Many Americans complain about tipping the wait staff when dining out. But when this restaurant chain experimented with a no-tipping policy, it backfired.
Joe’s Crab Shack made headlines last November when it boosted its servers’ hourly wages and adopted a no-tipping policy at 18 of its 131 restaurants. Now, just six months into the trial run, the popular casual seafood chain is pulling the plug on the no-tipping policy and reverting back to the standard gratuity model at all but four of the test restaurants.
It turns out the no-tipping policy was not only unpopular with Joe’s workers, but the majority of its customers also disliked it, Nation’s Restaurant News reports.
“[O]ur customers and staff spoke very loudly [about the policy],” said Bob Merritt, CEO of Joe’s Houston-based parent company Ignite Restaurant Group, in an analyst call last Wednesday. “And a lot of them voted with their feet.”
Joe’s Crab Shack hiked the wages of its servers and raised its menu prices at the no-tip restaurants to cover the increased labor costs. Merritt said the pilot restaurants saw an 8 to 10 percent drop in customers after implementing the no-tipping policy.
The restaurant chain’s research revealed that about 60 percent of its customers disliked the change in the tipping policy.
“Merritt said customers disliked the no-tipping policy for two reasons: first, they didn’t want to lose control of incentivizing service, and secondly, they didn’t trust management to pay the increase price to employees,” said Restaurant News.
As it reverts back to the standard gratuity model at 14 of the test sites, Joe’s also plans to roll back prices at those locations.
According to CNN Money, the no-tipping policy will remain at four of the fast-casual seafood restaurants where it was well-received. Merritt said his company will also try and identify the reasons why the policy works at some locations and not at others.
“The system has to change at some point,” Merritt said.
Do you think tipping is an antiquated model for restaurants? What do you think of the Ignite Restaurant Group’s decision to drop the no-tipping policy at 14 of the 18 locations where the policy was tested? Share your comments below or on our Facebook page.