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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[MidwestLandlord]

I can't understand why every fast food restaurant isn't set up with this yet. Pretty much any restaurant I go into (fast food like) could benefit from some type of automation. The inefficency just drives me nuts -- I've probably walked out of 4 restaurants in the last few months simply because their order process was like a feeding frenzy.

A few years back I helped do a test run for a chain that wanted to fully automate the front of the house ordering process. Touch screens and all that.

We paid a franchisee that had a great location for this test some cash to let us commandeer his location for a month.

A few BIG problems were found:

1) Older people that are adverse to technology or flat unable to use technology

2) People with certain types of disabilities struggled with it. Namely those with learning or vision disabilities

3) The technology was poor. Point of sale makers, for the most part, are way behind in tech

4) a full 1/3 of people mis-ordered their own orders

5) speed of service fell by over 50%. Why? Partly because it was new, but partly because a well trained employee has a "sense of urgency" and subtly pushes the customer along in the order process, something a touchscreen cannot do

6) people lack self-direction. They would order on the screen, then just stand there and wait, blocking the next customer. Again, this is because a well trained employee guides the customer, something a touch screen cannot do

7) ADA compliance for wheelchairs was non-existent

8) up-sells fell by over 80%

9) customers that couldn't read English struggled with it, even with a Spanish option (and converting the menu and POS to Spanish was expensive)

Some of these problems are fixable, others are not so easy. There is tremendous behind the scenes process in fast food that most people don't realize even happens, like "sense of urgency" and "tone of voice" guiding customers in the process.

So it's not a slam dunk by any means. This is why fast food places are only now starting to do this, because of other pressures like $15 an hour minimum wages and poor employee quality.

 

[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.

 

[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.

 

[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.

 

[Weaponize]

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.

I don't, personally. Here's why...

I've eaten at high end (Michael Star) restaurants and have hated coming up with a tip. I was at a Michael Star restaurant in Vegas not too long ago, we decided to go for the multi-course food & wine pairing. Meaning, they decide on the menu for us and have their Sommelier introduce each course with the wine (of their choice) that best fits the food.

It was lavish.

But... someone f*cked up half way through and delivered our food before the Sommelier could intro the food/wine for us. A big no-no in their world. We started eating the food BEFORE tasting the wine. The wine is suppose to enhance the flavor of the food, much like salt does, but in a much more regal way when paired with the correct wine.

The staff freaked out! F*cking, freaked out!

The chef came out and personally apologized. They have a book of the restaurant sitting at the front door, they snatched it away from it's perch and had the entire staff sign it for us. The entire F*cking staff. They sell some sort of high end french chocolates in a fancy-a$$ box to take home with you, they gave it to us, on the house. They were buzzing around like flies on a rump roast.

It was F*cking funny!

Did they care about the tip? Nope... They could give 2 shits about the tip. And when I say "they," I'm referring to the wait staff, those directly benefiting from a 20% (minimum) tip on a meal costing hundreds of dollars (tip was not included in the price).

You wanna know what they really cared about!? They only cared about... Their Yelp review. Yes... their F*cking Yelp review. Gawd forbid I leave, jump on Yelp, and describe this horrible atrocity in excruciating detail.

You see.. in that instant. The truth came out. F*ck the tip, we have bigger worries. We better make sure we address them before these customers leave.

A Sommelier, a Waiter, those directly benefiting from a tip at a high end place care about their careers more than that 1 time tip. This is truly their career, and they'll do anything to protect that.

 

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[MJ DeMarco]

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.

I can't understand why every fast food restaurant isn't set up with this yet. Pretty much any restaurant I go into (fast food like) could benefit from some type of automation. The inefficency just drives me nuts -- I've probably walked out of 4 restaurants in the last few months simply because their order process was like a feeding frenzy.

 

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[Daniel A]

^ A few days ago I ordered a pizza from Pizza Hut's website because they gave 50% off if you ordered via their app or website and I was craving some pizza (FYI -- today's the last day for that promo). I wouldn't order pizza any other way now. I'm assuming the process is easier and simpler for all parties involved.

While I was eating my pizza, I also watched a YouTube video titled Business of Pizza: The Pizza Show (and I learned that Pizza Day is Feb 9 in the USA ).

Anyways, there's a startup in Mountain View, CA where the making and delivery of their pizza is almost 100% automated (with plans to make it 100% automated ASAP) called Zume Pizza.

You can order pizza via their apps / website and it'll be cooked while it's being delivered via their specialized trucks.

The video explains and shows the process in detail. It's pretty cool. The segment about Zume Pizza starts at 4:25.

View: https://youtu.be/ZZzFoi_fuF4?t=4m25s

 

[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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[Lex DeVille]

I enjoyed Germany service. I sit down, they take my order, they bring my food when it's ready instead of letting it get cold while my friend's steak finishes getting super extra well done...

Tip is included in the bill.

Once they leave the table I either saw them once or not at all until time to pay. That's how I like it. When I go out it's not for service. It's for convenience. I want to eat in peace. I don't want to be watched. I don't want to be tended to. I don't want to have to do math or fight my phone for the calculator. If I want to talk to someone I bring them with me.

