Bar Owner Eliminated Tips, Raised Prices And Started Paying Everyone $15 An Hour
Portland, Oregon’s new bar Loyal Legion doesn’t just offer customers 99 different beer choices. It also requires them to pay zero in tips.
When owner Kurt Huffman opened the bar, he wanted to figure out to deal with a problem plaguing all of his establishments: the nearly impossible search to hire talented staff in the back of the house cooking and prepping food and washing dishes. “I can’t find line cooks anymore,” he said. The search for a single cook takes his team three or four weeks, an eternity in the business. “I’ve got to figure out how to get the kitchen more money so we can keep talent.”
He noted that the cost of living in the city is so high that almost all of his dishwashers and line cooks have to work two jobs to get by. “The system is broken in terms of how people are paid,” he said.
So to create a new pool of money to be able to increase the wages in the back to be comparable with what the people serving customers in the front are making, he eliminated tipping and instead has raised prices by 20 percent — so a beer has gone from $5 to $6. That’s allowed him to increase the minimum pay for the back of the house to $15 an hour, which increases to $18 after three months. The front of the house will also get an $18 minimum wage.
Huffman himself used to work in the back of restaurants, and he noted that the new system allows him to address an “ethical dilemma” he faced when paying those positions less than servers and bartenders who also rake in tips. “I used to work with dishwashers and cooks, and everybody is busting our ass,” he explained.
A growing wave of American restaurants has been getting rid of tipping in favor of a variety of other models. While it started with high-end places on the coasts, it’s now extended to bars like Huffman’s, diners, coffee shops, and barbecue joints. One piece of the reasoning, which Huffman also noted, is that tipping is no longer an expression of gratitude for service but simply a given. “In the olden days, tips were actually an index of quality of service,” he said. “They aren’t anymore. People tip always the same.” In fact, the quality of service only accounts for a percentage point or so change in the size of tips; instead, they tend to fluctuate more on gender, race, and looks.
The no-tip model could also serve as an experiment for how his sit-down restaurants might address a higher minimum wage. Huffman expects a $15 minimum wage requirement will soon be enacted in Portland given that it’s already been passed in San Francisco and Los Angeles, the city raised the wage for its own workforce to that level earlier this year, and voters will weigh in on an overall hike to that level come November. “I think everybody in the restaurant industry, everybody who’s paying attention, is thoughtful and mindful of how we’re going to address that change,” he said.
His company ChefsTable Group has 16 restaurants, and he estimated that for six of them, that sort of cost increase will be nearly impossible to contend with without other changes. One change he’s considering is adding an automatic gratuity to the bill — perhaps 5 percent — that would go to helping cover that cost, and customers would be able to add what they wanted on top of that. Some restaurants in other cities are instituting higher wages before they even go into effect by eliminating tips and raising prices.
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This has been reposted from Think Progress.
