You Are About To See an EPIC Industry Change

[Vigilante]

In the late 1980's, Best Buy dropped commission sales, gave all their people a raise, and changed retail for ever. Analysts said it would never work. High paid commissioned sales people quit by the hundreds. Best Buy took over the #1 marketshare in consumer electronics, and put several of their slow to adapt competitors into the graveyard of retail history.

You're about to see the same thing happen en masse in the restaurant industry. Joe's Crab Shack announced they are eliminating tipping, embedding the cost into the menu, and giving everyone raises.

I LOVE it. It is going to cause an epic earthquake in the restaurant industry. Eventually wages will adjust upward or downward to meet market equity.

It may take 3-4 years to catch on, but this change is going to alter the course of server compensation permanently.

Cool development. I am going to go eat at a Joe's Crab Shack as soon as it is implemented.

 

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[MarkNNelson]

I think we'll have to wait and see how it all shakes out.

When a waiter who works for tips starts to not get them due to poor service, they exit out of the system pretty quickly of their own volition. Nice clean free-market at work.

When a salaried waiter starts giving poor service, we now need to wait for peer pressure to kick in, and/or for a typically mediocre shift manager to start noticing, before that waiter gets purged from the system. This is a far less crisp version of the free market. And while the diner waits for those gears to churn over the course of weeks, they're still paying a built in tip for bad service.

In the case of Best Buy, the shift benefited the consumer because they didn't have to deal with pesky salespeople who were looking out for their own wallet. But in hospitality, the consumer wants servers who are looking out for their own wallet, because it leads to better service.

 

[Weaponize]

In the late 1980's, Best Buy dropped commission sales, gave all their people a raise, and changed retail for ever. Analysts said it would never work. High paid commissioned sales people quit by the hundreds. Best Buy took over the #1 marketshare in consumer electronics, and put several of their slow to adapt competitors into the graveyard of retail history.

You're about to see the same thing happen en masse in the restaurant industry. Joe's Crab Shack announced they are eliminating tipping, embedding the cost into the menu, and giving everyone raises.

I LOVE it. It is going to cause an epic earthquake in the restaurant industry. Eventually wages will adjust upward or downward to meet market equity.

It may take 3-4 years to catch on, but this change is going to alter the course of server compensation permanently.

Cool development. I am going to go eat at a Joe's Crab Shack as soon as it is implemented.

This is exactly how is works in Japan. Zero tipping. Salaries are higher. What's interesting is the LEVEL of service you receive. I've never received better service anywhere else in the world.

 

[Bouncing Soul]

This is exactly how is works in Japan. Zero tipping. Salaries are higher. What's interesting is the LEVEL of service you receive. I've never received better service anywhere else in the world.

While I agree with your observation, I don't agree with the idea it's from the higher wages. Tips are minimal to non-existent in other parts of Asia & Europe as well and the service can be really bad.

It will be interesting to see how this plays out, but my instinct is to agree with
@MarkNNelson

 

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[NYCGoblin]

You will probably see it become more difficult to obtain a job as a server at restaurants that go with this change. Also I would expect a system to come in place for ensuring customer service remains high and poor servers get cut.

 

[Weaponize]

While I agree with your observation, I don't agree with the idea it's from the higher wages. Tips are minimal to non-existent in other parts of Asia & Europe as well and the service can be really bad.

I'm not making the correlation between higher wages resulting in better service in Japan, only. That would be naive Though, I should have done a better job stating that There are many other factors, but the fact that there are no incentives to work harder because of tips IS a contributing factor for sure. Why not in other parts of Asia & Europe? Economic climates & culture.

 

[Bouncing Soul]

I guess we'll see whether it is or is not! I was traveling through SEATAC very frequently when they all got bumped, and service didn't improve at all...

 

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[Phones]

This is exactly how is works in Japan. Zero tipping. Salaries are higher. What's interesting is the LEVEL of service you receive. I've never received better service anywhere else in the world.

This is more of a cultural thing than a salary thing.

Tips are minimal to non-existent in other parts of Asia & Europe as well and the service can be really bad.

True. In Portugal, the portuguese people rarely give tips, mainly because it was never that much of a culture here and becaue of the recent economic crisis .


I agree that the cause of the Best Buy success was the change of behaviour from Agressive selling to regular service, I don't think you will see such a shift in the restaurant industry unless there's a cultural shift towards wanting all the costs stated upfront/anti-tipping.

