Bay Area Eateries Forge Ahead With 'No Tip' Experiment

Andrew Hoffman wants to end tipping as we know it.

Hoffman is co-owner of Comal, a Mexican restaurant in downtown Berkeley. About a year ago, he followed in the footsteps of other local restaurants and replaced tips with a 20 percent service charge.

“I think tipping is an unhealthy practice,” Hoffman says. “I would be in favor of anything that got restaurants out of that model.”

There has been a lot of criticism in recent years about the tip system. One of the biggest complaints is that it allows for discrimination. Studies have shown, for example, that black waiters make less than white waiters.

Hoffman and other no-tip restaurant owners argue that the tipping model creates bad dynamics in a restaurant.

Hoffman says you get mercenary servers -- waiters gunning for their own tips instead of working together. And because tips go to the service staff, they often end up making far more money than the kitchen staff or even managers.

Hoffman says, “If servers are making the most money in the building, something is wrong with the current restaurant compensation model.”

Hoffman has faulted the tip system for years. But what compelled him to finally ditch it wasn't any of the reasons above. Instead he says, it was the rising minimum wage.

Last year Berkeley voted to increase its minimum wage to $12.53 by October 2016, and there has been talk of continuing to raise it in the coming years. That means restaurants will need to pay everyone more, including waiters. Hoffman says the service charge helps him balance out pay because, unlike with tips, he can divide it among the whole staff. He expects more restaurants will adopt this model to cover the labor costs of a higher minimum wage.

Replacing tips with a service charge may sound good if you are working in the kitchen, but it's a scary proposition for career waitstaff like Kim Schooling.

Schooling has waited tables for 20 years at different places around the Bay Area. She worries that, with the new model, waiters will make less and less, until they can no longer earn a living.

Schooling says, “We have no idea what our income could potentially look like if this shift takes place.”

The uncertainty comes from the one big difference between a tip and a service charge. By law, tips go straight to the waitstaff. That is because restaurants have a history of stealing them. But with a service charge, owners get the money and can do whatever they want with it. Schooling feels like restaurateurs are using the rising minimum wage as an excuse to get their hands on tips.

“It seems oddly opportunistic,” Schooling says. “Like oh, our back is up against the wall with the wage increases, so we will use this income and we'll dress it up in this pretty dress called fairness.”

The no-tip movement is growing in the Bay Area and in major cities like New York. Many are also citing minimum wage increases as the main motivating factor. But for some local restaurants, the experiment has backfired so badly they have had to reinstate tipping. Owners of Bar Agricole in San Francisco reportedly brought tips back to keep staff from quitting.

Sedric Pieretti thought he would have to quit when his restaurant went no-tip. He is a bartender at Comal.

“My initial reaction was that I was going to have to find a new job,” Pieretti says. “I thought I wasn't going to make as much money.” But Pieretti has since changed his mind, and is now an advocate for the service charge.

Pieretti says he likes the stability and that his compensation is determined by his boss, not customers. He also says he feels like a service charge legitimizes his career as a bartender. But a big part of the reason the service charge works, Pieretti says, is because the owners at Comal are so good to work for.

First off, the owners promised no one on staff would take a pay cut. They're covering the extra payroll cost themselves. Also, the owners are way more transparent about finances than at most restaurants. They share a spreadsheet with the whole staff that shows exactly what the restaurant makes and where that service charge goes on any given night. Pieretti says he can see that the restaurant isn't pocketing any money that should go to him.

“I can look at the net sales of the restaurants for the night,” Pieretti says. "Which this to me is the most important number. That's the one that always gets hidden from employees. How much did they make and how much of that money do you get.”

Pieretti prefers the no-tip model as long as service job wages don't take a big drop. If they did, he says, he'd have to find another line of work. That might not be easy, since Pieretti has been a bartender all his working life.