws of California and several other states prohibit redirecting tips to restaurant workers who traditionally don’t receive them - owners, managers and members of the kitchen staff. But a service charge is free of such constraints. It is also fully taxed, while waiters, on average, fail to report what the Internal Revenue Service says is at least 40 percent of their tips.

Porter considered raising the prices of each item on the menu and simply increasing the wages of his employees. But that would have penalized the restaurant’s many takeout diners. Also, he figured many potential diners would look at the prices and - not factoring in what they spend on tips - compare them unfavorably with those of his competitors. So Porter instead proposed a service fee of 18 percent, to be pooled and split roughly 3 to 1 between the restaurant’s front of the house and its kitchen.

In his pitch to his staff, he employed the same arguments Alice Waters had nearly two decades before.

Waters, the owner of Chez Panisse in Berkeley, California, wrote to her board that at the restaurant, “the quality of the food and the skill and taste of the cooks are at least as central to our success as the quality of the service. Unfortunately, traditional tipping has created great disparities in earning between the serving staff and the cooking and support staff.”

By introducing a service charge, now 17 percent, Waters increased income to the kitchen.

A few other high-end American restaurants have followed Waters’s example, including Charlie Trotter’s in Chicago, the French Laundry in Napa Valley and Per Se in New York. None of these restaurants, however, including Chez Panisse, forbid additional tips.

“Some people still tip, and the waiters get to keep that money,” said Mike Kossa-Rienzi, general manager of Chez Panisse.

But Porter was convinced that tipping itself was pernicious. “If you have a fixed gratuity, but people are still tipping, then you’re back to Square1 in terms of the money dynamic,” he said.

If he could, he would have raised everyone’s wages, but there wasn’t enough revenue. The restaurant was already paying 65 percent of its employees’ health-insurance premiums, and Porter was working on a plan to give long-term employees ownership stakes in the business. Still, he worried that his staff might not be receptive to his proposal. Michael McGuan, Porter’s general manager, expected at least half of the restaurant’s eight servers to quit. But only one did, and Porter has had little trouble hiring additional waiters.

Chelsea Boyd says that eliminating tipping had made her work as a waiter at the Linkery more meaningful than any other restaurant job she has had in the previous 10 years. “For the first time, I get to concentrate on the job, and I’m looking at the guests without seeing dollar signs or worried about what anyone else is making,” she said.

Under the old system, waiters earned $25 to $35 an hour, much of which was untaxed.

“Now, waiters make about $25 an hour, which is fully taxed,” Boyd said.

Renee Lorion, a former waitress at the Linkery who now works in publishing in New York, also liked the new anti-tipping policy.

“As servers, we all took a pay cut, but we knew it was for the general health of the restaurant,” she said. “What made it work is that Jay was very transparent about the restaurant’s finances.”

Obviously, the kitchen appreciates the new policy. “Earning three or four extra bucks an hour makes a difference,” said Matthew Somerville, a cook. “In most restaurants, there’s not a close relationship between the front and the kitchen. But here you don’t have that tension, where waiters are trying to accommodate customers’ special requests, while the cooks doing the extra work don’t see any of the tips.”

Today, Porter’s employees appear almost as fervent in their opposition to tipping as their boss. But winning over his staff was only half the battle.

Eighty percent of Americans say they prefer tipping to paying a service fee, according to Zagat Survey. Tipping, its defenders say, improves service by rewarding good waiters and punishing bad ones. But there is little correlation, in fact - less than 2 percent, said Michael Lynn, a professor of consumer behavior and marketing at Cornell University.

The single most important factor in determining the amount of a tip is the size of the bill. Diners generally tip the same percentage no matter the quality of the service and no matter the setting. They do so, Lynn said, largely because it’s expected and diners fear social disapproval. Ego needs also play a part, especially when it comes to overtipping, said Boas Shamir, an Israeli social psychologist.

These psychological factors also go a long way in explaining the steady rise of the average tip in the United States from 10 percent in the early 20th century to 18.9 percent today, with little regional variation.

But not at the Linkery. Porter and his staff have found that most diners accept the no-tipping policy, which is explained on the restaurant’s Web site and menu as well as upon the presentation of the check. In Lynn’s own 2004 Internet survey, 44 percent of American respondents said they would prefer to have waiters paid higher wages instead of tips, while only 22 percent disagreed.

“Given that consumers’ preferences appear to be weak and are unlikely to have strong effects on patronage behavior, they need not dictate tipping policies,” Lynn concluded.

Every so often diners at the Linkery do take offense.

“I’ll go over to the table and ask if there is a problem with the service,” said McGuan, the general manager. “If there is, then I offer to remove the service charge. Almost always, the customers’ issue isn’t about the service but about not being able to handle their loss of control.”

In his one concession to big tippers, Porter offers them the option of donating money to charity. The Linkery’s charity of the month is printed on the menu, and in two years more than $10,000 has been raised for various causes. Porter said he didn’t expect his war against tipping to spread beyond his restaurant.

“You might be able to get rid of tipping if you raised the minimum wage to $15 an hour, but that’s not going to happen anytime soon,” he said.