PS: Portuguese waiters are still paid minimum wage most times, tips or no tips.

 

[CommonCents]

hmmm will be interesting to see what happens. Embedded culture is very difficult to change and America is used to lower wages + tips. To me, tips are the most instant market feedback you can possibly get. But to Vig's point, I think Joe's Crab Shack is probably a well run organization and they can make it work for them despite losing some rockstar servers.

However, for the broader part of the industry it will be a tough one to manage. The pressure will mount to front of the house management to really watch their waitstaff and make sure they are properly trained and performing on a daily basis. Just missing this by a bit will cause great pain to an establishment as they took out the instant feedback system that weeds out poor servers quickly. Great or even good front of house managers are few and far between.

The rockstar servers are going to move elsewhere quickly because they make good coin, far above what any wage increase offset will be. And restaurant "whales" (multiple repeat customers) many times seek out their favorite servers.

I think this is a bit different situation than Best Buy for one reason. I'm guessing Best Buy like most retailers view their floor people as sales people. The restaurant industry mostly does not view servers as sales people in the same way, or at all. I used to own a Food Mfg company so had lots of insight in the biz from white tablecloth dining down to QSR and Cstores. If I had a restaurant I would definitely train the staff as sales people, as they are selling service and product. They are the representatives of the establishment. As opposed to training them and letting them be "servers" gets them off the hook in their minds for not helping with quality product, as they are only a "server". This approach creates a big chasm between the service and the food/kitchen which does not matter one hoot to the customer experience, or shouldn't.

If you want to be wowed by good attitudes and high service on low wages, go visit a Chick Fil A. Especially comparing to their quick service restaurant peers. Heck, I'd even put them up against many other service oriented establishments. I hate the overused word of amazing, but Chick Fil A is amazing.

Here in MN (I'm sure you really miss it Vig) we just had a smackdown against OUTRAGEOUS liberal proposal by the mayor of Minneapolis wanting 12-15 bucks an hour MIN WAGE for servers, PLUS set schedules for a MONTH, plus OT hazard pay for any changes in schedules or on calls among a big list of outlandish things. Just outrageous stuff that would have gutted Minneapolis. Fortunately it received a big backlash, even from many career server professionals. They were trying to outdo seattle and sanfran, combined, on idiocy.

 

[Vigilante]

hmmm will be interesting to see what happens. Embedded culture is very difficult to change and America is used to lower wages + tips. To me, tips are the most instant market feedback you can possibly get. But to Vig's point, I think Joe's Crab Shack is probably a well run organization and they can make it work for them despite losing some rockstar servers.

However, for the broader part of the industry it will be a tough one to manage. The pressure will mount to front of the house management to really watch their waitstaff and make sure they are properly trained and performing on a daily basis. Just missing this by a bit will cause great pain to an establishment as they took out the instant feedback system that weeds out poor servers quickly. Great or even good front of house managers are few and far between.

The rockstar servers are going to move elsewhere quickly because they make good coin, far above what any wage increase offset will be. And restaurant "whales" (multiple repeat customers) many times seek out their favorite servers.

I think this is a bit different situation than Best Buy for one reason. I'm guessing Best Buy like most retailers view their floor people as sales people. The restaurant industry mostly does not view servers as sales people in the same way, or at all. I used to own a Food Mfg company so had lots of insight in the biz from white tablecloth dining down to QSR and Cstores. If I had a restaurant I would definitely train the staff as sales people, as they are selling service and product. They are the representatives of the establishment. As opposed to training them and letting them be "servers" gets them off the hook in their minds for not helping with quality product, as they are only a "server". This approach creates a big chasm between the service and the food/kitchen which does not matter one hoot to the customer experience, or shouldn't.

If you want to be wowed by good attitudes and high service on low wages, go visit a Chick Fil A. Especially comparing to their quick service restaurant peers. Heck, I'd even put them up against many other service oriented establishments. I hate the overused word of amazing, but Chick Fil A is amazing.

Here in MN (I'm sure you really miss it Vig) we just had a smackdown against OUTRAGEOUS liberal proposal by the mayor of Minneapolis wanting 12-15 bucks an hour MIN WAGE for servers, PLUS set schedules for a MONTH, plus OT hazard pay for any changes in schedules or on calls among a big list of outlandish things. Just outrageous stuff that would have gutted Minneapolis. Fortunately it received a big backlash, even from many career server professionals. They were trying to outdo seattle and sanfran, combined, on idiocy.

