How to Pay Restaurant Workers a Living Wage With Benefits

[zoramargolis]

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[DaveO]

Thanks, Zora.  I love stuff like this.  It appears he has put a lot of thought, research, planning and preparation into this.    .....and now the unknown.  How will it work?

He would be a good person to follow up with to find out how this significant experiment works.  Best of luck to him and his staff.

[darkstar965]

Bar Marco has gotten a lot of buzz recently, including a great NPR piece. And there are at least two spots in NYC, along with a handful of others, doing this elsewhere in the country.

It will be truly awesome if these businesses can thrive.

At the end of the day, this only works if the fundamentals are sound. A big-enough market of targeted customers with enough discretionary income and high-enough quality food/service with smart and experienced business management. The lack of those things, especially the business stuff, are at the root of the very high US restaurant failure rate. The best-run, most profitable restaurants will be able to pull this off. But the great majority won't see enough incremental revenue to compensate for the higher labor expense.

Putting it a different way, I'm as excited as anyone hoping that the future of the restaurant biz in this country will include living wages for all staff as expected or table stakes. But the key to making that work is to make the profit & loss statement work, a significant challenge for the great majority of restaurants who don't guarantee a living wage to most staff currently. It's a multi-faceted and complicated problem yet a problem we must solve. Hopefully pioneers like the team in Pittsburgh will prove it can be done.

[Eric Ziebold]

If you're a fan of moving away from the current gratuity system then it's great that Bar Marco has been able to get as much press and publicity as they have for what they're doing.

While it's probably in some ways more 'simple' to look at the restaurant economics there are IMHO two major issues with changing to gratuity system which are much harder to address.  Public perception, and finding staff.

Don has repeatedly said that he would gladly pay the 20% extra if the need to tip at the end of a meal was removed.  I certainly don't question his sentiment, and am good enough friends with Don that I can say with confidence that he genuinely means that, however what if the diner isn't aware that service is included.  Unless the entire industry was to change all at one time I do think it would be a perception challenge if there were only a small handful of restaurants that had 20% higher pricing to compete.  I'm not saying they wouldn't get any customers but I do question that most people would delve that deeply into the issue to say oh, I see, the reason their appetizers are $18 instead of $15 is because service is included.  Oh that's not really a $10 dessert its actually $8 because service is included.  3 courses for $54 is actually the same as 3 courses for $45 because service is included.  If it's a restaurant that I really want to go to does it make a difference?  Probably not.  But if I'm strolling along the Promenade in Manhattan Beach reading menus as I walk by or strolling through Chinatown for that matter and am deciding where to eat, does it make a difference?  I think it can/would/does.  Some of those are probably the types of restaurants where the service staff needs the most help.

Additionally, until the new system was in place long enough, would we still not feel a little guilty about leaving 0 gratuity?  Or would it simply be we would still leave a tip just maybe 5% instead of 20%?  I thought Charles brought up a good point months back.  If the service staff in California IS getting paid a higher base salary then do we still need to tip them 20%?  Is the cost of living that much higher in San Francisco or San Diego than Washington DC, or NYC?

Which brings me to the question of service staff.  I think there is a large segment of the service workforce that doesn't want to change the system.  Doesn't want to go away from receiving cash tips, and certainly doesn't want to have to declare and get taxed on all of their income.  There is what I would consider a large section of the service population that likes feeling like they control their own destiny in regards to their income.  Again, unless the change happens overnight to the entire industry, I think that for the bulk of the restaurants it's going to be much harder to find good, well trained/trainable service staff if you're a restaurant paying a straight hourly wage and the restaurant next door gives you the opportunity to make hard cash.

[Eric Ziebold]

uh oh, Don how do I change my tagline?

Should probably read

Eric Ziebold

Chef,

Unemployed

[darkstar965]

Totally agree with CIT* Ziebold. Too many consumers simply aren't like Don. Too many restaurants, running in the red already, can't afford to take such a risk. And, the "best" or certain kinds of servers make higher incomes under the current tipping system than what Bar Marco or other spots experimenting can pay. Likewise the perception issue when a handful of restaurants are 20% higher but others are not.

It's not impossible to fix and improve. But it is much more complicated and difficult than many realize.

*CIT: Chef in Transition? :-)

P.S., really looking forward to your new place!

