Why It’s So Hard for Restaurants to Go Tip-Free

September 25, 2019 Admin 0 Comments

Changing a restaurant’s tipping model is challenging, but Eater Young Gun Andrea Borgen (’16) is trying to address the pay gap

The pay equality gap always bothered Barcito owner Andrea Borgen. The 2016 Eater Young Gun winner opened her Los Angeles business in 2015 and noticed the front of the house earned two and a half to four times as much as the kitchen staff. To address this, Borgen very publicly converted to a no-tipping model in 2016, and on July 2 she brought tipping back, but this time with a surcharge to be shared across the staff. Borgen views this recent shift as a sustainable way to build equity between Barcito’s front- and back-of-house staff.

It’s incredibly tricky to change a restaurant’s tipping model. If staff ends up earning less than before, they might revolt and leave. And as Downtown’s Pez Cantina can attest, adding unusual service charges to the bill can result in customers feeling cheated. “Restaurant owners are scared of change and rightfully so,” says Borgen. “I had a lot of fallout from the changes that I made [in 2016].”

Even now, Borgen understands why restaurants explore varied tipping models or new service charges. “I totally understand the mentality behind adding a four percent surcharge and calling it whatever you want to call it. But restaurants have been surviving off the backs of minimum-wage workers for far too long, and we need to find a new sustainable solution that’s not the old way of doing things.”

Committed to seeing restaurant culture shift, Borgen looked to her former boss and Union Square Hospitality Group CEO Danny Meyer, who instituted a no-tipping model in all of his New York restaurants in 2015. This leap wasn’t without its challenges; Meyer admitted in 2018 that 30 to 40 percent of his long-term staff quit, while back-of-house employees saw a 20 percent increase in their paychecks. Turnover is never good in any business, plus Meyer openly shared that his customers were taken aback by the menu price increase. Throughout this change, Meyer stuck to his policy. And at Barcito, Borgen simply wanted ensure employees remained happy while equalizing pay, and that her customers still enjoyed the food and service.

Even as she and Meyer both have faced challenges in converting to an entirely tip-free model, Borgen remains invested in her efforts to bridge the equality gap. Operating costs in LA continue to rise, plus California’s minimum wage went up on July 1, with another increase scheduled for 2020. Then there’s 2018’s Fair Labor Standards Act which permits restaurants to share tips with kitchen staff, and each element presents a new set of challenges for restaurant owners. Factor in the established challenge of keeping restaurant kitchens staffed, and it’s clear it’s never been more important for LA restaurant owners to figure out how to keep their employees paid and their customers happy.

In spite of it all, Barcito’s model is working. Eater sat down with Borgen to talk about her thoughtful approach towards business, keeping both employees and customers satisfied, and what drives her to equalize employee pay at Barcito.

How no-tipping affected her customers: “The biggest pitfall was from the standpoint of sticker shock. Our prices have always been really reasonable, even when the tip was included.”

How her present tipping model affects the entire staff: “We have a tip pool model based on hours worked per shift, and every job or category has a certain number of points associated with it according to experience. The only difference is that it includes the back of the house.”

Hope Leigh

How Borden implemented the changes from within: “There are people that have been at the restaurant since day one, and I’ve worked with some while in New York. I’m transparent with any decision that I make, so there’s a lot of trust there. I explained everything, especially when we transitioned, gave out paychecks, and found out the team was on board with this. People like to have each other’s backs. No-tipping had its challenges, but it’s been pretty successful. I think our regulars and guests really love it, and it fosters more genuine relationships with some of the staff.”

On keeping morale up during change: “You can talk about taking care of your employees all you want, but until you actually have something to show for it, it’s a lot of talk and not a lot of walk. Providing health insurance, stable schedules, and having a team-oriented culture for an independent restaurant is something that sets us apart.”

How restaurants can determine if no-tipping is workable: “Have [staff] conversations across the board with different types of service models, even the ones that were unsuccessful. There’s a lot to spec out other than just plain wages. Take the minimum wage hikes into account, and consider [how to] create a culture where people are going to feel taken care of, not [needing to] run to another restaurant. Incentivize people to help you build your business and feel invested in you.”

On persuading customers to accept this change: “So much of this topic is about education. Operators are confused about it, so diners are confused too. You don’t want to burden people who are trying to go out and eat and have a good time with an education about minimum-wage laws.”

On transparency: “I’ve always been honest and transparent why we do the things that we do. And 50 percent of our customers we know by [their] first names. It felt like a bit of a crusade to go with no-tipping, which is abnormal here in LA. When we went back to the more common practice of tipping, I created language in the restaurant. I engaged with my staff so they’re armed to talk about why we changed things. It took a lot of work, explanation, and a lot of one-on-one conversations with people on a daily basis about why it felt important to me. We have so many regulars that we have close relationships with, so we just had conversations with them.”