$15 plus tips

 

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[juan917]

I dont think this is a big of a deal as you think, I cant imagine a consumer choosing this restaurant over another one for this very reason. If tips are included in the menu then the end price should be the same.

Also, last time i went into best buy i was appalled by how shitty the workers were. Might be good in the short term but maybe not long term when comfort starts to sink in

 

[Weaponize]

This is exactly how is works in Japan. Zero tipping. Salaries are higher. What's interesting is the LEVEL of service you receive. I've never received better service anywhere else in the world.

This is more of a cultural thing than a salary thing.

I'm not making the correlation between higher wages resulting in better service in Japan, only. That would be naive Though, I should have done a better job stating that There are many other factors, but the fact that there are no incentives to work harder because of tips IS a contributing factor for sure. Why not in other parts of Asia & Europe? Economic climates & culture.

I sometimes skip past stuff as well...

 

[hellolin]

This is exactly how Japan does it, there food in the restaurants cost just a bit more, but the tips and taxes are build into it, and the waiters are forbidden to take any tips, but they do make enough money to make a living, even in the cities because the prices of the food are adjusted to market value including cost of living. This will help out a lot poorer people who can only do this kind of job for a living, but I wonder how customer services will be since tipping does give that a big boost.

 

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[Writer]

This will help out a lot poorer people who can only do this kind of job for a living.

The opposite effect will occur as the cost will have to be absorbed by the owners as a fixed expense. In other words, waiting will become a semi-specialized job, with higher entry-level salaries, especially if minimum wage is increased. A lot of kids that are trying to get a first job to gain experience and credibility will be prevented from entering the workforce.

 

[Weaponize]

In other words, waiting will become a semi-specialized job, with higher entry-level salaries

A lot of kids that are trying to get a first job to gain experience and credibility will be prevented from entering the workforce.

...and then service get's better

 

[Writer]

...and then service get's better

Not necessarily. I don't miss going to a restaurant in Europe where a grumpy 50 years old guy is waiting me and has his salary independently of the quality of service (I actually got yelled at by more than one).
I'd rather have the American kid who hustles to get his tip and has to pay for his college.

(Obviously a generalization)

 

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[GMJimmy]

In my home country:

• tip is included in the price.
• But you are expected to give a tip to the waiter/cashier.
• And you pay service fee
• And you pay a higher service fee if you eat in

 

[Weaponize]

Not necessarily. I don't miss going to a restaurant in Europe where a grumpy 50 years old guy is waiting me and has his salary independently of the quality of service (I actually got yelled at by more than one).
I'd rather have the American kid who hustles to get his tip and has to pay for his college.

(Obviously a generalization)

One could easily argue the opposite as well It'll be fun to see the outcome!

 

[Chitown]

In California we have a local burger chain called In-N-Out. Delicious food. Great service. Clean restaurants - this includes the restroom, which is a major deciding factor as to whether I go back or not - and the order takers make $10.00 + per hour, with health benefits.

Managers of their establishments annually make $90,000 - $100,000, with bonuses. I don't think they have 500 locations in more than 6 or 7 states.

I patronize this business, in part, because of how they treat their employees.

The same with Starbucks. CEO Howard Schultz, who grew up in a Brooklyn housing project, watched his father struggle with chronic illness and lack of access to health care options. He vowed that were he ever in a position to do so, he would provide some form of health benefits even to part-time employees.

I realize that not everyone is In-N-Out or Starbucks. However, I can't stand this notion that because someone flips burgers or serves mocha-frappa-soy milk whatever they don't deserve a decent livable wage - whatever the amount agreed upon.

If eliminating tips and raising prices improves service and morale, so be it. But I've always believed that a quality service person will provide top notch service - tip or no tip.

A tip is merely an additional value affirmation on the part of the customer for the services rendered. A friend and I tipped a server a penny because she, literally, threw our plates across the table at us.

We were like, WTF?

We finished our meals, told the manager what happened and left. We went back two weeks later, had wonderful service from a different server and promptly left her 20% on a $60.00 tab.

Both servers were tipped based on the value they provided to our dining experience.

I love Joe's Crab Shack. I eat there because I like their food, not because they have tipping or not.

Just my 2 cents.

 

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[Writer]

In California we have a local burger chain called In-N-Out. Delicious food. Great service. Clean restaurants - this includes the restroom, which is a major deciding factor as to whether I go back or not - and the order takers make $10.00 + per hour, with health benefits.

