How will public, staff respond to Danny Meyer’s no-tip policy?

Danny Meyer is famous for saying that “hospitality exists when you believe the other person is on your side.” We’ll find out soon whether customers still get that feeling after Meyer’s Union Square Hospitality Group jacks up menu prices 25 percent or so as part of a new no-tipping policy dubbed “Hospitality Included.”  The new system will make its debut in late November at The Modern, USHG’s most expensive restaurant. The rest of the company’s 13 full-service operations will follow suit shortly after.

Meyer isn’t the first operator to adopt a no-tipping policy, just the most prominent. Two dozen or so other restaurants scattered across the country have already done the same.

Why? The ability to address pay disparity between the front and the back of the house is the primary reason operators make this drastic change. Meyer and other forward-looking operators figure it’s smarter to deal with these compensation-based issues proactively than to react to labor problems and wage mandates piecemeal. A no-tip policy’s higher markups enables them to do so. 

That was the thinking behind the no-tip move made by Seattle-based multi-concept operator Ivar’s earlier this year. Faced with a $15 an hour minimum wage mandate that would be phased in over the next couple of years, the company went all in and raised menu prices at its full service restaurants 21 percent last April.

Here’s how the company explains its no-tip policy to its customers. “Ivar’s has been a leader in the restaurant business for 77 years and we decided to get to $15 an hour as quickly as we could. By making the change now, it avoids a continuous series of operating and pricing disruptions that would have been necessary had we elected for a slow phase in.”

Meyer wants to avoid operating disruptions, too. A big one: turnover in the kitchen. It’s a problem at many restaurants, even for prestigious ones like those that make up USHG’s portfolio.

“We’ve never faced a shortage of talented cooks like we have this year," Meyer tells Eater. "We’re in a day and age where there are more talented cooks than there ever have been, but fewer of them who want to live in New York to start a fine dining career." 

Minimum wage escalation is another factor. "Fine dining has an obligation to lead fast food in everything," Meyer says. "Whether it’s how we source ingredients, how we hire, how we train, how we design, how we interact with our communities—we can’t have a situation where we are asking someone to pay $40,000 to go to the Culinary Institute of America to then work for $12.50 per hour, when they could work in fast food for $15."

USHG’s version of a no-tipping policy will be fairly strict. If customers want to give their server a little extra, they’ll have to do it in cash. There’s no line on their check on which they can write in an additional sum that goes to their server.

In contrast, Ivar’s does give customers that option. So far, the company says, 40 percent of guests leave between three and ten percent extra on their checks.

The industry’s strictest no-tip policy has to be the one in place at a Washington DC brewpub, The Public Option. Even if customers leave an extra tip, their server isn’t allowed to keep it.

“The Public Option will pay a starting wage of $15/hr. and provide full-time (40 hr./week) work,” the restaurant says on its website. “We will ask customers not to leave tips as our prices provide for living wages for all employee. If a customer leaves a tip, it will be added to a fund which will be donated to a local non-profit to be decided on by the staff.

A no-tip policy makes a lot of sense from the operator’s perspective. But it depends on customer willingness to pay much-higher menu prices (“the total cost you pay to dine with us won’t differ much from what you pay now,” Meyer promises customers) and many servers, perhaps the best ones, will make less. It’s working so far at Ivar’s. But the big question is whether customers elsewhere will embrace similar changes.

New York magazine food critic Adam Platt sees the implementation of USHG’s no-tip policy playing out this way. “It's going to be a shock to diners, it’s going to be a shock to the front-of-the-house staff who’ve built their entire careers around their uncanny and suddenly obsolete ability to extract tips, and it’s going to be a shock to the management who will on the one hand be relieved to be rid of the whole tipping rats' nest, but also deeply fearful of driving their customers away.” 

But it would be unwise to bet against Meyer and USHG. He's had the golden touch for decades. If anyone can make customers feel comfortable about paying a lot extra for their meal but not leaving a tip, he's the one. Many other operators will want to keep a close eye on how USHG handles implementation of its no-tip format. Reading Meyer's letter to customers about it is a good place to start.

Contact Bob Krummert at [email protected]