Could the Growing Trend towards Zero Tipping Benefit Your Restaurant Business?

While often required by many restaurants in London and the wider UK hospitality scene, tipping can sometimes be a customer pain point, who wonder how much to give. It can also be difficult for serving staff, who wonder how much they’ll get, and a headache for restaurateurs if they act as the troncmaster – dividing up pooled tips, known as ‘the tronc’, and then doing tax and National Insurance calculations.

Yet the growing zero-tipping movement in the United States may be a good strategy for restaurateurs in the UK, allowing them to demonstrate that they are innovative, fair employers who can anticipate the latest trends.

The vast majority of UK restaurants now include a service charge on bills to make the calculations easier. But that may all change – the Government launched a consultation last year on how tipping should be handled, after media reports that some restaurants were hanging onto some or all of the tips that their staff received.

The options the Government consulted on included abolishing the service charge completely, forcing restaurants to be more transparent about where the money goes, and stopping restaurants from taking a share of the tips. The consultation finished in the summer of 2016 and the Government hasn’t made any decisions yet, but changes to tipping could present a whole new challenge for restaurateurs – and a great opportunity.

If you are looking to open your first – or next – restaurant, speak to a member of the Restaurant Property team, who are experts not just in the buying and selling of leisure property, but who are also restaurant industry consultants.

Zero-tipping in the United States

So perhaps the answer lies in the USA. America is famous as the land of the tip – taxi drivers, hotel staff, hairdressers, parking attendants all expect a gratuity. But there is a growing trend towards zero-tipping in restaurants.

Historically, waiters and serving staff in the US have been paid very low wages and make the bulk of their income through tips. But staff turnover is often high – a problem shared in the UK where the average length of service is about a year – and the practice of not sharing tips creates problems as staff don’t want to share big tables, yet struggle to deal with the demands of a large group on their own.

Some US restaurants have dropped tipping, instead raising wages and menu prices to cover the lost income – the most prominent is Shake Shack, the burger chain. Some include prominent advice on menus telling customers not to tip, and servers tell them they do not accept tips. When customers have been desperate to tip, the money has been donated to local charities instead.

Zero tipping has not been a success everywhere. Joe’s Crab Shack, a seafood chain, reinstated tipping three months after stopping the practice because customers and staff complained, and other independents and small chains have also brought back tips. But Shake Shack continues to press ahead, and claims that the measures have been a success.

Could zero-tipping work in the UK?

There are certainly significant advantages for restaurateurs in a zero-tipping model. Administration costs should be much lower, and tronc calculations would be a thing of the past. The question is whether or not customers and staff would welcome the move.

One major difference between the UK and US experience lies in the prevalence of cash. Britain, and particularly London, is moving towards contactless payments at a far faster rate than in the United States where people are much more likely to use cash for small payments. That has an impact on tipping culture – if people don’t carry much cash, they’re less likely to bother to make a separate cash payment for waiting staff.

The main complaint from customers that the Government found was that they believed tips went to waiting staff. Yet since tipping culture is less embedded in the UK, it might be easier for restaurateurs to introduce. For staff, some of whom make about half their income in tips, the prospect of zero-tipping may be a concern, but moving to a predictable and transparent wage may well help restaurateurs retain staff for longer.

As a side benefit, this sort of zero-tipping programme could also work as a covert marketing strategy, with those concerned with the rights of workers and exploitation of staff seeing a move to a fixed wage as a positive. For those restaurateurs wishing to present themselves as ethical – and who isn’t? – zero-tipping might be a route forward.

Since zero-tipping is mostly confined to the US at the moment, there are opportunities for entrepreneurial British restaurateurs to experiment with their financial model and gain a major publicity boost by ending tipping. Boosting base wages, creating more transparent menu pricing without a service charge and explaining this to customers would create a reputation of being a fair employer who is ahead of the curve.

Of course, it won’t work or indeed be a viable strategy for all restaurateurs, so the trick is understanding where it may or may not be helpful. The team at Restaurant Property can help you seek the right strategy. Contact us today to see how we can help.

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