Restaurant Sees Profits Triple After It Ditches Tipping
It’s not exactly established economic theory, but what if you could triple your business’s profits by paying your employees more? That’s what one restaurant owner claims happened after he turned to a no-tipping policy at his restaurant, instead choosing to pay employees an annual wage.
Bobby Fry made headlines earlier this year when his restaurant, Bar Marco, decided to join the small but growing trend of restaurants that have decided to ditch tipping. Entrepreneur decided to check in to see how the restaurant owner was doing, and Fry says the results have been phenomenal. Since getting rid of tipping on April 1, profits have increased from about $3,000 a week to $9,000.
“Our water bill was cut in half, our linen bill was cut in half, our liquor inventory was lean,” Fry told Entrepreneur, crediting it all to greater employee cognizance. Employees have more on the line, too: Bar Marco’s new system cuts them into the profits as well. All workers now get a base salary of at least $35,000—plus health care, paid vacation and 500 shares in the company—but they also get bonuses. Because of his recent financial boom, Fry says salaries could end up between $48,000 and $51,000 this year.
Granted, Bar Marco made other changes as well, looking to offset some of the costs of having to better pay its staff. But not only are profits up, revenue is as well—around $7,000 more coming in per week.
Fry’s take on tipping is simple and logical. “Whether it’s good service or bad service, people tend to tip the same amount,” he said, citing a Cornell professor’s findings. “When you have bad service, you just don’t go back. So in reality, tipping hides how people actually feel.” Plus, Fry says how you pay your employees shows how you feel about your business. “You cannot tell me that your business model relies on paying people below the poverty line,” he said. “You gotta have more pride in your business than that.”
It will be interesting to see if stories like this will lead to more restaurants going tip-free. Though they might see major resistance from the calculator lobby.