Photo by Caitlin Abrams
Server with mask on
To say that the pandemic has been the most significant event in the rise of restaurants is probably an understatement. Plenty of restaurant owners have acknowledged that the industry was on shaky ground before, with old systems like tipping already under the microscope. But nothing courts innovation like a global shutdown. As rules are being reset and already thin-margin models rejiggered, the pandemic might have sealed the fate of a professional service life compensated by tips.
Back in early 2017, I wrote a few fiery blogs to then mayor Betsy Hodges and the Minneapolis City Council asking them to consider the proposal for a tip credit (a lower wage for tipped employees, figuring in an average income from tips) when raising the minimum wage. I didn’t see how low-margin small businesses could find the money to compensate the non-tipped employees (dishwashers, cooks, hosts, etc.) equally with servers who were already getting paid the highest hourly average through tips. I figured everything would change with either sky-high menu prices, kiosk ordering, or no tipping, and small restaurants would close and servers would lose their jobs. Then COVID-19 showed up and said, “Hold my beer.”
What the pandemic has given us is a total industry reset, and maybe that’s not all bad. As restaurants figure out how to reopen, they are forced to do some new math. Suddenly, rising food costs and labor costs have to be realigned to match limited capacities and extra expenses (cleaning products, masks, reservation systems, etc.). So, as it costs more to do business with fewer people dining, restaurants are using this moment to reset expectations and redistribute the flow of money coming in to support the restaurant as a whole—not just the tipped employees.
Because Minnesota law does not allow restaurants to control tips once they are given, more and more restaurants are now using the terms service charge, admin charge, and hospitality charge to reorient the guest to this new model. Simply put, it’s a specific percentage applied to your bill (usually in the 20 percent neighborhood) that is not legally considered to be a tip or gratuity. This allows restaurants to use the funds to even out the wages of the whole staff (not just cooks, but also bussers and barbacks who used to have to rely on servers to give them a share of tips) or help cover new costs of takeout containers or fund a new front-door staff position to monitor masks.
Early on, as this started rolling out, there was confusion when some restaurants still included a tip line on the check. Minnesota guilt often leads us to feel that if there is a tip line, we are duty bound to add a tip. Some restaurants thought they should keep the tip line to allow guests the option to be generous to their particular server; others removed it to help reset expectations on how employees are compensated and what the guest’s role is in that. Think about it: When you walk into the dry cleaner or gas station, do you think about how you need to directly compensate the workers? Why do you tip the Caribou person handing you a coffee but not the grocery store person checking and bagging your items?
This is more than a shift in money; it’s a paradigm shift. “We’ve been studying this for 16-plus months,” Gavin Kaysen of Spoon and Stable told me. “We worked with a professor at Cornell and one from UC Berkeley who wrote the law on fair wage. The statistics are fascinating. I mean, like, scary. She had one example where she looked at a Black female server and a white male server who worked side by side their entire time in the same restaurant, and the white male server had received six hundred thousand dollars more in his lifetime in gratuity.” Kaysen and his team also have a year’s worth of their own data from Demi, which opened without tipping, to support their decision to move forward without tipping, or a tip line, at any of their establishments. “This isn’t about robbing Peter to pay Paul; this is about leveling the playing field and creating a more professional environment.”
With a service charge, employees get a higher hourly wage and, often, more health insurance benefits. When you have a stable wage (some restaurants noted looking at between $20 and 25/hour for servers), your pocket is less cursed by the whims of weather, and your life changes when a Tuesday shift can be as profitable as a Friday shift. Kaysen noted that this system works to help those who want to ladder up into managerial positions and, later, into ownership of their own. It has already been working in town at Travail for years, but also on a smaller scale at Hyacinth and Birchwood. From small places like The Buttered Tin to higher-volume operations such as Hai Hai, Alma, and Rock Elm Tavern, this is a shift that restaurateurs feel might help save the industry.
Of course, some servers and bartenders are not happy, and restaurants know that they could lose some of their best over the change. But in a time when nothing is certain, it’s hard to imagine stepping into a shift where you have to rely on a constant flow of generous people to pay your way versus knowing what your six-hour shift contributes to your rent. Not all restaurants will turn to this model. Many bars and eateries will keep tipping, though it will be interesting to see which model draws more applicants in the long run. And as this industry gets creative, as we’ve seen it do when it needs to survive, we’ll see new innovative solutions, like a variable wage, which allows for sales numbers to factor into bonus structures and employee teams across positions working toward boosting numbers in a way that hasn’t been allowed before. Maybe we do have to burn it all down to build it back up, better.
This article originally appeared in the September 2020 issue.
