There’s been increasing debate in the restaurant world about the standard practice of paying food workers mainly through tipping… and not just because it forces diners to do math. Employees who work for tips have unstable, sometimes very low incomes (a recent report says tipped hospitality workers in New York state are twice as likely to live in poverty) which is one reason restaurants find it hard to retain workers.
So more and more restaurants are trying alternatives to tips. The big example this week was the newly re-opened, Michelin-starred Dirt Candy, where tipping has been replaced with a flat “administrative fee.” But in L.A., the restaurant Brand 158 has been running a similar experiment for over a year. There, instead of a tip, you pay a flat 15 percent service charge, which helps pay the whole staff higher hourly wages. Rico met up with Brand 158 owner Gabriel Frem to learn how the policy’s been working out.
Rico Gagliano: First of all, how do diners like it?
Gabriel Frem: Over all, and there’s always exceptions, but over all, it seems people are appreciating it, because it’s only 15 percent. And most people these days are tipping 15 percent, 18 percent, or 20 percent. And people who tip less than that, then that’s a different issue altogether. We’re not trying to address those right now!
But people also… there’s a few elements associated with a tip that are eliminated when you take the tip out, and replace it with a service charge:
One: You’re not having to judge another human being with a number. You may or may not have money to show someone your appreciation. And you may not feel 15 percent is enough, so, now, you feel like you have to put 20, 25 or 30 percent… You feel this obligation.
Two: You have to do mental math. Most people don’t like math. So you’re doing math, you’re judging another person. We eliminated that.
Three: When you don’t have to tip in a restaurant, you don’t feel, as you’re sitting and relaxing, that you’re taking away from the livelihood of that person serving you. When you take the tip out, they’re not making money based on how much they’re selling you. And I always tell people: “Imagine paying your babysitter based on how many bananas she feeds your child during your absence?!” I mean, we want a relaxed environment, where people can sit back and leave whenever they wanna leave, and not feel that they’re in direct conflict with the compensation model that you put for the person serving them.
Rico Gagliano: But I do have to ask though: For you, as a business man, that means potentially that you’re not getting as much turnover. You’re not getting as many people in buying your food. Don’t you want to have more turnover?
Gabriel Frem: Well, I can tell you, we are more interested in returning guests than in turning tables. If people develop an emotional relationship with a place, they will come back more often. And, you know, you design the restaurant and your pricing to where, if people sat longer and enjoyed themselves, you can still make a profit.
Rico Gagliano: Still, that’s kind of a hassle to do that. It’s not the industry norm. What made this issue kind of important to you? Why did you decide to do this?
Gabriel Frem: One of the reasons is to create stability for our employees so that they can focus on the guest. We feel that, if their lives are unstable — if they came to work and didn’t know what they’re going to make for the week — they would not be focused on the people that they’re taking care of.
Also,We hire and train our employees, and we don’t feel a random guest should be making a payment to them based on calculations that may or may not be reasonable. We’re not comfortable with that.
And we feel that we can sustain our employees so that they can stay with us, so we don’t have the issues that come from a nomadic workforce that’s constantly moving around.
Rico Gagliano: Oh, interesting. Have you found over the last year that you’ve retained more staff than is typical for a restaurant?
Gabriel Frem: Absolutely. Now I’m not a restaurateur by background, so I can’t say “OK, over the last ten years, I’ve had this experience.” But I’ve dined. I know a lot of people who own restaurants. And the big problem everybody says is, “The staff is a problem.” Retention. Well, if you go to our restaurant, 90-plus percent of the people who are there, were there on opening day. We feel that we end up saving tremendously by having the same staff, and having less people on the floor, because everybody knows what they’re doing.
Rico Gagliano: You actually have fewer waiters on the floor?
Gabriel Frem: I think, relative to the typical restaurant, we can operate at every level with less people, because they are veterans. They know what they’re doing. I mean, people get better with time when they’re doing something. They work together better. You can’t just create a unified culture if your people are being changed every three to four weeks.
I was talking to someone who said to me, “My aunt has a restaurant. She has 16 employees. Last year she sent 124 W-2s.” That many people she changed in one year, because every three to four weeks, someone… they gotta move on. So you have that type of vicious cycle going on. But people think they’re saving money. I don’t think they’re saving money this way.
Rico Gagliano: So far, you and a few others that are starting to pop up are the exceptions to the rule. Is this a trend, you’re feeling?
Gabriel Frem: You know what, I hope that the industry wakes up. It is a business interest. It’s not a charity thing. I think everybody is trying to run a restaurant basically without paying anyone anything. And it’s food! It’s a sensitive thing! So you can imagine in the back of the house, where people are touching meat and making all of that sensitive stuff for you, if you change them every three to four weeks, you can only imagine what’s happening in these kitchens.
Rico Gagliano: Oh no!
Gabriel Frem: Oh yeah, there are stories! There are shows on TV where the hero chefs walk in, and try to look at how many things are wrong and how many roaches are there. Why do you think these things happen a lot? Because you have a labor force that is not committed, that’s being changed all the time.
AndIn an era where there is this movement where chefs care that the animals are not treated humanely, how about starting to employ people in a humane way?