4 ms·

Part of the reason could be the tipping system. It is impossible to raise the price of the food in your restaurant without giving a raise to your waitstaff, sin

Part of the reason could be the tipping system. It is impossible to raise the price of the food in your restaurant without giving a raise to your waitstaff, since almost everyone tips a fixed percentage. So if you want to give a raise to your chef, you want to fund it with a price increase, but you can't do that without giving a raise to your waiters.

harryh 10y ago
There is definitely some evidence for this hypothesis. If you read about the restaurant industry you'll see a lot of comments from restauranteurs that seem to indicate that they think the salary ratios between FOH and BOH staff are off. We've had a couple of restaurants in NYC go tip free, instead building the cost of service into the base cost of menu items. Unfortunately it appears that this can be a challenge because consumers aren't used to the higher cost menu items. Even though a $30 entre with no tip is roughly the same cost as a $25 entre where a tip is expected apparently consumer behavior changed significantly. Quite a few places have abandoned their gratuity free plans after a couple of months of testing. There might be a bit of a prisoners dilemma problem here. If every restaurant eliminated tipping consumers would soon get used to new prices, but when only a few do they stick out as feeling more expensive (even if they really aren't). We might currently live in a stable but non-optimal equilibria.
- danharaj 10y ago
  Sounds like something an ordinance could solve.
  - harryh 10y ago
    Indeed. In fact, one of the main reasons that some NYC restaurants have been experimenting with no-tipping policies are due to labor law changes. Not ordinances about tipping specifically but rules around pay and benefits for restaurant industry workers.
  - kasey_junk 10y ago
    Its a federal statute originally designed to prevent kitchen staff from being underplayed. In the modern high end restaurant its back fired.
- ufo 10y ago
  Are tips required by law to go to the FOH staff or could a restaurant split the tips between the FOH and BOH staff (assuming the staff agrees to it)?
  - harryh 10y ago
    I believe that in most jurisdictions they are required to go to FOH staff. I am not 100% certain about that though.
  - et-al 10y ago
    Nope. It's called tip out, and in my experience it's been 3-4% of my total sales going to the other staff (sometimes 4% of only the liquor sales to the bar). Othertimes, it has been a percentage of my tips themselves (~30%: 10 bar, 10 runner, 10 bussers, I think.. been years).
    - harryh 10y ago
      All of the tip outs you describe are to FOH staff.
      - et-al 10y ago
        Pretty sure the first gig with the 4% of sales went to the kitchen, but okay.
- parennoob 10y ago
  > Even though a $30 entre with no tip is roughly the same cost as a $25 entre where a tip is expected apparently consumer behavior changed significantly. I bet this is due to the same effect that leads to .99 pricing. People concentrate the most on the first digit of a dollar amount. So if all your first digits go one number up, the consumer is going to feel the mental pinch and consume less. One solution would be to restructure no-tip pricing in a way that causes the minimum number of first-digit changes (i.e go ahead and make that $12 entree $17, but make the $25 one only $27).
- SixSigma 10y ago
  You can thank "the other NRA" for many of the problems in food wages. http://rocunited.org/the-other-nra-unmasking-the-agenda-of-the-national-restaurant-association/ http://rocunited.org/the-other-nra-unmasking-the-agenda-of-t... They have lobbied hard to keep FOH staff wages down (up to 3x less than ROH) supplemented by tipping. The driving force for this is that your wage bill is not as strongly correlated with demand - no customers means no tips so your FOH staff pay the price for your poor management.
  - harryh 10y ago
    When I said "they think the salary ratios between FOH and BOH staff are off" I was indicating that they think that FOH is overpaid relative to BOH. That is not inconsistent with lobbying to keep FOH pre-tip wages down. I don't think this is an industry conspiracy so much as a particularly challenging market. The consumer is a vicious seeker of value. This depresses wages and also makes it so that restaurants aren't particularly profitable enterprises(1). 1. http://www.newyorker.com/business/currency/the-thrill-of-losing-money-by-investing-in-a-manhattan-restaurant http://www.newyorker.com/business/currency/the-thrill-of-los...
- lackbeard 10y ago
  In Seattle some higher-end restaurants have done away with tips and added an automatic surcharge of 20%. They're very diligent about making sure customers know this before they order, and they make it clear that the money is split between the front and the back of the house.
  - harryh 10y ago
    I can see how that would work but as a consumer I kind of hate that and look at it as dishonest pricing. Annoying.

