Joe’s Crab Shack Scraps No-Tip Experiment

For more than a century tipping has been the preferred method for American restaurants to pay their servers. The idea is that customers will tip more if they receive good service, thus giving employees incentive to do well. However, the system doesn’t always work out that way. Besides getting outright stiffed by diners, on slow nights servers can earn as little as $2.13 an hour, the legal minimum that tipped employees can be paid. Given these less than ideal outcomes, more people in the restaurant industry have begun to demand that servers receive a steady wage that doesn’t depend on tips.

Last year, the seafood chain Joe’s Crab Shack ran with this concept by instituting a “no tip” policy at 18 of its 130 American locations. The participating restaurants paid workers a minimum wage of $12 an hour. Meanwhile, menu prices at these locations rose by about 20 percent in order to compensate for the extra costs. These changes pleased neither diners nor servers, though. A survey found that 60 percent of customers disliked the idea, leading Joe’s to scrap it last week. “The system has to change at some point, but our customers and staff spoke very loudly,” said Ignite Restaurant Group CEO Bob Merritt. “A lot of them voted with their feet.”

The attitude of Joe’s customers seems to be consistent with the rest of the country, at least according to a 2015 poll that found 65 percent of Americans support tipping. Still, others feel that the practice fails to properly reward servers and saddles customers with labor costs that should be paid for by businesses. Until a better system comes around, however, tipping looks like it’s here to stay. “It is very much ingrained in our culture,” said Christin Fernandez of the National Restaurant Association. “Consumers really like being able to reward good service and the spirit of hospitality.”

 

Questions:

  1. Why would a server prefer to be paid in tips rather than a steady wage? 
  1. Should the government increase the minimum wage that tipped workers can earn?

 

Source: Reuters, “Joe’s Crab Shack Ditches No-Tip Policy at Customer Request,” NBC News, May 13, 2016. Photo by Joe Wolf.

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