Tips, Tricks, and Service Charges

Why explaining your pay model to guests (effectively!) is more important than ever.

Illustration of mouse arrow hovering over one star out of five.
To avoid ★☆☆☆☆, know how to explain $$$. / putracetol ©

With tipping an increasingly contested practice, plenty of restaurants are taking the opportunity to add a service charge to guests’ tickets. We asked consumers on Instagram whether they’d be willing to pay a service charge (in addition to a tip) that went to non-tipped employees. Seventy percent said yes.

But when we asked industry pros whether diners understand the service charge when it’s explained to them, it’s a different story. Just 39 percent of servers said customers get it. The remaining 61 percent said guests remain unclear on how and why the money is distributed—even though there seems to be a willingness among restaurant goers to ensure both back and front of house are paid fairly.

“The old tipping model is broken, plain and simple.”

River & Woods

There are seriously annoying (and possibly just serious) consequences for not being able to communicate the fee correctly. Customers can feel cheated—either for themselves or on behalf of your employees—and as we all know, a disgruntled customer is a one-star-review-writing customer.

Take this recent review of Boulder’s River & Woods:

Screenshot of one-star yelp review of River & Woods. "What is going on with this 20% 'fair wage' fee. We assumed this was gratuity but it isn't. It's an additional charge that goes mostly to the back of the house that is already making minimum wage."

If we were English teachers, we’d get out a big ol’ red pen and start deducting points for the reviewer’s (admittedly understandable) lack of knowledge about complicated labor laws. (Check out our crib sheet on legal tip pooling here.) But we let the restaurant do that for us.

Here’s River & Woods’ response to the review (which has since been deleted):

We are glad to hear you enjoyed your experience, but are of course dismayed that your misunderstanding of our Fair Wage Fee somehow undermined that enough to result in a 1-star review. It does appear as that this policy was severely miscommunicated and/or misunderstood.

We, like a number of other restaurants, have enacted this practice to replace traditional gratuity, which is an outmoded and inequitable model. This is a movement that is taking hold across the industry.

The language on the card that is presented with each bill, as well as on our menu and on our website, explains the following: “A 20% fair wage charge is added to every bill during regular service. Our entire staff—those behind the scenes and those out front—put their souls into creating the experience at our restaurants. This charge allows us to reliably and equitably compensate everyone working so hard to keep you happy, healthy, safe and nourished during your time with us. Additional gratuity for exceptional service is greatly appreciated by your server but is not required.”

We appreciate your concern, but we work very hard to make sure that our team is compensated well and fairly at every level of the restaurant. This is a huge step towards making that a possibility. The old tipping model is broken, plain and simple. We are committed to playing our part to make employment in the restaurant industry something that allows for a quality of life for all of our staff.

In a nutshell: 20 percent for service allows us to compensate everyone on our team fairly, and well above the Colorado minimum wage. This is the baseline cost of providing the experience at River and Woods. No guest is expected or required to add gratuity on top of that, but if service is exceptional, as it sounds like yours was, then any additional gratuity is distributed 100% to servers. This, to us, is what a “tip” should be—not expected or required, but earned. And for the record, we have foregone any tip credit, so your assertion that servers make a “lesser tipped wage” is inaccurate.

It’s time to make a change and we are proud to be part of that change. We know that change can be confounding, and communicating it is admittedly a challenge. We apologize that we clearly didn’t do that well in your case, but we don’t apologize for the policy itself, as the fact of the matter is that it is working. It allows us to care for our team—including those behind the scenes. Your feedback will help us continue to refine the message, so, misguided though it was, we thank you for it, even in this public forum.

Unless you have the time and desire to pen a tiny doctoral thesis about the whys and hows of your compensation model every time you get slapped with a less-than-stellar review, you need to become defter at explaining those nuances in a way that makes customers feel satisfied instead of scammed.

“I’m here to give people food and drink, not to educate them on the racist history of tipping.”

Bobby Rayburn, Duo

Bobby Rayburn is the general manager at Duo, one of the first spots in Denver to add a “kitchen livable wage surcharge” of 2 percent to checks in late 2017. Front-of-house workers continued to receive tips, and back-of-house staff saw a $3 per hour increase thanks to the fee. Rayburn says only a handful of guests ever pushed back on the charge. He credits that both to the small amount of the surcharge and to getting FOH staff on board with it.

Explaining the depth of the disparity to FOH folks is “a fine line,” Rayburn acknowledges. “I’m front of house, I understand. We expressed how imperative front of house is in their roles, but back of house goes to school for what they do. They have loans for this. So for them to be so underpaid is so unfair.”

The four or five times customers requested Rayburn come to the table to elaborate on the fee, he says he was very willing, if not ecstatic (“I’m here to give people food and drink, not to educate them on the racist history of tipping”) to delve into the excruciating details. The conversations, while rare, were “extremely graciously received.”

After over three years of charging a kitchen livable wage surcharge, Duo’s management decided to ditch tipping completely in January of this year. Instead, it implemented a 22 percent service and hospitality fee, which is prominently disclosed on its website as well as a pop-up on its QR menus. “It was really, really scary,” says Rayburn. “It’s a matter of getting your staff used to not making tips anymore, which is weird when you’re used to it….and [in telling guests], ‘I know you’re used to this [old] model.’ I think by being very transparent it’s helped.” He notes FOH staff’s income hasn’t changed since the switch, while BOH staff’s has gone up $5 to $6 per hour. “We’ve finally gotten to the point where we feel like the culinary team is being paid appropriately.”

“One hard rule we decided on before we could do this,” Rayburn continues, “is that our POS system had to be able to remove the tip line.” He says Duo now gets about one customer a night who wants to leave more, which they can in the form of cash or by writing in a tip line.

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