Is It Time to Rethink Gratuity in Restaurants?
Entrepreneur|January 2016

There’s a growing movement to eliminate gratuities for servers. What does this mean for the restaurant world?

Corie Brown, illustration by Patrick Vale

American diners really give it to their servers. In New York City and Los Angeles, tips at independent eateries average 22 percent of the check, a big jump from a generation ago, when 15 percent was the norm, according to restaurateurs. Waiters and bartenders often earn more than $50 an hour.

And that has to stop, say a growing number of restaurant owners. Bottom-line necessity and common sense are uniting small family-owned cafes with the country’s most expensive chef-owned dining rooms in a move to abolish tipping. The restaurant industry is facing a sudden 15 to 18 percent increase in costs, says Kurt Huffman, owner of ChefStable in Portland, Ore., which has invested in 17 chef-owned restaurants and food businesses. The rise in the minimum wage, to $15 an hour in some states, and new laws requiring paid sick leave and healthcare coverage are sending restaurant food costs soaring.

“It’s suicide for most restaurants to raise prices to cover this,” says Human, noting that restaurant profit margins tend to hover between 2 and 5 percent. “There is tremendous concern among our clients,” adds Riley Lagesen, chairman of the National Restaurant Industry Practice Group at law firm Davis Wright Tremaine. “They know increased costs will change their ability to expand and grow.”

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