A new study shows that diners are happier when they can tip. But what's best for restaurants? 

Maria Yagoda
May 01, 2018

The question over whether or not gratuity should be included in the price of menu items, or added by the customer as a tip, has long sparked debates, but the conversation has a new urgency, with more restaurants switching to the tip-free model—and others ditching the tip-free model after finding it didn't work for them. What's more, the current administration has angled to give restaurants more control over workers’ tips, though Congress introduced legislation in March to shut that down (for now.)

“There is a lot of wage theft, tip stealing in restaurants and other sectors where workers depend on tips,” Christine Owens of the National Employment Law Project recently told the New York Times. “This would be one more reason for employers to take workers’ tips and do whatever they want to do with them.”

Danny Meyer has famously eliminated tips from all of his restaurants, upping hourly pay for servers rather than making them rely on patrons for gratuity, and several other big-name restaurateurs have followed suit, though that strategy hasn't been without controversy either, with some servers saying this meant lower wages and more turnover. A new study even found that diners are happier when they can leave a tip. But what's best for restaurants?

Here's everything you need to know about where the debate currently stands. 

Countless restaurants have eliminated tips—and plan to stay that way, even with difficulties

In an April 10 Medium article, restaurateur Andrea Borgen talks about opening her first restaurant, Barcito, in 2015, and how she eliminated tipping in 2016, inspired by Danny Meyer's move to eliminate tipping from all of his restaurants. Here was the idea: "Eliminating tipping, providing better pay to kitchen staff (who weren’t allowed to partake in tips), revenue sharing with waitstaff to improve wage stability, and providing health benefits to all full-time employees," she writes. "Our prices increased by about 22 percent (based on value perception and product mix), the tip line was eliminated, and we politely declined cash tips."

Yet two years later, she says profits are at an all-time low. Having to raise menu prices—at the most, $3 more for a dish—has had a negative impact on sales. But she's not ready to abandon the lofty ideal just yet. 

"Staffing is really hard, mostly because restaurants have a long, storied history of wage theft, long hours, and nonexistent benefits," she writes. "Money earned in tips is unstable, and varies each night, and as soon as a restaurant starts to lose its edge, waitstaff tends to abandon ship."

Some tip-free restaurants have seen increased profits

Bobby Fry, of the restaurant Bar Marco, eliminated tipping and increased servers' wages in 2017; and he says he saw profits triple. In an interview, he rejected the idea that eliminating tips would mean that waiters have less incentive to provide good service.

"Whether it’s good service or bad service, people tend to tip the same amount,” he said. “When you have bad service, you just don’t go back. So in reality, tipping hides how people actually feel.”

All workers were given a base salary of at least $35,000—plus health care, paid vacation and 500 shares in the company—and bonuses as well. 

“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.”

A new study shows that the ability to leave a tip raises customer satisfaction

Michael Lynn, professor of food and beverage management at Cornell University’s School of Hotel Administration, recently spoke with the Wall Street Journal about how banning tips can alienate customers and lead to negative reviews, even if the restaurant compensates service in other ways, like with higher menu prices. 

“People perceive the service is worse if there’s no tipping,” says Dr. Lynn, who has published two studies on tipping within the past year.

But eliminating tips—and raising wages—may help combat sexual harassment at restaurants

In November, Saru Jayaraman wrote a column for Food & Wine's Communal Table, arguing that making employees rely on tips for a livible wage forces them to endure objectification at work as part of the job.

"As women earning just a few dollars an hour from their employers, they are forced to tolerate inappropriate behavior—from lewd comments and groping to assault—in order to feed their families in tips," writes Jayaraman. "And this culture of objectification creates a hostile environment that leaves workers vulnerable to further abuse from coworkers and management. Unfortunately, our industry sets the standard for America; since half of all American women work in restaurants as their first job, they are introduced into a world of work in which sexual harassment is normalized and even encouraged in order to please the customer."

Some servers object to the tip-free model

In October, a class-action lawsuit filed in California targeted several big-name restaurateurs in New York and the Bay Area, including no-tipping advocates Danny Meyer and Momofuku's David Chang, who are considered pioneers in the movement to raise fixed, hourly wages, rather than making servers rely on tips for a living wage. The complaint alleged that restaurant owners were holding secret meetings and eliminating tips for the sole purpose of raising prices as part of an anti-competitive conspiracy.

Restaurants are going back and forth

When David Chang opened Momofuku Nishi in NYC, he implemented a no-tip policy. As a result, the menu prices would be higher. The experiment lasted five months before Chang decided to bring tipping back to the dining room. At the time, he wrote on the company Tumblr page that the change in policy was by “no means the end of the no-tipping discussion at Momofuku." Months later, in February 2018, the restaurant group announced that Chang's more upscale Momofuku Ko would give the tip-free strategy another try.