Tipping, as a compensation scheme, is great for everyone.
Restaurant customers like tipping because it puts them in the driver’s seat. As a diner, you control your experience, using the power of your tip to make sure your server works hard for you.
Restaurant servers like tipping because it means their talent is rewarded. As a great server, you get paid more than your peers, because you are a better worker.
Restaurant owners like tipping because it means they don’t have to pay for managers to closely supervise their servers. With customers using tips to enforce good service, owners can be confident that servers will do their best work.
There’s only one problem: none of this is actually true. I know because I ran the experiment myself.
For over eight years, I was the owner and operator of San Diego’s farm-to-table restaurant The Linkery, until we closed it this summer to move to San Francisco. At first, we ran the Linkery like every other restaurant in America, letting tips provide compensation and motivation for our team. In our second year, however, we tired of the tip system, and we eliminated tipping from our restaurant. We instead applied a straight 18% service charge to all dining-in checks, and refused to accept any further payment. We became the first and, for years, the only table-service restaurant in America where you couldn’t pay more money than the amount we charged you.
You can guess what happened. Our service improved, our revenue went up, and both our business and our employees made more money. Here’s why: