(clipped from San Francisco Chronicle on Friday, October 24, 2014
No tip? No problem! 5 restaurants add 20% surcharge in effort to better divide pay
article by Tim Hussin / Special to The Chronicle
Call it the tipping point. Thanks to widening staff salary discrepancies and increasing minimum wage requirements, local restaurants are taking tips off the table — literally. Citing both pragmatic and philosophical reasons, a small collection of Bay Area restaurateurs are eliminating tipping.
Instead of expecting diners to leave a tip, the restaurants will automatically add a 20 percent service charge to all bills — and not accept any additional gratuity beyond the service charge.
The five businesses — Comal in Berkeley, Camino and Duende in Oakland, and Bar Agricole and Trou Normand in San Francisco — each plan to institute the policy within the next few weeks, forsaking the ubiquitous model they believe is outdated. And they expect more restaurants could follow suit.
“If we were doing this, and there was a sense that the rest of the world wouldn’t pay much mind to it, I would be more concerned. But this is on everybody’s minds,” said Comal partner John Paluska. Rather than relying on tips, the restaurants will compensate staff on merit-based hourly wages and revenue-sharing. It’s a system common abroad. With tipping, there’s a pay divide between the back-of-house (cooks and dishwashers) and the better-compensated front-of-house servers and bartenders. Thanks to tips, service staff can take home as much as twice the pay of their kitchen counterparts, despite similar base salaries. California law does not allow tips to be shared, or to be counted as part of salary. “You have a bunch of people working their butts off, day in and day out, providing great value, but one group of them is making way more than the other one. And the rules and regulations are such that as the minimum wage goes up, the gap is getting worse,” Paluska said. “I think anyone can understand why you’d want to put a stop to that, and start making changes.” Minimum wages rising The timing of this overhaul is largely motivated by increased state and local minimum wage levels. Restaurants often operate on thin margins, so higher wages quickly impact profitability. As opposed to tips, a service charge becomes part of the restaurant’s overall revenue, helping owners to pay higher wages.
In July, California’s minimum wage rose to $9 an hour; it was the first such increase since 2008. Thad Vogler of Bar Agricole and Trou Normand believes it is only a matter of time until San Francisco increases the minimum wage to $15 an hour — the highest in the country. So, he argues: Why wait? “If it’s going to have to change that we can guarantee our dishwasher $15 an hour, why shouldn’t it change now?” Vogler said. “Why rely on legislation to do the right thing?” The situation has been accelerated in the East Bay. “We had our $1 minimum wage increase, and it affected our business immediately, really powerfully,” said chef Russell Moore, who owns Camino with his wife, Allison Hopelain.
If an upcoming ballot initiative passes, Oakland’s minimum wage will jump in March to $12.25. Berkeley businesses have had a pair of $1 increases within the past three months, one by the state and one by the city. That has sparked Comal co-owners Paluska and Andrew Hoffman to implement the new system on Nov. 3. Moore, who cooked for 20 years at Chez Panisse, has felt firsthand the benefit that a service charge can have for cooks and understands how kitchen workers can benefit from the service charge policy. When Chez Panisse moved from a tipped system to its existing service charge model during his tenure there, it created a “real job atmosphere” that bred career restaurant workers — and paid him well.
Chez Panisse’s influence is paramount, as is Jay Porter’s, the owner of Half Orange in Oakland. Porter plans to open a second Oakland restaurant in early 2015, named Salsipuedes, but he previously owned a tipless restaurant in San Diego. He documented the entire experiment, from finances to critical reviews. “One person in 1,000, or in 10,000,” would get upset about the fixed service charge. But more often than not, that rare upset guest would not be concerned about money, but as Porter wrote, “angry about his lack of control over the price, angry about not being the final arbiter of our service.” But, Porter countered that a tipless restaurant made for a better — and thus more profitable — restaurant, and the entire staff made more money. As Comal’s Hoffman puts it, “Now we’re all on the same team.” And in an industry that has bemoaned a dearth of cooks, paying cooks more can be a great boon. “Nothing is more exciting about this whole thing than sitting down with one of our cooks and saying you get a 20 percent raise,” Hoffman said.
So far, the restaurants’ respective staffs have been largely supportive, according to owners. Camino’s Hopelain estimates that cooks stand to receive an hourly increase of 50 cents to $1, while servers’ pay will remain steady, or perhaps decrease 50 to 75 cents an hour. One major shift will be in reporting tips for tax purposes. Generally speaking, cash tips have a tendency to go unreported among restaurant servers. Once the service charge becomes an official line item on a receipt, people will be accountable. Hoffman said employees at Comal will not see a change in their income if they have been declaring all of their tips.
Christian Young is a full-time senior server at Comal. He says management has been transparent about the forthcoming changes. “It’s something I’ve believed in as a change,” Young said. He guesses that there will be nights when his compensation will be less, but there will also be nights when it will be more. For example, on slow nights — like those during World Series games — he would be getting a high enough hourly wage to compensate. While tradition dictates that diners reward or punish waiters through tipping, and thus encourage good service (in theory), Hopelain feels otherwise. “Tipping affects (the relationship between waiter and diner) in a way that I don’t think is necessarily positive for either party,” Hopelain said. “In this day and age, and in this area, it’s a little different, but I think there’s still that holdover of waiters being seen as servants. Now this can shift that a little bit.” Plus, the restaurateurs say, their incentivized, merit-based compensation system will allow for the best servers to elevate on the pay scale. “We’re still getting recognized for good work,” Young said.
To ensure that there is no confusion with guests, servers at the restaurants will explain the new policy before the meal. When the bill comes, 20 percent gratuity will automatically be tallied, as will tax. There will be no line for a further tip. “We have philosophically been wanting to get rid of tipping for a long time. Now, if there’s ever a time, this is the time,” Moore said. “We’re happy to take away that weird feeling at the end of the meal.”