The US may not be ready to eliminate tipping in restaurants after all.
Joe’s Crab Shack, the first large US restaurant chain to try to end tipping, is abandoning the experiment after only six months. The seafood chain said last week that it will extinguish the no-tip model in 14 of the 18 restaurants it was being tested in because of customer and staff complaints.
The restaurant chain hopped on the no-tipping bandwagon in November, after restauranteur Danny Meyer’s Union Square Hospitality Group was hailed for eliminating tipping in its restaurants and incorporating the cost of hospitality into the bill instead. But unlike in Meyer’s upscale New York dining staples, which have flourished under the new policy, Joe’s Crab Shack customers have headed for the door since the locations went tip-free.
“Our customers and staff spoke very loudly and a lot of them voted with their feet,” Bob Merritt, CEO of Ignite Restaurant Group, which owns Joe’s Crab Shack, said during the company’s recent first-quarter earnings call.
Consumer research showed that 60% of Joe’s Crab Shack customers disliked the new policy, Merritt said. As part of the pilot program, the restaurant chain raised prices at test locations to cover the loss of tips. Some customers didn’t trust restaurant management to pass those extra earnings onto the staff, or felt that ending tips also ended the incentive for good service.
At the 18 test locations, 8% to 10% of customers shared negative feedback, Merritt said.
Prices will return to normal at the 14 locations where the no-tipping model is being shuttered. But the company expects it will take some time to patch up its relationship with customers who were turned off by the pilot program.
“When you roll back prices, you rarely get credit for it very quickly,” said Merritt. “It’s going to take us time to rebuild that.”
Joe’s Crab Shack will retain the no-tipping model at four of its 130 locations, where the policy actually worked well. The company said it isn’t sure why the policy was more successful in some places than others, but is trying to figure that out.
It did not immediately return requests for comment on which locations would maintain the pilot program.