On a side note, Wendys is all in with tech and they're upgrading 6,000 chain stores to full frontline automation and leaving it up to franchise owners to decide whether or not to do the same. They're more on board with tech than McDonalds. I don't eat fast food, but if this was standard for all restaurants, I'd definitely eat out more.

As it is I can't stand to eat out in the U.S. I hate being herded to a table like cattle and getting some half-alert waiter who gives an automated response and automated laughs to anything I say. I hate being asked if I'm doing "alright" every two seconds, and hate being expected to leave a tip of a certain amount even when not earned.

No thanks. Give me robots.

Let a computer let me book my seat at the door or from home. I'll find my way there.
Let me press buttons on a screen to order and choose the perfect color of steak.
Let me press another button in the event I need something extra.
Let me pay by card right at my table so I don't have to wait on someone's a$$ to "come back around."
Let me have reasons to eat out again.

Screw tip/no tip.
Give. Me. Robots!

 

[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.

 

[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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[BaraQueenbee]

Same system in the UK and Europe. Terrible service.

Everytime I get back from the US, this is my first reality slap. Always.

I have been looking and thinking about this alot.
Someone mentioned in a previous comment, it being about culture.
Here in the netherlands, many people complain about not liking the US. One of their top 5 reasons?
"Their fake kindness"

Mindblown

Not thinking in ways as "fake" or "real". It is about the atmosphere one creates.
Also, I prefer "fake kidness" over "real rudeness" everyday anyday.
Its more open, creates opportunity to talk to the people, get the know a bit more.

Will that dissapear when we take away the element of tipping? I so hope not.
However I do agree that everyone should get a minimum wage that can make them at least "live live" with the basic needs.

BUT....... I feel this will be at all times a two-way thing. Just because you are a paying customer, it doesn't give right or the ok to treat the person that is serving you/working for you, rudely or in a sense of entitlement <--- and THIS, is also very different per culture.



This is going to be an interesting change to see, excited to watch how it evolves and takes course.

 

[BaraQueenbee]

I been to the US for the first time in my life, this year. When we came back home I felt like I came from a country of friendly open people, back to a cold and unfriendly country (Germany). I miss the friendly convos wherever we went.

Yes. God I know yes. Now lets be those that create the convo here too and be open person, on this side of the planet :-D

 

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[Vigilante]

My predictions have been shit lately

Joe’s Crab Shack Reportedly Preparing For Bankruptcy

http://www.dontwasteyourmoney.com/j...partner&utm_campaign=scripps&utm_content=WFTS

 

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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.

 

[MJ DeMarco]

6) people lack self-direction. They would order on the screen, then just stand there and wait, blocking the next customer. Again, this is because a well trained employee guides the customer, something a touch screen cannot do

Execution is everything on this, and I think customers should have an option. At Frys, some deli counters have a kiosk giving you the choice -- I think the last time I ordered through a human was 3 years ago.

 

[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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[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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[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.

 

[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 .

 

[Supa]

Everytime I get back from the US, this is my first reality slap. Always.

I have been looking and thinking about this alot.
Someone mentioned in a previous comment, it being about culture.
Here in the netherlands, many people complain about not liking the US. One of their top 5 reasons?
"Their fake kindness"

Mindblown

Not thinking in ways as "fake" or "real". It is about the atmosphere one creates.
Also, I prefer "fake kidness" over "real rudeness" everyday anyday.
Its more open, creates opportunity to talk to the people, get the know a bit more.

Will that dissapear when we take away the element of tipping? I so hope not.
However I do agree that everyone should get a minimum wage that can make them at least "live live" with the basic needs.

BUT....... I feel this will be at all times a two-way thing. Just because you are a paying customer, it doesn't give right or the ok to treat the person that is serving you/working for you, rudely or in a sense of entitlement <--- and THIS, is also very different per culture.



This is going to be an interesting change to see, excited to watch how it evolves and takes course.

I been to the US for the first time in my life, this year. When we came back home I felt like I came from a country of friendly open people, back to a cold and unfriendly country (Germany). I miss the friendly convos wherever we went.

 

[Weaponize]

but the average you really care about is the one in the country and restaurants that you normally eat.

That's what makes this whole thread so damn interesting. Seems to be some radical differences based upon location. Great stuff!

 

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[Vigilante]

Just a follow up to this thread from last year. http://www.nytimes.com/2016/05/13/b...d-getting-rid-of-tips-it-didnt-last-long.html

What do you think? What kind of change would it take for this cultural norm to be changed?

My predictions have been shit lately

 

[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.

Genious ! Ok...fine. Lucky.

 

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[Bigguns50]

I hate being asked if I'm doing "alright" every two seconds,

Same for me. I always tell my server upfront NOT to come check on me/us every 2 minutes but rather, keep an eye from a distance and I will let him/her know if I need something. I also tell them..."yes, I do tip".

Wendys is all in with tech and they're upgrading 6,000 chain stores to full frontline automation

Now THIS....my prediction...it will work as long as the system works better than the people who take your order.

As far as the main topic.... I think the 'no tipping' thing will work for some restaurants but definitely not for all. And I think if it catches on...it will take many years. I'm thinking the now 18-20 something year olds might welcome this in the future.

 

[MidwestLandlord]

No cashiers, no lines – Amazon debuts its new grocery store

This ^^^ is the real future of retail.

 

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[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.

 

[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

 

[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