Summary
Tipping in America has expanded into unexpected areas, with 72% of Americans saying it is expected in more places than five years ago, according to Pew Research.
While tipping can release feel-good neurotransmitters, a Bankrate survey found two-thirds of Americans now view it negatively, and one-third feel it’s “out of control.”
Critics highlight issues like social pressure and wage inequality, while businesses attempting no-tipping models, like a New York wine bar, have struggled to sustain them.
Many believe tipping culture has become excessive, with calls for reform growing.
If your business can’t survive without my tips, you don’t have a viable business.
But also, if you can’t survive without my tips, you’re probably working in the American service sector.
I don’t tip businesses, I tip people. Some of those people own the business.
If you underpay people to rely on tips, you’re just playing the game on a harder level.
I generally agree with you, but what is your response to businesses like those mentioned in the article that tried a no-tip model and could not sustain it?
I think that tipping models are starting to emulate app microtransaction models - they know that a majority of people are not going to tip, or will round their total up to the nearest dollar or something. It’s the person that sees the option to tip and decides to throw an extra $20 just because that they’re after. If they instead raise the prices to make it average out, the majority of people that normally would not be tipping go somewhere that’s cheaper (because they do tips), and the few people that would pay extra no longer have the option to.
To tie back to the microtransaction analogy - the games that bring in money are the free ones where you can pay to get stuff. Most people pay very little or nothing, but a small percentage throws tons of cash into the game. If you were to take the amount of money brought in by these whales over the life of a game, divide it among all people that played it, and charged that much for the game, it wouldn’t profit nearly as much, because none of those people want to pay the $5, and the people that were spending hundreds can only buy the game once, if that.
No response, they didn’t explain what challenges they encountered.
That they don’t have a viable business.
Probably because of all the other businesses competing by not paying their employees a fair salary
I don’t think you understand the competitive pressure of every other restaurant not raising their menu prices 20% alongside you. Do you think that a business isn’t viable if they can’t absorb a 20% labor increase without raising prices?
I suspect you are not a reliable or competent business analyst.
I don’t think you understand my stance on the issue. Why would you assume that I think a restaurant should stop accepting tips while everyone else does, and also not raise their prices? You are making a lot of assumptions about what I think.
You are combining the two distinct possibilities I referenced as consequences for a restaurant that stops accepting tips:
Raise menu prices, lose business to competitors
Do not raise prices, fail by not covering expenses
Either way, it’s not sustainable to voluntarily go tipless, which is why those who tried, revert. You’re the one that said that made them unviable. Did you mean to say something else?
I said that a business which cannot survive without tips is not viable. I did not comment on what other changes might be required.
Then the vast majority of restaurants are not viable. Again, your business analysis is not viable. An opinion that ignores fundamental aspects of the trade space isn’t worth the cost to light the pixels to display it.
I’ll admit, I don’t have numbers on hand, but I’m gonna bet money that the vast majority of restaurants in the world do not have tips and they are chugging along fine enough. The USA is not the center of the universe.
I mean, yeah. Obviously. But to the other businesses or potential business owners that want to try a tipless model, that see these businesses failing, that’s not very encouraging or helping to figure out what the underlying issue is. If people are trying to do a good thing but can’t quite figure out how to make it work, should we just say, “guess you’re not very good at this” and continue giving business to the places asking for tips, or should we try to look into what’s going on?
I’m not sure what you think my stance is or what point you’re trying to make.
The problem with one place going tip-less, is that they’re still competing with tipped places.
Going tip-less inherently means the prices need to go up. If the average tip is 20%, you need to raise prices at least that much, to match what your people got from tips. So if you have a restaurant with menu prices 20-30% higher than others, you’d expect to loose business to competitors. If every restaurant in the area had to raise menu prices 20-30% with you, that wouldn’t happen.
I have a dine-in movie theater near me. Which I grant, is different than a standard restaurant. This last year they changed their POS system, and removed from the bill an automatic 18% gratuity they used to have. Something like a month later, they added it back. Because everyone complained. Customers, and servers alike.
If a single restaurant really wants to go “tip-less”, that’s the way to do it. Automatically add a minimum tip to every bill.
I don’t understand what’s the difference between a 10$ + 2$ tip burger or a 12$ burger, why is the 10$ one more competitive?
Mathematically, in then end, there isn’t a difference.
The difference is in reality vs expectation.
People have the expectation of one price on the menu and a 20% higher final total. This is an unconscious habit built over a lifetime of it always working that way. So when they go online to see the menu of various places, they’ll see the tip-less restaurant has having higher prices. Even if they know it is tip-less, they’ll still unconsciously call it more expensive anyway. So they’ll go to the other restaurant that looks just as nice, but has cheaper prices on the menu.
It’s similar to why all stores, corporations, and business fight against having to include taxes and fees in advertised prices. They want to bring people in with the lowest possible price, then hit them with the full cost only at the last moment, when they’re least likely to back out.