No Tip? Service Charge Faces Struggle at Restaurants

By Patrick McGeehan

Reprinted from the New York Times

Is the right to stiff the waiter as American as apple pie?

Thomas Keller, chef at the extravagantly priced Per Se restaurant in the Time Warner Center in Manhattan, does not think so. Indeed, he is taking tipping off the table at Per Se starting next month and replacing it with a flat service fee of 20 percent. At the Per Se restaurant in the Time Warner Center in Manhattan, tipping is being replaced with a 20 percent service fee next month.

But in doing so, he is trying an approach that chefs and restaurant managers say has never caught on in this country for a simple reason: American diners relish the power of the tip to reward or punish their servers, and the servers want them to have it.
 

"He's taking a high-risk approach," said Danny Meyer, owner of the Union Square Cafe and several other restaurants in Manhattan. Mr. Meyer was not warning that Per Se's customers might balk. After all, they have been begging for a chance to pay $175 or more for a single dinner there - and on average they tip at a rate of 22 percent. No, he meant that Mr. Keller might face a mutiny among his waiters, who might not stand still for Mr. Keller's plan to divert a larger portion of the service charge to the people in the kitchen.

Mr. Keller said he was making the switch to head off an exodus of cooks and kitchen workers who had complained that they did not earn enough. He said he had already lost one talented young cook and that another had asked to become a waiter temporarily so that he could pay some bills.

"We realized the imbalance of earnings and that a change needed to occur in order to provide everyone in the restaurant an opportunity to pursue their dreams," Mr. Keller wrote in response to questions from a reporter.

"Some of the dining room staff is understandably concerned," he added. "They're going to be compensated in a new way that they're not used to." Instead of worrying about how much they take home on a particular night, the waiters and all the other employees will earn steady wages, even for weeks when the restaurant is closed, Mr. Keller said. He said the system worked well for more than seven years at French Laundry, his restaurant in Yountville, Calif., which charges 19 percent for service.

Mr. Meyer said he understood the instinct to opt for a service charge because he had it more than a decade ago. In 1994, Mr. Meyer said, he was all set to assume more control over how each member of his Union Square Cafe staff was paid by de-emphasizing tipping. He planned to build the cost of service into the prices on the cafe's menu, then pay the waiters' salaries out of the total, as is commonly done in France.

"At that point, I was impassioned about abolishing the tipping system because I felt it created a false servant-master relationship between servers and guests at the restaurant," Mr. Meyer recalled in an interview. Receiving a small tip or no tip at all, he said, "would just make the staff member feel really horrible, as if they had done something wrong."

He would not have been the first owner of a top-flight New York restaurant to take that approach. The Quilted Giraffe, once one of the more expensive and innovative restaurants in Manhattan, pioneered the use of the service charge in the 1980's, automatically tacking on a 15 percent charge to meals that cost a minimum of $75. (Although automatic service charges are rare for couples and small groups, they are customary for parties of eight or more.)

But Mr. Meyer was surprised by the resistance from his waiters at the Union Square Cafe, who wanted to preserve their chances of raking in some really big tips. "What I heard was that the incentive that a tip provides really energizes the servers to go perform," he said. Diners seem to notice, said Tim Zagat, chief executive of the Zagat Survey. About 80 percent of people surveyed say that they prefer to decide how much to tip their servers, he said. They reserve the discretion to give a very big tip or no tip at all, though they rarely do either, he said. Three out of four respondents say they have never left nothing, and the average tip has been rising steadily, he said. The average amount diners said they left last year was 18.6 percent, up from about 16 percent in the early 1990's, he said. Few restaurants are likely to follow Per Se's lead because few are confident enough of the quality and consistency of their food and service to get away with it, Mr. Zagat said.

"If you're a restaurateur, you've got to be careful when you say, 'I'm going to take 20 percent more from a client,' " he said. "You're asking for trouble. You're asking for angry clients."

At Per Se, tips average 22 percent, Mr. Keller said. So, he said, there is a risk that although diners will not be discouraged from leaving more, they will decide the automatic 20 percent sounds fair. Plus, the service charge is subject to the 8.25 percent sales tax, bringing it to almost 22 percent of the price of the food and wine. How many customers, faced with more than $100 in taxes and service charge on a $450 tab, will lay down a little extra because they liked the service? Gilbert E. Pilgram, the general manager of Chez Panisse in Berkeley, Calif., said that would not be unusual. Alice Waters, the founder and owner of Chez Panisse, instituted a 15 percent service charge more than 16 years ago and has rarely received a complaint, Mr. Pilgram said.

He said he did not hear a peep after the charge was increased to 17 percent less than a year ago. The increase to 17 percent covered a 25 percent increase in the cost of providing health insurance to the staff, he said. Many customers leave more, Mr. Pilgram said. Indeed, if anybody leaves a tip of more than 5 percent, he said, a waiter will ask if the customer understood that he had already been charged for the service. If not, it is returned. The waiters are free to keep all intentional tips and to split them with the rest of the staff as they choose, he said.

Mr. Pilgram said that he and Ms. Waters want the experience of the customers and waiters to be as democratic as possible. "We cannot completely ignore the fact that the market for whatever reasons pays a waiter more than a cook," he said. But he added, "If Mr. Big Bucks comes to the restaurant and drops 20 percent and in comes Mr. Non-Big Bucks and leaves 17 percent, I don't want the waiters at Chez Panisse giving Mr. Big Bucks better service."