Shake Shack Founder Danny Meyer Is Eliminating Tipping From All His Restaurants

By Kara Brown | October 15, 2015 | 5:35pm

In Depth

Restaurant magnate Danny Meyer has decided to eliminate tipping from all 13 of the restaurants in his successful Union Square Hospitality Group.

Meyer announced the change on Wednesday. The New York Times reports it will affect almost 1,800 employees. The debate about tipping in America has been bubbling for some time now and Meyer’s shift will mirror the (lack of) tipping policy that our good friends in Europe practice.

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Meyer says his restaurants’ checks will now have “one total, as if you were buying a sweater at Brooks Brothers.” Among the reasons for eliminating tips, he almost chiefly cites the importance of being able to retain kitchen staff who have not seen the same increase in income as dining room workers:

“The gap between what the kitchen and dining room workers make has grown by leaps and bounds,” Mr. Meyer said. During his 30 years in the business, he said, “kitchen income has gone up no more than 25 percent. Meanwhile, dining room pay has gone up 200 percent.”

They expect the hourly wage for kitchen staff to rise from $11.75 to $15.25, which will be in line with the new state minimum wage of $15 an hour.

Because we’re all accustomed to tipping, there are concerns that customers will not respond positively to the sticker shock of seeing gratuity already folded into the bill.

“Danny has a lot of trust out there with his customer base,” the chef and restaurateur Tom Colicchio said, “and if they’re willing to pay higher prices, it’s going to make it easier for everybody else. That’s still my biggest concern: whether the dining public is up for it.”

Mr. Colicchio said that the success of the car service Uber, whose fee includes service, “is making it possible at least for younger generations to swallow this.”

There are a whole host of distribution problems with tipping, from people simply not tipping at all to discriminatory practices that range from outright racism to tipping more to an attractive server.

Eliminating tips does, of course, come with some very tangible drawbacks.

But restaurants that pay servers a straight salary give up a sizable tax credit on tipped income. The Union Square Hospitality Group expects to lose from $1 million to $1.5 million — “real money,” as Mr. Meyer puts it — on the tax credit alone.

It goes without saying that most restaurants cannot afford to lose that kind of money. We’re talking about Danny Meyer here—the man also created Shake Shack, for which he should get an immediate pass into heaven.

The Union Square Hospitality Group is already extremely successful and can likely support any fluctuation in profits that arise in the immediate future. The question will be if other restaurants can do the same while keeping both their staff and customers happy.

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Image via The Union Square Hospitality Group.