The NRN 50: The cost of doing business

The NRN 50: The cost of doing business

On the surface of things, the tip should not exist—at least not as the main source of income for servers in North America. In this capitalist yet thoroughly regulated society, how can the wages of a significant chunk of the labor force be at the mercy of consumers who can give them as much or as little as they please?

And how is it that much of the money that customers spend in restaurants cannot be touched by owners or management but must be kept in the hands of waitstaff?

In spite of its lack of logic, the tip has not only survived in foodservice. It has thrived, growing in size and working its way into our societal norms and legal structure—today 43 states allow employers to pay tipped staff less than minimum wage based on the assumption that gratuities will make up the difference.

One reason for the tip’s staying power is that servers and customers alike like the system, and mounting evidence shows that the promise of a tip improves service.

But new threats loom that may take away the tip’s status as a legal part of a server’s wage.

“Tipping is a very American thing,” says restaurant consultant Clark Wolf. “It makes us [as customers] feel successful and a little powerful,” he says, but it also shows a certain sense of equality—the notion that we should be appreciative of those who do our bidding.

“It’s designed to award behavior that shouldn’t be expected,” he says. “It comes from our not wanting to have work be like [being or having] a servant. … I think there’s a little post-slavery thing going on.”

There’s also an American work-ethic thing going on, he suggests.

“You can go from being a slightly inebriated busboy to a multirestaurant owner and community leader and millionaire in under a decade,” he says. “We like that. It’s very Horatio Alger, very up-by-the-bootstraps, and tipping is a part of that.”

Denver-based restaurant publicist and former restaurateur John Imbergamo points to the freedom that it gives customers.

“What other service can you buy with the ability to choose the price based on results?” he asks. “The next time your plumber does a lousy job, try giving him less than the invoice amount. Tipping provides the consumer with the power to decide what the service is worth.”

That’s true in theory, but in practice, the amount a customer tips any of the 2 million or so servers in the United States is not much related to the quality of service, says marketing and tourism professor Michael Lynn of the School of Hotel Administration at Cornell University in Ithaca, N.Y.

“Literally, how sunny it is outside has as much of an impact as their evaluation of the service [on the amount a customer tips],” he says.

Actions that do help improve tips include introducing oneself to customers by name, presumably not in an insincere, cloying way, Lynn says.

Addressing customers by name—after reading it off of the credit cards with which they paid, for example—also can result in higher tips, he says. So can squatting next to the table when interacting with customers, touching them briefly on the hand or shoulder, using tip trays embossed with credit-card insignia, writing “thank you” on the backs of checks, and giving customers large, open-mouthed smiles.

Lynn says studies also found that waitresses who draw a happy face on the backs of checks get bigger tips. Drawing any sort of cheery picture seems to work for servers of either sex, Lynn’s research found.

Servers who personalize their appearances—such as with distinctive hats—entertain with little jokes or factoids, give candy along with the check or even point out forecasts for good weather, also get better tips.

None of those acts are necessarily good service, he points out, but they can have a significant impact on the tips that customers leave.

Lynn adds that, apart from benefiting servers, good tips also likely reduce turnover. New York-based restaurateur Peter Glazier agrees.

“If a waiter makes $150 [or more] a night, I can tell them what to do. Otherwise, they can tell me what to do,” he says, adding that losing employees is expensive.

“You lose a lot when you lose a waiter,” he says. “You try to protect them and keep them happy … because they’re you’re only contact with your customers. They’re not really even servers, they’re salespeople.”

Bernard Martinage, head of the Federation of Dining Room Professionals, points out that even though the practice of tipping makes waiting tables a lucrative profession, there is still an endemic shortage of servers.

“I think that the fact that you can make so much money in tips is what is keeping this industry surviving,” he says.

In a paper to be published by Lynn and colleague Glenn Withiam in an upcoming issue of the Journal of Applied Social Psychology, one reason pointed to in favor of tips is that customers prefer them, both to service charges that are automatically added to bills and to all-inclusive menu prices.

Lynn says customers perceive restaurants with all-inclusive menu prices that forbid tipping to be more expensive than those with prices 15 percent cheaper that expect tips of at least 15 percent.

In a separate study, Lynn points out that, although the quality of service has virtually no effect on amount of the tip that customers leave, servers think that it does and in fact give better service because of it.

Lynn used the Zagat Survey of Miami Beach, Fla., restaurants to conduct his research. Because of the large number of foreign visitors to Miami Beach who are unfamiliar with tipping customs here, a large number of restaurants—40 percent of those in the Zagat Survey—have automatic service charges. Lynn called the restaurants in the guide to determine their tipping and service charge policies and then controlled for decor, price and food quality ratings. He found that restaurants with voluntary tipping policies had higher service ratings than those without them.

Many restaurants have implemented policies of adding automatic service charges for large parties to prevent their servers from getting stiffed on large bills, and a few fine-dining restaurants have done away with tipping altogether in favor of service charges. So have some cruise lines. But with customers preferring voluntary tips and waitstaff apparently giving better service because of it, the practice of tipping seems well entrenched.

But Lynn says that all could change with one argument: It could be against the law.

In a 1971 case, Griggs v. Duke Power Company, the Supreme Court ruled that the Civil Rights Act of 1964 prohibited business practices that appear to be neutral with regard to “protected classes” but that in fact result in discrimination.

The 37-year-old case might now have an impact on restaurants, Lynn says, because new data suggest that black servers get lower tips on average than white servers. Even though the discriminating is being done by customers, not by restaurants, the practice of allowing voluntary tipping could be deemed illegal.

“I think there’s going to be a class action lawsuit against some restaurant chain” that argues that tipping is tantamount to discrimination, Lynn says.

He has spoken to many labor employment lawyers in the hospitality industry.

“Some of them say, ‘Yeah, that’s possible,’” he says, “and some say they don’t believe a court would allow that to happen.”

But, of course, the same could have been said not too long ago about lawsuits against restaurants for causing obesity, or for making their coffee too hot.