Managers of their establishments annually make $90,000 - $100,000, with bonuses. I don't think they have 500 locations in more than 6 or 7 states.

I patronize this business, in part, because of how they treat their employees.

The same with Starbucks. CEO Howard Schultz, who grew up in a Brooklyn housing project, watched his father struggle with chronic illness and lack of access to health care options. He vowed that were he ever in a position to do so, he would provide some form of health benefits even to part-time employees.

I realize that not everyone is In-N-Out or Starbucks. However, I can't stand this notion that because someone flips burgers or serves mocha-frappa-soy milk whatever they don't deserve a decent livable wage - whatever the amount agreed upon.

If eliminating tips and raising prices improves service and morale, so be it. But I've always believed that a quality service person will provide top notch service - tip or no tip.

A tip is merely an additional value affirmation on the part of the customer for the services rendered. A friend and I tipped a server a penny because she, literally, threw our plates across the table at us.

We were like, WTF?

We finished our meals, told the manager what happened and left. We went back two weeks later, had wonderful service from a different server and promptly left her 20% on a $60.00 tab.

Both servers were tipped based on the value they provided to our dining experience.

I love Joe's Crab Shack. I eat there because I like their food, not because they have tipping or not.

Just my 2 cents.

God, I love In 'n Out!!

 

[Bigguns50]

Great topic @Vigilante !

There are many variables to debate here and I've thoroughly enjoyed reading everyones take. But...I'm just going to make a prediction. 4 months and Joe's goes back to tipping.

Oh...and if this turns out to be better for the employees then I hope I am wrong.

 

[biophase]

Having spent a few months in Australia this year where there is no tax or top, I actually like not tipping. However, the service was horrendous. But I think it is something that we would get used to as a trade off. Yes, the menu prices may go up, but are they going up by 20%? I guess we will wait and see. I like sitting down and see a dish for $19.95 and actually paying $19.95. Not paying $26.

The way I figured was, based on a $20 meal. Would it be worth it to me not have to pay $4 (20% tip), but have the hassle to ask for my water to get refilled, ask for the check, or find a waiter to come by to order dessert? I have no problem getting up from my seat and finding the waiter or busboy to get more water. If I save $4, that's a free meal every 5 meals.

I think that we have gotten accustomed to people waiting on us in our restaurants that when the service level drops people will go crazy and complain. Me personally, I can deal with that if I know I'm not paying a tip. I absolutely hate paying tips when the service is bad.

 

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[Dwee]

Excellent point Bio. I'm not that interested in having someone fawn over me. When I decide I want/need something I immediately ask for it. Forgoing a tip, and continuing to ask for what I want, isn't a big deal for me.

Besides, if the service was ever truly awful I'd speak with a manager about it.

 

[Chitown]

God, I love In 'n Out!!

@Writer

Yes, indeed! That, my friend, is good eatin! I had clients at the premiere party, last night, for Will Smith's new film, Concussion. I knew I wouldn't see them for at least three hours and I was starvin' like Marvin.

So what's a hungry fella to do?

I took my happy buttocks a couple of blocks down the road to the In-N-Out, across from Hollywood High. Had me a #2 - Cheeseburger...no lettuce...grilled onions...fries...and a lemonade. Halle Berry could've shown up, offering all kinds of goodies.

I'd have told her, "Beat it, baby! I'm busy!

That's how much I like those burgers.

 

[Rawr]

Having spent a few months in Australia this year where there is no tax or top, I actually like not tipping. However, the service was horrendous. But I think it is something that we would get used to as a trade off. Yes, the menu prices may go up, but are they going up by 20%? I guess we will wait and see. I like sitting down and see a dish for $19.95 and actually paying $19.95. Not paying $26.

The way I figured was, based on a $20 meal. Would it be worth it to me not have to pay $4 (20% tip), but have the hassle to ask for my water to get refilled, ask for the check, or find a waiter to come by to order dessert? I have no problem getting up from my seat and finding the waiter or busboy to get more water. If I save $4, that's a free meal every 5 meals.

I think that we have gotten accustomed to people waiting on us in our restaurants that when the service level drops people will go crazy and complain. Me personally, I can deal with that if I know I'm not paying a tip. I absolutely hate paying tips when the service is bad.

Words out of my mouth. Except service in Spain is still quite good - and what's MUCH MUCH more important, is people are genuine when they say "Hello" with a smile or an upbeat tone when you come in.

