Bar Marco, a Pittsburgh-based restaurant, has been around for three years. But starting later this year, its employees will no longer receive tips. Instead, they’ll get a salary, 40 dependable hours a week, and health care benefits.
“It started about a year ago,” co-owner Robert Fry told ThinkProgress. He was listening to a Freakonomics podcast about the downsides of tipping. The quality of service only accounts for a percentage point or so difference in tip size; instead, it’s more likely to be influenced by whether a server is white, a woman, or physically attractive. He was also thinking about heading into the third year of his restaurant being open. “It’s kind of a make it or break it year in a restaurant,” he said. “Seventy percent of restaurants fail within the first three years.”
He wanted to give employees health care coverage while also increasing efficiency to make it through the long run. Employees living off of tips and working ever-changing schedules were top on the list of inefficiencies. “All those things kind of dragged on service,” he said. “If you try to force people to put up with an inefficient system for too long, that’s why restaurants end up going stale.” After looking at profit projections along with labor costs, he calculated that it could get rid of tips while giving everyone a salary and remain “pretty safe.”
Starting next quarter, more experienced staff and those in the front of the house will get at least $35,000 a year. (Median pay for food and beverage servers is $18,400 a year.) They’ll get standard health benefits. Everyone will have a set 40-hour workweek schedule. He noted that in the industry, “everyone’s overworked for the most part, and we’re just going to eliminate that by making it a more consistent process.”
Unlike most restaurants, workers in the kitchen will also be salaried staff. “If you’re burning out your kitchen at $10 an hour, you can come up with the greatest menu in the world, but unless you have people who can execute it the same time every time, what’s the point,” he noted.
Meanwhile, all tips received will go to the restaurant’s related nonprofit, Food Revolution, which has top chefs give cooking lessons to underserved kids.
The benefits of these changes, which haven’t even taken place yet, have already accrued to the restaurant: After it sent out a tweet broadcasting that it’s hiring more full-time positions that won’t work for gratuities, he said it’s received 250 resumes. “It means we can keep the team that we have and make sure they know in three years we’re not going to burn them out,” he said. And he expects it will be a boon to the work being done. Without tips, employees “will be empowered to really make us run as efficiently as possible,” he said. Meanwhile, eliminating tips will help the business by not papering over bad service. When a customer has a bad experience, “what happens is you don’t come back,” he noted. “So it actually hides service problems.”
And he says all of this can be done without increasing prices. By spending more on high-quality staff and tools, they’ll be able to buy bigger cuts of meat or larger shares of in-season vegetables and utilize them for the menu. “You actually add more to your depth and to the plate that costs you less money in ingredient costs and a little more in employee costs,” he explained.
Fry thinks getting rid of tips in favor of better benefits will soon be commonplace. “It’s pretty clear that this is the way that the industry’s going to go,” he said. “I think every restaurant has to come up with its own plan on how it works.” There are a number of others that have already taken this approach, from high-end eateries in New York City and the West Coast to a brewpub in Washington, DC, a brasserie in Philadelphia, and a meat-based restaurant in Kentucky.