Wednesday, December 14, 2016

To Tip or not to Tip?



Year of Upheaval for Restaurants That Ended Tipping

The New York Times  by JULIA MOSKINDEC. 13, 2016

Octopus at Huertas, before and after the no-tipping policy. The dish gained a tentacle to ease a price increase. Credit Francesco Sapienza for The New York Times 

The owners of Huertas, a cheerful Spanish small-plates restaurant in the East Village, knew they would have to raise prices when they abolished tipping last December. But when the octopus plate rose to $21 from $16, they looked at the plate and realized another adjustment was needed.

“We decided to add a tentacle,” an owner, Nate Adler, said. The extra limb costs about a dollar, but the more substantial dish eased the sting of the $5 price increase.

“Ultimately it’s not about the numbers on the check, but about whether the balance and the value feels right to people as they leave the restaurant,” Mr. Adler said. “It’s not an entirely rational system.”

A rational system is exactly what he was hoping for when Huertas joined several restaurants in Danny Meyer’s Union Square Hospitality Group — Maialino, Marta, the Modern, North End Grill and (as of last week) Gramercy Tavern and the newly reopened Union Square Café — that have stopped accepting tips. The switch is part of an effort to bring the nation’s roughly $800 billion restaurant business, with its frequently chaotic and unprofessional practices and traditions, in line with modern workplace standards.

Instead of expecting customers to tip the people who wait on them, tip-free restaurants pay all employees wages that reflect their skill and seniority. The customer pays a fixed amount, stated in writing (in menu prices), as in virtually every other kind of consumer business, from Nordstrom to Netflix to The New York Times.

This service-included system — also called gratuity-free, tipless and, within the Union Square group, Hospitality Included — has been in place for several years at expensive restaurants like Per Se and the Chef’s Table at Brooklyn Fare. But this year, influential restaurants up and down the price scale and around the country signed on, including Le Pigeon and Park Kitchen in Portland, Ore.; Dahlia Lounge and Canlis in Seattle; and Comal, Cala and Petit Crenn in the Bay Area.

It is too soon to tell whether the no-tipping model will become the standard, or simply an option for a few restaurants that can make it work. What is clear after about a year is that it has forced a number of unforeseen changes, large and small, in the places that have embraced it.

To manage costs without inflicting sticker shock on customers, restaurants have to hunt down every possible savings. At Huertas, where the octopus grew another leg, the kitchen staff has shrunk from six cooks to four or five per shift. At Roman’s in Fort Greene, Brooklyn, the bar is no longer always stocked with organic lemons.

Abram Bissell, left, the executive chef of the Modern, and Dino Lavorini, the director of operations at the restaurant. Credit Cole Wilson for The New York Times 

The Union Square group, with its deep pockets, has begun buying more items in bulk, like paper towels, laundry services and software. Its chefs are coordinating menus so they will be able to share whole animals, like holistically raised lambs from Elysian Fields Sheep Farm in Pennsylvania, instead of buying individual cuts.

Because restaurants have for so long relied on tips as an important financial element — essentially subsidizing the entire payroll for the service staff — what sounds like a simple policy decision can require a complete overhaul.

“This is more like opening a new restaurant,” said Dino Lavorini, the director of operations at the Modern, which ended tipping in November 2015, the first restaurant in the Union Square group to do so. In the year since, the restaurant’s profits have slipped, company officials said; they would not say by how much, but added that they had anticipated the drop and expect it will correct itself.

But some restaurants that adopted a no-tipping policy in 2016 have already revoked it: The New York restaurateurs David Chang, Tom Colicchio and Gabe Stulman all found it unworkable in the small-scale experiments they tried. “We continue to be supportive of the no-tipping movement,” Mr. Colicchio said, “but we’ve heard from our customers and team that they just aren’t ready for it yet.”

Mr. Adler of Huertas, and others, say that one big reason to end tipping is the need for more equity between those who work in kitchens, who earn straight wages, and those who work in dining rooms, who receive tips.

A more immediate motivation, local restaurateurs said, was the approach of the $15 minimum wage in 2018, proceeding in New York City on Dec. 31 with a raise to $11 an hour (from $9) for nontipped workers. “Labor is just going to cost more and more, and all restaurants will need to rethink how their people get paid,” Mr. Lavorini said.

As the dining business, especially at the high end, attracts more educated and skilled workers, there is increased pressure to treat them fairly, professionally and predictably.