 

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[Mineralogic]

In the late 1980's, Best Buy dropped commission sales, gave all their people a raise, and changed retail for ever. Analysts said it would never work. High paid commissioned sales people quit by the hundreds. Best Buy took over the #1 marketshare in consumer electronics, and put several of their slow to adapt competitors into the graveyard of retail history.

You're about to see the same thing happen en masse in the restaurant industry. Joe's Crab Shack announced they are eliminating tipping, embedding the cost into the menu, and giving everyone raises.

I LOVE it. It is going to cause an epic earthquake in the restaurant industry. Eventually wages will adjust upward or downward to meet market equity.

It may take 3-4 years to catch on, but this change is going to alter the course of server compensation permanently.

Cool development. I am going to go eat at a Joe's Crab Shack as soon as it is implemented.

yes, i think its really about the phase in to have more robot/automations and lack of jobs in these chains in the future though. this is just a step along that road. Several chains been testing ordering drinks from the table, etc. No need for same level of attention/servers .

 

[Vigilante]

Right now, at the finest convenience stores in America (WaWa gas stations) you step up to a digital screen. You order your lunch. 4-5 clicks total to a customized order. The order goes electronically to the "cooks" who make it while you pay. Your lunch comes up. Almost zero interaction with humans, which means almost zero error on the order side.

It's WAY better than a clerk who is talking with her girlfriend about last night's party and how hung over she is when all you wanted to do was get a damn sandwich. They eliminated payroll while simultaneously making the consumer experience better.

Times are changing, and being escorted to escalation by a rapid evolution of technology colliding against the $15/hour burger flipper entitlement generation.

Honest to goodness... who started giving these kids participation trophies a decade ago? That a**hole should be drawn and quartered.

 

[HAL]

This sounds like something that might work for chains, but at higher end places I think the clientele would prefer tipping and so would the wait staff. It's all just perception I guess, but I know some people who would have to be paid $50-60 / hr to equal what they do in tips.

 

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[Mineralogic]

Right now, at the finest convenience stores in America (WaWa gas stations) you step up to a digital screen. You order your lunch. 4-5 clicks total to a customized order. The order goes electronically to the "cooks" who make it while you pay. Your lunch comes up. Almost zero interaction with humans, which means almost zero error on the order side.

It's WAY better than a clerk who is talking with her girlfriend about last night's party and how hung over she is when all you wanted to do was get a damn sandwich. They eliminated payroll while simultaneously making the consumer experience better.

Times are changing, and being escorted to escalation by a rapid evolution of technology colliding against the $15/hour burger flipper entitlement generation.

Honest to goodness... who started giving these kids participation trophies a decade ago? That a**hole should be drawn and quartered.

The Technocracy is finally here! Who's side are you on?

 

[hellolin]

In California we have a local burger chain called In-N-Out. Delicious food. Great service. Clean restaurants - this includes the restroom, which is a major deciding factor as to whether I go back or not - and the order takers make $10.00 + per hour, with health benefits.

Managers of their establishments annually make $90,000 - $100,000, with bonuses. I don't think they have 500 locations in more than 6 or 7 states.

I patronize this business, in part, because of how they treat their employees.

The same with Starbucks. CEO Howard Schultz, who grew up in a Brooklyn housing project, watched his father struggle with chronic illness and lack of access to health care options. He vowed that were he ever in a position to do so, he would provide some form of health benefits even to part-time employees.

I realize that not everyone is In-N-Out or Starbucks. However, I can't stand this notion that because someone flips burgers or serves mocha-frappa-soy milk whatever they don't deserve a decent livable wage - whatever the amount agreed upon.

If eliminating tips and raising prices improves service and morale, so be it. But I've always believed that a quality service person will provide top notch service - tip or no tip.

A tip is merely an additional value affirmation on the part of the customer for the services rendered. A friend and I tipped a server a penny because she, literally, threw our plates across the table at us.

We were like, WTF?

We finished our meals, told the manager what happened and left. We went back two weeks later, had wonderful service from a different server and promptly left her 20% on a $60.00 tab.

Both servers were tipped based on the value they provided to our dining experience.

I love Joe's Crab Shack. I eat there because I like their food, not because they have tipping or not.

Just my 2 cents.

There burger is freaking delicious too, better than some non fast food restaurant chain burgers, they are the Costco of fast food I guess.