4 ms·

Restaurants can really barely afford to stay open in my (small) region, frankly they are seen as a service to a town not a net extractor. I know the finances b

Restaurants can really barely afford to stay open in my (small) region, frankly they are seen as a service to a town not a net extractor. I know the finances behind my locals and can tell you they would not be able to stay open if workers were not also compensated via tips, and workers would not be there without the requisite pay. Tips end up being the difference between having a restaurant or not.

burkaman 5y ago
Would customers be willing to pay marginally higher menu prices if tips were explicitly not allowed? I assume there must be research on this.
- peteradio 5y ago
  Changing menu prices is probably a bit less elastic than letting people be flexible with their spending. I'm more likely to buy the burger that I can afford and stinge on the tip if I'm tight and come back next week and guilt tip when I'm full. Raise the price across the board and I'm not coming the tight week.
  - watwut 5y ago
    Why should wait staff salary be the thing that gets sacrificed to economic downfall? They have much less control over what kind of food the restaurants sell and for what price. It makes more sense for those who have more decision power to eat the consequences. They can make cheaper burgers, lower salaries for everyone rather then single profession, change what they sell. The wait staff can only decide whether they work or not.
  - mindslight 5y ago
    Tipping as price discrimination, with positive empathy from a human face being the upsell. You can pay either $8 or $10 for the same meal. If you pay $8 you feel bad, if you pay $10 you feel good. Thereby the restaurant takes in the full $10 from people who can afford it and/or aren't psychopaths, but still makes the sale at $8 for anyone else.
elvis10ten 5y ago
Genuinely curious: what if your local restaurants raise prices too?
runako 5y ago
If the region can't afford a restaurant without having external taxpayers subsidize the restaurant (e.g. via social safety net transfer payments), perhaps it shouldn't have one. Every business doesn't need to scale down or up to fill every niche.
soco 5y ago
I'm not sure I understand: me as a customer, whether I pay the menu + 20% tip, or I pay a menu 20% more expensive, I end up exactly the same. So why is for the restaurant owner better with tipping, instead of raising the prices 20% and putting an entry sign "no tipping needed here, we pay our workers right"? Even call the restaurant "no tipping place" if they wish. Can someone with experience in restaurant business explain this?
- peteradio 5y ago
  Menu: $5 burger Customer 1 (richy rich): $5 + $2 tip Customer 2 (workin man): $5 + $1 tip Customer 3 (poor man): $5 no tip Total: $18 Menu: $6 burger Customer 1 (richy rich): $6 + $1 tip Total: $7 You've reduced your customer based on true affordability and perceived affordability. This doesn't consider the margin on selling a single burger but generally you need to push product rather than sell master pieces.
  - AlexandrB 5y ago
    Based on many of the other comments here it would look more like: Customer 1 (richy rich): $5 + no tip Customer 2 (workin man): $5 + $2 tip Customer 3 (poor man): $5 + $1 tip The tip amount seems to depend more on empathy/demographics than the amount of money one has to spend.
  - pjmorris 5y ago
    Seems like you'd still have two customers (The burger is still in 'workin man''s budget), at 2/3 the food cost.
    - peteradio 5y ago
      You are right, but I removed him to make the point that this is partly based on perception of the person doing the buying. Workin man this week is poor man next week and then some weeks he's richy rich. Do you want to capture all forms of this guy? None of this is rigorous of course but ya know we don't have a town full of 1 guy with a single budget. We have a town full of people with various and changing budgets, what kind of mechanism can be put into place to keep base finances workable in tight times while extracting more in good times?
EvRev 5y ago
When we look at the issues that are behind the thin margins that restaurants operate on, i.e. rent and cost of goods, then it seems that the labor is the only variable that is under the operators control. So instead of framing the argument of whether we should have to directly pay those wages/tips the discussion needs to shift. Why are commercial rents so high? Because vacancies are preferred over "market rate" rents. https://news.ycombinator.com/item?id=27939860 https://news.ycombinator.com/item?id=27939860 Not saying this is the case, but when a business shuts down the property it operated in stays in place. The rent will continue to rise to meet the financial demands of the property owner. So the next fool comes in and tries to run a business that is doomed. The young workers rents are subsidized by parents. Unless a restaurant owner is working in the trenches then they will NEVER be able to run the business effectively. The banks get richer either way, but at a certain point there will not be any restaurants left as the societal contracts erode.
kevin_nisbet 5y ago
So I think a different angle to look at something like this is. If everyone in an area gets paid a living wage, and the people who work at a business can actually afford to be customers of that business, it actually creates more customers and businesses overall do better. I forget the name of who put this idea forward, but businesses that barely break even when paying the absolute minimums, don't necessarily do worse if labor costs go up universally in an area, and everyone can begin to afford to use the services.
bena 5y ago
This is kind of a bullshit excuse. Most restaurants can barely afford to stay open because most restaurants are run by people who have no business running a business. Hell, let's be honest, most businesses are run by people who have no business running a business. Most people don't really want to run a business, they want to do something else, but also get paid to do it. There are plenty of small restaurants around the world that get by fine without tips and manage to pay their employees. But for some reason, the U.S. thinks this is somehow impossible. Tipping is stupid. But since servers can make more money than on a set wage, they don't mind that the restaurant owners are essentially pitting their employees against their customers. You know what would increase the overall level of service? If the restaurant paid a decent wage to their employees and then removed the obligation from the customer to pay the restaurant's employees.
- gunfighthacksaw 5y ago
  It always blows my mind when business owners complain “oh labour is too expensive, oh I can’t stay in business” Yes, that’s how capitalism, markets and commerce work. It has good parts and bad parts. If you don’t want the government to get involved when it’s going well, why get them involved when it isn’t? Greed and hypocrisy, that’s why.