With tipping, chaos is a consequence. Servers compete ruthlessly for Saturday night shifts, when tips run high, but many are no-shows for Monday lunch. An experienced line cook who carries $40,000 in debt from years of culinary school earns $12 an hour, while a new server can reap three times that much.

Tipping can also prompt servers to nudge customers into ordering more expensive food and wine. And, at its most malign, it encourages servers to accept harassment, whether verbal, sexual or professional.

“There’s no reason a restaurant should feel like an unsafe workplace,” said Andrew Tarlow, the owner of Roman’s and four other Brooklyn restaurants. To encourage other restaurateurs, Mr. Tarlow created an open-source “Gratuity Free” logo and a website that explains the model.

The “automatic service charge” imposed at many restaurants like Chez Panisse in Berkeley, Calif., and Alinea in Chicago, can redistribute money the same way a no-tipping policy does, although states treat that revenue in different ways.

Tips are also handled differently in different states, but in New York, by law, they can be pooled and distributed only to “front of house” employees: those who work in the dining room, like waiters, bartenders and backwaiters (formerly known as busboys).

“There was regularly a 500 percent deficit between the back of the house and the front of the house,” said Abram Bissell, the executive chef of the Modern. “Like every kitchen in New York, we were having trouble attracting and retaining talent at that pay grade.”

Retaining expensively trained staff members is a major concern at the Modern. Along with the new Hospitality Included system, the restaurant started a separate revenue sharing program for the front-of-house staff, so that raises for the other workers would not cost them money. Some left nonetheless, believing that they could earn more in tips than the restaurant could compensate them for. (The Union Square group acknowledged that there had been “some attrition” but would not give specific numbers.)

James Napolitano, 25, a bartender, said that most of the bartenders senior to him had left. “You can’t blame them,” he said. “They have strong skills that they can take anywhere.” But for him, the benefits of a regular schedule and steady income — with medical insurance, paid leave and revenue sharing — have proved more valuable.

Restaurateurs have learned to proceed carefully with customers, to soothe the pain of sticker shock. “We didn’t want to just raise prices 20 percent across the board,” Mr. Lavorini said. The Union Square Hospitality Group analyzes ordering patterns, solicits feedback from customers about pricing and shares data with Michael Lynn, a Cornell professor and expert in the psychology and practice of tipping.

 Two steaks at North End Grill. The smaller one was added to the menu after a price increase on the larger cut. Credit Francesco Sapienza for The New York Times .Two steaks at North End Grill. 

One clear lesson: “There are certain fixed items — a glass of wine, a bar snack, a cup of coffee — that affect how guests experience the welcome of the restaurant,” Mr. Lavorini said. The prices of those items stayed where they were, even as others, including those for many bottles of wine, rose by as much as 20 percent.

At the group’s North End Grill, when demand dipped for the $69 aged strip steak (up from $59), the chef Eric Korsh slipped a small $33 sirloin with fries alongside it on the menu to satisfy the restaurant’s steak-loving regulars.

Sticker shock at no-tipping restaurants has affected restaurant owners as well.

From 2015 to 2016, the payroll for the Modern’s two dozen front-of-house employees’ hourly wages rose to as much as $30 an hour from $5, through a combination of the rising tipped minimum wage, paid overtime and revenue sharing.

Also, restaurants pay taxes on their revenue, but not on income from tips. When service is folded into the price of the meal, the restaurant is taxed on that “additional” revenue.

For Mr. Tarlow, who describes his business as “ideal driven,” the challenge has been to maintain those ideals across all aspects of the restaurants in the face of higher costs. As sole owner, “it all comes out of my pocket,” he said, referring not only to higher wages, but also to spending on organic produce, local and artisanal bread, health insurance for employees and other costs that he has decided are nonnegotiable.

“The question is not only, ‘What will the customer’s pain point be?’” he said — whether diners will see the $22 charge for a pasta and vegetable dish, and go elsewhere. The question is also: “What will our pain point be, what do we give up?”

At Huertas, there is more work for everyone now that both front- and back-of-house staffs have been trimmed. But Mr. Adler says that because the cooks and servers that remained have been made full partners in the enterprise, they work harder and better.

Like the Union Square group, which has no plans to revert to tipping, he said his restaurant would stay the course, despite many short-term complications.

“It took hundreds of years to build up the traditions of how things are done in restaurants,” he said. “We can’t expect to change all of that in one year.”

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