harryh 10y ago

There is definitely some evidence for this hypothesis. If you read about the restaurant industry you'll see a lot of comments from restauranteurs that seem to indicate that they think the salary ratios between FOH and BOH staff are off. We've had a couple of restaurants in NYC go tip free, instead building the cost of service into the base cost of menu items. Unfortunately it appears that this can be a challenge because consumers aren't used to the higher cost menu items. Even though a $30 entre with no tip is roughly the same cost as a $25 entre where a tip is expected apparently consumer behavior changed significantly. Quite a few places have abandoned their gratuity free plans after a couple of months of testing. There might be a bit of a prisoners dilemma problem here. If every restaurant eliminated tipping consumers would soon get used to new prices, but when only a few do they stick out as feeling more expensive (even if they really aren't). We might currently live in a stable but non-optimal equilibria.

danharaj 10y ago
Sounds like something an ordinance could solve.
- harryh 10y ago
  Indeed. In fact, one of the main reasons that some NYC restaurants have been experimenting with no-tipping policies are due to labor law changes. Not ordinances about tipping specifically but rules around pay and benefits for restaurant industry workers.
- kasey_junk 10y ago
  Its a federal statute originally designed to prevent kitchen staff from being underplayed. In the modern high end restaurant its back fired.
ufo 10y ago
Are tips required by law to go to the FOH staff or could a restaurant split the tips between the FOH and BOH staff (assuming the staff agrees to it)?
- harryh 10y ago
  I believe that in most jurisdictions they are required to go to FOH staff. I am not 100% certain about that though.
- et-al 10y ago
  Nope. It's called tip out, and in my experience it's been 3-4% of my total sales going to the other staff (sometimes 4% of only the liquor sales to the bar). Othertimes, it has been a percentage of my tips themselves (~30%: 10 bar, 10 runner, 10 bussers, I think.. been years).
  - harryh 10y ago
    All of the tip outs you describe are to FOH staff.
    - et-al 10y ago
      Pretty sure the first gig with the 4% of sales went to the kitchen, but okay.
parennoob 10y ago
> Even though a $30 entre with no tip is roughly the same cost as a $25 entre where a tip is expected apparently consumer behavior changed significantly. I bet this is due to the same effect that leads to .99 pricing. People concentrate the most on the first digit of a dollar amount. So if all your first digits go one number up, the consumer is going to feel the mental pinch and consume less. One solution would be to restructure no-tip pricing in a way that causes the minimum number of first-digit changes (i.e go ahead and make that $12 entree $17, but make the $25 one only $27).
SixSigma 10y ago
You can thank "the other NRA" for many of the problems in food wages. http://rocunited.org/the-other-nra-unmasking-the-agenda-of-the-national-restaurant-association/ http://rocunited.org/the-other-nra-unmasking-the-agenda-of-t... They have lobbied hard to keep FOH staff wages down (up to 3x less than ROH) supplemented by tipping. The driving force for this is that your wage bill is not as strongly correlated with demand - no customers means no tips so your FOH staff pay the price for your poor management.
- harryh 10y ago
  When I said "they think the salary ratios between FOH and BOH staff are off" I was indicating that they think that FOH is overpaid relative to BOH. That is not inconsistent with lobbying to keep FOH pre-tip wages down. I don't think this is an industry conspiracy so much as a particularly challenging market. The consumer is a vicious seeker of value. This depresses wages and also makes it so that restaurants aren't particularly profitable enterprises(1). 1. http://www.newyorker.com/business/currency/the-thrill-of-losing-money-by-investing-in-a-manhattan-restaurant http://www.newyorker.com/business/currency/the-thrill-of-los...
lackbeard 10y ago
In Seattle some higher-end restaurants have done away with tips and added an automatic surcharge of 20%. They're very diligent about making sure customers know this before they order, and they make it clear that the money is split between the front and the back of the house.
- harryh 10y ago
  I can see how that would work but as a consumer I kind of hate that and look at it as dishonest pricing. Annoying.