The gratuitous side of tipping
Restaurant chain Joe’s Crab Shack announced with much fanfare in November that it was experimenting with a no-tipping policy at 18 of its outlets nationwide.
The chain’s parent company, Ignite Restaurant Group, said at the time that “tipping is an antiquated model” and that customers “can expect the same great food and service without the obligation to leave tips.”
It said menu prices at participating restaurants had been raised so that employees would receive higher wages, but the increased cost to diners would be “typically less than the average 20 percent service tip.”
Yet now, less than a year after the experiment quietly began in August, Joe’s has restored tipping at all but four of the locations.
The lesson seems to be that even though tipping is indeed an antiquated model, and even though much of the developed world has moved on from this archaic, class-based system, Americans remain convinced — wrongly, many researchers say — that service is always better, and prices cheaper, when tips are a factor.
“What we know in practice is that tipping actually has little impact on service in most restaurants,” said Lars Perner, an assistant professor of marketing at USC’s Marshall School of Business. “But it gives consumers the feeling that they’re in control.”
Mike Lynn, a professor of consumer behavior at Cornell University School of Hotel Administration, said diners routinely disregard the tip they’ll leave when judging a restaurant’s prices. Thus, if a restaurant has a no-tipping policy but 20 percent higher menu prices, it will be seen as a lot more expensive than a restaurant with 20 percent lower prices but where a 20 percent tip to the server is customary.
“Is that rational? No,” Lynn said. “But it’s what people think.”
In recent years, restaurants in Los Angeles, New York and elsewhere have introduced no-tipping policies. In most cases, this was done to provide greater pricing transparency and more equitable compensation to the staff, including those toiling away in the kitchen.
A widespread end to tipping has been seen as unlikely, though, until large restaurant chains also did away with the practice. Joe’s Crab Shack was the first national chain to give it a go.
The company has seafood restaurants in 32 states, including nearly a dozen in California. The no-tipping experiment was confined to restaurants in the Midwest.
I spoke with the manager of a Joe’s outlet in Southern California, who asked to remain anonymous because he wasn’t authorized to speak on behalf of the company. He said executives at the parent company, Ignite, were initially excited about the no-tipping policy.
“They wanted us to be an industry leader,” he said. “But it didn’t work out.”
I asked Ignite whether I could speak with its chief executive, Bob Merritt, about the company’s experience. No one responded to my calls and emails.
But Merritt shared some thoughts with investors in his company’s recent first-quarter earnings call.
“The system has to change at some point, but our customers and staff spoke very loudly,” he said, according to a transcript of the call. “And a lot of them voted with their feet.”
Merritt said the company’s internal research found that almost 60 percent of Joe’s Crab Shack customers disliked the no-tipping policy. He said customers felt they’d lost control over quality of service and didn’t trust managers to share the wealth of higher prices with employees.
The restaurants tried various ways of communicating to customers how things now worked, Merritt said, but most patrons just wouldn’t play ball. As for why four of the 18 outlets will continue without tipping, he said the company will try to figure out “why it worked in some places and why not in others.”
Richard McKenzie, a professor emeritus of economics at the University of California at Irvine, said one reason may be because of management. When restaurant customers perceive strong oversight by managers, he told me, they feel more comfortable that good service isn’t contingent on paying a fat tip.
In other words, if the manager is seen working the room and interacting with diners and staff, as opposed to hiding in a back office, customers think there’s no danger of servers slacking off and, he said, “there’s no need for tipping.”
In much of the developed world, it’s simply a given that restaurants strive for good service: Diners aren’t expected to be responsible for motivating servers. USC’s Perner hails from Denmark. He said you might leave behind a “token tip” after a meal there, or something more substantial if the level of service was exceptional.
Tipping is an absolute no-no in Japan, where a server would lose face if a diner suggested he or she wasn’t always trying their best. Tipping also isn’t customary in Australia, China, France, Italy, Singapore, South Korea, Spain, Sweden and Switzerland, among other nations.
American consumers seem to be of two minds. We believe tipping is essential to good restaurant service, but we usually don’t tip hard-working staffers at fast-food outlets. We tip the person who cuts our hair but not the one who fixes our car.
Meanwhile, tasks that once were seen as un-tip-worthy, such as pouring a cup of coffee or toasting a bagel, now routinely come with the soft pressure of tip jars. Facebook is even said to be considering “digital tip jars” for users who share particularly popular posts.
As for the future, look no further than the ride-sharing service Uber. It tells customers that tips are neither expected nor required. Yet many passengers still grease the palm of drivers.
Cornell’s Lynn, who is regarded as one of the nation’s foremost experts on tipping, said this is a perfect example of why tipping will remain a part of the U.S. economic landscape. It’s just a matter of time, he said, before all Uber passengers are tipping.
“If some people do it, eventually everyone will have to do it,” Lynn said. “That’s how it works.”
David Lazarus is the consumer issues columnist for the Los Angeles Times.