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The zero per cent solution: Is it time to stop tipping in restaurants?

Photo illustration by Ben Barrett-Forrest/The Globe and Mail

Right now, the no-tipping movement is the electric car of the restaurant world. Everyone on the inside is excited about this potential game-changer. Many restaurateurs think it's inevitable, since tipping creates an income inequality that results in a shortage of experienced cooks that's becoming increasingly unsustainable.

But nobody wants to go first.

The reason is the rest of us, the downright ignorant general public for whom tipping is a part of the culture of going out to eat. Disrupting something so ingrained would be a very risky move and no Canadian restaurateur is yet willing to take on the job of educating the masses about why tipping is such a bad thing.

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So allow me.

Just for a minute, imagine that tipping applied to your job (provided you are not already a restaurant server). Are you a doctor? A mechanic? A software developer? A yoga instructor, car lot attendant or high school teacher? Those all sound like hard jobs and I hope you are appropriately paid.

What I'm asking you to imagine is that all of society has agreed to give you a little something extra each time you do your job. It's not payment, mind you. It's a gift, determined by the personal satisfaction and generosity of each client.

It's also not totally reliable, fluctuating every day depending on your work, your client's mood and a myriad of other factors. Yet this gift-giving becomes so standardized that the government passes a law allowing you to be paid less than the legal minimum wage, considering that the majority of your earnings come through the voluntary contributions of customers like us.

That's the system we've all accepted for restaurant servers. And it's riddled with problems.

First, let's stop pretending this money is a gift. That's goofy. Unless the customer wraps it in a bow or puts it in a birthday card, it's revenue and tipping puts the control of that revenue into the hands of customers instead of the restaurateurs who design and manage how their businesses work.

"Restaurant operators are only in control of 80 or 85 per cent of the revenue that their customers spend," Bruce McAdams, assistant professor at the school of Hospitality, Food & Tourism Management at the University of Guelph, says. "There are no other businesses that allow the customer to decide where that revenue is distributed. It's insanity."

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For 20 years, McAdams worked in the restaurant business, in nearly every position possible: kitchen manager, dishwasher, pizza cook. Before starting at Guelph, he spent the last 13 years of his career at Oliver & Bonacini as vice-president of operations. He's about to publish a research paper on tipping, co-authored with agricultural economist Mike von Massow. After interviewing 52 restaurateurs and 150 servers in Canada, the two biggest problems they identified were control of revenue and income inequality.

The first problem leads directly to the second: Many otherwise smart and well-informed people have told me they believe that restaurant tips are divided evenly, that the servers who collect the cash divide it with cooks, bussers and dishwashers. Actually, the average tip-out is about 3.25 per cent of sales and there's no telling how that gets split. This means that tipping creates a huge income inequality between front and back of house.

According to McAdams's research, cooks in Ontario earn about $14 an hour, while servers make $27.80 an hour ($9.80 hourly wage plus $18 an hour in tips). Plus, cooks' earnings are subject to taxation, while the servers I've spoken with told me they commonly declare only about 15 per cent of their tips on taxes.

When I was a cook, I saw a server admonish a food runner for adding up his tips in the kitchen. "We never count our money in front of the cooks," he explained. It was a thoughtful principle, but didn't address the real issue. Cooks and servers all work hard, but one group gets a significantly greater share of the loot. One unintended consequence of the 10-cent raise in Ontario's minimum wage for servers last October (from $9.80 an hour to $9.90 an hour) was that many restaurateurs were forced to increase labour costs to meet a new minimum for servers, instead of the money going to the still-underpaid cooks.

Yet as nutty as the tipping model is, customers are inured to it and any ideas for change are seen as radical. Various mechanisms have been proposed through which restaurant revenue can be redistributed to address this disparity, such as standard service fees or employee profit-sharing.

But the basic premise is that menu prices would have to rise to reflect the actual cost for goods and services. A $10 lunch will become a $12 lunch – and even though most customers would likely have tipped about $2 on that lunch, restaurateurs fear that making a voluntary cost suddenly mandatory will mean grumbling, or lost business.

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"The market doesn't bear those kinds of dramatic changes," says Sal Howell, proprietor of River Café and Boxwood restaurants in Calgary. Howell would very much like to eliminate tipping and was getting ready to rally local restaurant leaders and work together to inform customers. Then came the oil crash.

"We have bigger worries on our plate right now than introducing something revolutionary," Howell says of the mood among Alberta's restaurateurs. But she's still intent on making the initiative happen, hopefully within the year.

Last October, Danny Meyer of Union Square Hospitality in New York, announced that all 13 of the group's restaurants (including Gramercy Tavern and The Modern) were switching to a service-included policy within a year. McAdams calls Meyer "a hero of mine," but points out that the move was strategically timed. In January, 2015, Meyer took his hamburger chain, Shake Shack, public and by the time of the no-tipping announcement, his personal shares were estimated to be worth $50-million.

This allowed him to build a cushion for any blowback from customers – or servers, the best of whom might be loath to trim down their earnings. The current system, McAdams argues, provides too much incentive for servers to be mercenary, to work for themselves rather than the restaurant, adding to the transient nature of those jobs.

Ryan Donovan, co-owner of Richmond Station in Toronto, fears that moving to a no-tipping model would mean the exodus of his best servers to places where they can make more money. Last March, on the podcast Welcome to the Food Court, Donovan said that he'd be glad to make this change, but only as part of a cartel of like-minded owners – naming Anthony Rose, Peter Oliver, Michael Bonacini, Jeff Stober and the King Street Food Company, who collectively operate over 30 restaurants in Ontario.

"If you had a good amount of people, they could represent enough change." Donovan said on the podcast.

Two Toronto restaurants – Little Italy's Sidecar and Indian Street Food Co. in Leaside – have gone no-tipping, with the latter's owner, Hemant Bhagwani, promising to adopt the policy with another restaurant he's planning. But these are small operations. Large institutions don't make big moves without measurable public support. I wouldn't expect change to come from government mandate or a collaborative effort from big restaurateurs. I'd bet on a small player with big guts, the ripple effect from one small, but hugely influential restaurant.

Interested customers, in the meantime, might ask a few questions: In the current system, your tips decide your server's salary, making you partly their boss. So ask about tip-outs. Ask them what percentage goes to the kitchen, what the cooks earn.

Or just ask yourself how you'd feel if this was how you got paid.

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