You Do The Math, For Your Customers

Sure, full-service restaurateurs suffer financially in a lousy economy like the one we’ve got now. So do their wait staffers, for whom the combination of fewer customers with less to spend translates to shorter shifts, fewer tables, a drastic reduction in tip income and, often, an immediate search for a better-paying job. Is there anything you can do to help them earn enough to stick around until the restaurant market rebounds? Three professors say there is—and their solution won’t cost you a dime.

There isn’t a single set of numbers that will tell you how bad it’s gotten for the full-service restaurant business this year. But you can look at the recent quarterly results of national full-service chains as a sort of proxy if you want some guidance. Most that have reported so far have been able to tread water on the profit front, even while showing declines in same-store sales and, more alarmingly, customer counts.

Ruby Tuesday, for example, saw sales drop 10.3 percent in its fiscal fourth quarter (March, April and May 2008) at its 741 company-owned U.S. stores, while its 170 domestic franchisee-owned units were down 7.2 percent. The company’s OK. It still eked out a small profit. But ask yourself: What was it like to wait tables at one of these units during this time?

A lot of Ruby Tuesday’s wait staffers have to be hurting, as are thousands of others throughout the full-service restaurant world. And servers who don’t make enough money often quit. They’re not irreplaceable, to be sure. But if you’re the manager who has to keep a dining room running smoothly while trying to hire replacements, it’s a huge problem. It’s easier and better to keep servers around than to find and train new ones—especially if the ones you have now are good at their jobs.

So what can you do to keep them from leaving? Paying them more won’t do it. You can’t afford it and hourly wage rates for servers are, by design, a pittance. How about giving them more shifts, bigger sections or longer hours? That’s not feasible when business is slow.

So how about prompting customers to give bigger tips? Before you say, “Good luck with that,” take a gander at “Exploring Consumer Reactions to Tipping Guidelines: Implications for Service Quality.” It’s a new study from the Cornell School of Hotel Administration that “examines the relative effectiveness of using gratuity guidelines to encourage restaurant patrons to be more generous with wait staff.”

The researchers (a trio of professors: Rohit Verma, Kate Karniouchina and Himanshu Mishra) employed a simple methodology. They gave customers checks printed in three different formats. All three gave the meal total and included a blank line where the customer was expected to write in a tip. But one included an “education statement” at the bottom reading “Quality service is customarily acknowledged by a gratuity of 15% to 20%. Another, dubbed “calculation assistance,’ told the customer how much 15% of the total and how much 20% of the total amounted to. The third type of check had neither statement.

Click image to enlarge.

The researchers then examined how these three types of checks played out when service was poor, average or excellent.

After collecting their data and running it through statistical analysis software, here’s what the researchers found. Tipping guidelines can work, producing higher tips for your wait staffers.

They don’t work uniformly, the researchers point out. If your restaurant consistently offers superior service, the “calculation assistance” format should produce bigger tips.

If your service level is average, the “education statement” approach produces higher tips.

If your restaurant is burdened by poor service (you know who you are), be aware that the “calculation assistance” method again produced higher tips, while the “educational statement” format resulted in poorer tips.
So should you start printing either piece of information on you guest check right away?

The authors suggest a cautious approach:
“Managers should not use either of the tipping guideline approaches in this study without conducting a detailed examination of the tipping dynamics in their establishments. For those implementing this tactic, if there is any doubt regarding the perceived quality associated with a restaurant’s service, we suggest using calculation assistance rather than education guidelines.”

Our take: Follow their advice, but feel free to speed up implementation. We foresee an immediate boost in server morale, plus a likely boost in their income. At minimum, you’re be showing your wait staff that you’re on their side despite the current market conditions. That alone might be enough to convince the good ones to ride out the downturn with you.