[DaveO]

From a certain perspective from the industry side I think the following comments by Eric are very astute and on target:

If you're a fan of moving away from the current gratuity system then it's great that Bar Marco has been able to get as much press and publicity as they have for what they're doing.

While it's probably in some ways more 'simple' to look at the restaurant economics there are IMHO two major issues with changing to gratuity system which are much harder to address.  Public perception, and finding staff.

Don has repeatedly said that he would gladly pay the 20% extra if the need to tip at the end of a meal was removed.  I certainly don't question his sentiment, and am good enough friends with Don that I can say with confidence that he genuinely means that, however what if the diner isn't aware that service is included.  Unless the entire industry was to change all at one time I do think it would be a perception challenge if there were only a small handful of restaurants that had 20% higher pricing to compete.  I'm not saying they wouldn't get any customers but I do question that most people would delve that deeply into the issue to say oh, I see, the reason their appetizers are $18 instead of $15 is because service is included.  Oh that's not really a $10 dessert its actually $8 because service is included.  3 courses for $54 is actually the same as 3 courses for $45 because service is included.  If it's a restaurant that I really want to go to does it make a difference?  Probably not.  But if I'm strolling along the Promenade in Manhattan Beach reading menus as I walk by or strolling through Chinatown for that matter and am deciding where to eat, does it make a difference?  I think it can/would/does.  Some of those are probably the types of restaurants where the service staff needs the most help.

Additionally, until the new system was in place long enough, would we still not feel a little guilty about leaving 0 gratuity?  Or would it simply be we would still leave a tip just maybe 5% instead of 20%?  I thought Charles brought up a good point months back.  If the service staff in California IS getting paid a higher base salary then do we still need to tip them 20%?  Is the cost of living that much higher in San Francisco or San Diego than Washington DC, or NYC?

Which brings me to the question of service staff.  I think there is a large segment of the service workforce that doesn't want to change the system.  Doesn't want to go away from receiving cash tips, and certainly doesn't want to have to declare and get taxed on all of their income.  There is what I would consider a large section of the service population that likes feeling like they control their own destiny in regards to their income.  Again, unless the change happens overnight to the entire industry, I think that for the bulk of the restaurants it's going to be much harder to find good, well trained/trainable service staff if you're a restaurant paying a straight hourly wage and the restaurant next door gives you the opportunity to make hard cash.

For the last several decades the regional bartending school we operate has graduated hundreds and thousands of bartenders ever year.   Of that number, every year some of them become excellent industry bartenders.  They earn a lot of money.  Some have developed and migrated to become known mixologists in the region.  Some are consistently high volume club bartenders.  Some have stayed in the industry as bartenders over the decades and migrated to higher end establishments as they've aged.

The ones that are big earners can do it in three or four shifts a week.  Of those, some are more than capable of leaving one excellent location and moving to another excellent location.   I suspect that group and folks like them would not want to see the current situation change.  I suspect they do far better with tip money than they would do otherwise.

[Pat]

uh oh, Don how do I change my tagline?

Should probably read

Eric Ziebold

Chef,

Unemployed

Go to the drop down menu next to your name at the top right of the screen and click on settings.  On the left, there is a signature option.  Click on that to change your signature.

I'm looking forward to your next venture, and I agree that it will be very hard to change the system unless it's done all at once.  The only way it could happen all at once is for the federal government to mandate it, which is not going to happen.  It's possible that changes to the tex code that give incentives to the employers and some kind of tax break (even a temporary one) to the employees might do something to move it along, but otherwise, it will require individual restaurants changing one at a time (or one restaurant group at a time or one city at a time) until the point at which critical mass is reached.  It's pretty amazing how quickly ingrained habits/patterns can change once critical mass is achieved but what it takes to reach that "tipping" (haha) point seems pretty unpredictable.

We seem to be moving towards being a more tipping oriented society all the time (see: proliferating tip jars), which somehow has to be factored into this.

[ktmoomau]

I don't feel guilty when I am at the Greenbrier and gratuity is included on my services, not tipping.  I also paid more to get my nails done at a nail salon in Clarendon that was a gratuity included place because I know with gratuity it would be the same amount.  So I think while those are concerns, I think there would be a way to alleviate them in some regards too.  I like to think people generally aren't idiots, although from time to time I get proven wrong.  There might need to be more diner education, and it might be easier to roll out in some restaurants rather than others.