How are restauranteurs Danny Meyer and Bob Merritt like canaries in a coal mine?
Coal miners, as you probably know, used to take canaries down into the mines with them to test the air. If the birds died, it meant that the air was unsafe for the miners.
Meyer and Merritt have recently provided a similar service to small business restaurant owners. Toward the end of 2015, each decided to experiment with no-tipping policies in their restaurants.
Expensive vs moderately priced restaurants
It’s important to put this in perspective. Danny Meyer operates some very high-end restaurants in New York City as part of the Union Square Hospitality Group. These are five-star restaurants – not only in the quality of the food but in the price as well. Bob Merritt, chief executive officer of Ignite Restaurant Group, runs the Joe’s Crab Shack chain of seafood restaurants. Any restaurant that has “Joe’s” in the name serves solid food at reasonable prices.
This background is necessary to understand because we’ve been treated to public experiments in which two very different types of restaurants tried the same radical change in policy by eliminating tipping. And, as perhaps we should have suspected, these experiments seem to have produced very different results.
Potential benefits of no tipping
There are some very good ideas and principles behind the no-tipping policy. First, as Shep Hyken wrote here at the time, good service is every employee’s responsibility, not just those who get the tips. Second, eliminating tipping allowed for a slight rise in prices, which would be used to increase wages across the board. The hope was to improve pay for everyone, acknowledge their roles in customer service, and encourage their commitment to great customer service.
The early results are in: In Meyer’s restaurants the change seems to be working, but Merritt has already dropped the policy.
Meyer first implemented the policy in The Modern back in November and he reported that the restaurant had its biggest December ever. However, as Meyer himself noted in an interview with New York Eater, The Modern enjoyed a lot of press coverage prior to the policy change and that would have contributed to some of the restaurant’s traffic. As he implements the policy in other restaurants, they won’t have that advantage.
It’s a no-go at Joe’s
The experiment with no tipping at Joe’s Crab Shack didn’t last very long; it quickly dropped the policy at 14 of its 18 trial locations. “Our customers and staff spoke very loudly, and a lot of them voted with their feet,” Merritt said.
While experimenting with changes like these can be worthwhile, I’m glad that these two well-heeled restaurant companies went first and were willing to be very public about their results. They have saved many small business people who own independent restaurants a lot of trouble. If you’re operating at the top end of the pricing spectrum, you might want to try no tipping. However, if you’re battling it out among moderately priced restaurants, don’t bother.
(I think it’s interesting to note that no-tipping seems to work at both ends of the pricing spectrum: fast food restaurants are generally no-tip eateries, and high-end restaurants can go that route if they so desire.)
There’s one more lesson to be learned here: Keep an eye on the experiments of your bigger competitors – you can learn a lot from their successes and failures.
Let them fund the trial balloons…or pay for the canaries.
