Why these five restaurants are using the pandemic to do away with tipping

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“This is the right thing to do morally and socially”: Why these five restaurants are using the pandemic to do away with tipping

The global pandemic continues to have a devastating effect on the hospitality industry. To survive, many businesses have reinvented their operations by introducing takeout menus, or pivoting to deliver meal kits and pantry items. Some owners are also rethinking the way they compensate their employees, eliminating the tipping model and raising menu prices to include a built-in hospitality fee. The goal, they say, is to create greater financial security for their employees.

This isn’t the first time Toronto restaurants have experimented with going tip-free. But against the backdrop of a global recession and widespread financial upheaval, there’s more urgency to change the status quo. We spoke with five restaurateurs to understand some of the challenges behind reforming an entire industry’s pay structure.

Richmond Station owner Ryan Donovan (left) and chef Carl Heinrich (right)
Ryan Donovan, Richmond Station

 
Why the switch to a hospitality-inclusive business model?
We were close to adopting it in 2016 and again in 2018, but in both instances we decided there was more to lose than to gain: our staff were well taken care of, our business model worked and there was no telling how guests would respond. The pandemic changed everything. In March, [co-owner Carl Henrich] and I had to lay off all of our staff. Our business has lost $2 million in sales, and continues to bleed money every day. So in June, we looked at this issue again. Our staff were not doing well—we didn’t have any. Our business was not doing well. And customers, we felt, were ready for change. We wanted to make the change to no-tipping at a time when change was the norm. 

How did you kick-start it? 
The conversation started when we considered the E.I. calculations that our staff would have to rely on when CERB ended. We were floored by the lack of support our national safety net would provide for hospitality workers, whose full compensation is largely composed of uninsured and non-pensionable cash gratuities. The social safety net supports workers that pay into the system, and only where the employers also pay their share into the system.  

What was the most challenging change to implement?
Arriving on what the right compensation level is for the staff. Not because it’s difficult to gauge their value, but because our business model has been destroyed and future business volumes are wholly unpredictable. If we were making this change last year, it wouldn’t be complicated to arrive at the appropriate hourly rate or salary for a bilingual, tenured server with great wine knowledge and a decade of experience. But today, that math isn’t as easy. Now, our employees have a guaranteed pay rate and certain income, and Richmond Station will bear the risk. As an employer, we’re contributing to the social safety net for our employees as we match or exceed the contributions they make. They now have pensionable earnings as together we contribute higher amounts to CPP. 

Does all of this affect menu prices?
We’ve raised prices on average by 18 per cent. I imagine we’ll continue to tinker with the pricing, but that’s mostly because of the pandemic. This is a permanent change for us and is not a bridge over the pandemic. We are not going back to tipping. This is the right thing to do morally and socially. 
 

Ten chef Julian Bentivegna Photo by Michael Graydon and Nikole Herriott
Julian Bentivegna, Ten Restaurant

 
Why has Ten gone tip-free?
The pandemic has really shed light on a lot of issues that plague the service industry, including the practice of tipping. We decided that it should no longer be up to our guests to choose how much our employees make. It should be the business owner’s focus to create not just jobs but good jobs—and that’s where the hospitality-included model comes in.

How else does this model benefit your employees?
By passing a base 18-per-cent service charge directly to our staff, we’ve increased their salaries to above industry average. We’ve also been able to transition to a four-day work week. This creates a healthy work-life balance, which is very rare in this industry. We also split the service charge evenly between the front- and back-of-house staff, so that everyone is equally compensated for their work. And this is just the beginning, we’re also in the process of extending dental and vision benefits to our staff members. 

How did this movement come to your attention? 
The majority of the work to bring awareness to the hospitality-inclusive model has been done by marginalized groups within our industry. They deserve the true credit in starting this movement and pushing it forward—I just have the platform to put it into effect. I’d also like to drill home the point that the people who work in the hospitality industry are some of the hardest working, smartest and most talented people that you’ll ever meet, and that they deserve to be paid properly and have job security, especially during this pandemic.

Tamara Jensen (right) with co-owner and chef Adam Hynam-Smith Photo by Maude Chavin
Tamara Jensen, Dispatch Restaurant

 
Dispatch has been tip-free since opening in St. Catharines last year. Why?
Our logic is that our team members are hospitality professionals, and they deserve to be compensated fairly and equitably for their professionalism and experience. Our chefs have invested time and money into going to school, staging and taking additional training, as have our bartenders and dining room staff. We also want to ensure that our team works as an equitable, unified entity so that our guests receive the best possible experience.

How else does this business model benefit your employees?
We had a team of 11 back in March, and had to lay off all but two when things shut down. Because they were earning an above-average living wage that was documented in full, they were able to claim a higher wage for E.I. purposes—CERB wasn’t a thing yet—than servers elsewhere, who might not claim all of their tips. We have since hired two more team members, and have only been able to do so because of the wage subsidy. We’ve also switched to a four-day work week, giving everyone the same three days off. With each change we make, we base our decisions on what’s best for the well-being of our team. It’s an exhausting and challenging industry at the best of times, nevermind during a pandemic.

How do you think customers will react to restaurants going tip-free?
A common response to the elimination of tipping is “But what if I get bad service?” Our response to that is if a restaurant is treating and paying their team of professionals as professionals, nobody should receive bad service. There is more room for exceptional employees to grow in a business when that business is making its guests happy and loyal and is able to invest in professional staff. Dining out isn’t a basic human right that’s as affordable as doing groceries, just as buying ethically made clothing isn’t as affordable as buying clothes at a big box store. This mentality needs to shift so that restaurants can charge what they need to in order to survive, pay staff fairly and ensure that farmers and suppliers aren’t pinched to extinction. 
 

Redstone’s executive chef David Sider Photo courtesy of Redstone Winery
David Sider, Redstone Winery

 
What made you decide to go tip-free at Redstone?
We had considered eliminating tipping for years—even before we opened—but hadn’t found the right opportunity to pull the trigger. Lockdown gave us the opportunity to reset and re-evaluate the way we do things. Our motivation for eliminating tipping, in short, was to do the right thing. 

We started operating as a service-included restaurant immediately upon reopening.  When the government-mandated closures first happened we were all terrified. Our front-of-house staff feared they were going to be unemployed indefinitely and E.I. wouldn’t come close to representing what they were actually paid. Our back-of-house employees were wondering how they would pay their bills when their E.I. would be 55 per cent of a wage they could barely live on to begin with.

How else does this model benefit your employees?
For service staff, their entire wage is now guaranteed income. The service-included model sets employees up for the future. Our team can now report their income in its entirety for consideration in parental leave calculations or for a mortgage application, not to mention that if heaven-forbid anything was to happen to them on the job, their actual wage would be considered for WSIB. 
 

Chef Daniel Hadida Photo courtesy of The Restaurant at Pearl Morissette
Daniel Hadida, The Restaurant at Pearl Morissette

 
Your restaurant has been tip-free since it opened. Why?
I spent a good amount of time working outside of North America, where the practice of customer-subsidized income is not part of the conversation. It was pragmatic, logical and ethically correct. The practice of tipping is a subsidy provided by and decided by the customer, and it’s an uncontrolled system that’s not healthy. We don’t do “gratuities included,” we provide the goods and services and charge the amount that it costs relative to that good and service.

What would you say to other restaurant owners thinking about going tip-free?
We’re coming up to our third-year anniversary and it’s been successful. I’m extremely supportive of any policy which takes into account human beings, including fair compensation.