burkaman 5y ago

Would customers be willing to pay marginally higher menu prices if tips were explicitly not allowed? I assume there must be research on this.

peteradio 5y ago
Changing menu prices is probably a bit less elastic than letting people be flexible with their spending. I'm more likely to buy the burger that I can afford and stinge on the tip if I'm tight and come back next week and guilt tip when I'm full. Raise the price across the board and I'm not coming the tight week.
- watwut 5y ago
  Why should wait staff salary be the thing that gets sacrificed to economic downfall? They have much less control over what kind of food the restaurants sell and for what price. It makes more sense for those who have more decision power to eat the consequences. They can make cheaper burgers, lower salaries for everyone rather then single profession, change what they sell. The wait staff can only decide whether they work or not.
- mindslight 5y ago
  Tipping as price discrimination, with positive empathy from a human face being the upsell. You can pay either $8 or $10 for the same meal. If you pay $8 you feel bad, if you pay $10 you feel good. Thereby the restaurant takes in the full $10 from people who can afford it and/or aren't psychopaths, but still makes the sale at $8 for anyone else.

elvis10ten 5y ago

Genuinely curious: what if your local restaurants raise prices too?

runako 5y ago

If the region can't afford a restaurant without having external taxpayers subsidize the restaurant (e.g. via social safety net transfer payments), perhaps it shouldn't have one. Every business doesn't need to scale down or up to fill every niche.

soco 5y ago

I'm not sure I understand: me as a customer, whether I pay the menu + 20% tip, or I pay a menu 20% more expensive, I end up exactly the same. So why is for the restaurant owner better with tipping, instead of raising the prices 20% and putting an entry sign "no tipping needed here, we pay our workers right"? Even call the restaurant "no tipping place" if they wish. Can someone with experience in restaurant business explain this?

peteradio 5y ago
Menu: $5 burger Customer 1 (richy rich): $5 + $2 tip Customer 2 (workin man): $5 + $1 tip Customer 3 (poor man): $5 no tip Total: $18 Menu: $6 burger Customer 1 (richy rich): $6 + $1 tip Total: $7 You've reduced your customer based on true affordability and perceived affordability. This doesn't consider the margin on selling a single burger but generally you need to push product rather than sell master pieces.
- AlexandrB 5y ago
  Based on many of the other comments here it would look more like: Customer 1 (richy rich): $5 + no tip Customer 2 (workin man): $5 + $2 tip Customer 3 (poor man): $5 + $1 tip The tip amount seems to depend more on empathy/demographics than the amount of money one has to spend.
- pjmorris 5y ago
  Seems like you'd still have two customers (The burger is still in 'workin man''s budget), at 2/3 the food cost.
  - peteradio 5y ago
    You are right, but I removed him to make the point that this is partly based on perception of the person doing the buying. Workin man this week is poor man next week and then some weeks he's richy rich. Do you want to capture all forms of this guy? None of this is rigorous of course but ya know we don't have a town full of 1 guy with a single budget. We have a town full of people with various and changing budgets, what kind of mechanism can be put into place to keep base finances workable in tight times while extracting more in good times?

EvRev 5y ago

When we look at the issues that are behind the thin margins that restaurants operate on, i.e. rent and cost of goods, then it seems that the labor is the only variable that is under the operators control. So instead of framing the argument of whether we should have to directly pay those wages/tips the discussion needs to shift. Why are commercial rents so high? Because vacancies are preferred over "market rate" rents. https://news.ycombinator.com/item?id=27939860 https://news.ycombinator.com/item?id=27939860 Not saying this is the case, but when a business shuts down the property it operated in stays in place. The rent will continue to rise to meet the financial demands of the property owner. So the next fool comes in and tries to run a business that is doomed. The young workers rents are subsidized by parents. Unless a restaurant owner is working in the trenches then they will NEVER be able to run the business effectively. The banks get richer either way, but at a certain point there will not be any restaurants left as the societal contracts erode.

kevin_nisbet 5y ago

So I think a different angle to look at something like this is. If everyone in an area gets paid a living wage, and the people who work at a business can actually afford to be customers of that business, it actually creates more customers and businesses overall do better. I forget the name of who put this idea forward, but businesses that barely break even when paying the absolute minimums, don't necessarily do worse if labor costs go up universally in an area, and everyone can begin to afford to use the services.

bena 5y ago

This is kind of a bullshit excuse. Most restaurants can barely afford to stay open because most restaurants are run by people who have no business running a business. Hell, let's be honest, most businesses are run by people who have no business running a business. Most people don't really want to run a business, they want to do something else, but also get paid to do it. There are plenty of small restaurants around the world that get by fine without tips and manage to pay their employees. But for some reason, the U.S. thinks this is somehow impossible. Tipping is stupid. But since servers can make more money than on a set wage, they don't mind that the restaurant owners are essentially pitting their employees against their customers. You know what would increase the overall level of service? If the restaurant paid a decent wage to their employees and then removed the obligation from the customer to pay the restaurant's employees.

gunfighthacksaw 5y ago
It always blows my mind when business owners complain “oh labour is too expensive, oh I can’t stay in business” Yes, that’s how capitalism, markets and commerce work. It has good parts and bad parts. If you don’t want the government to get involved when it’s going well, why get them involved when it isn’t? Greed and hypocrisy, that’s why.