06/20/2017
Demystifying Gratuity In America:
In the last few weeks I've seen recurring arguments about gratuity in the Food + Beverage industry. Please take a moment and share this with any and everyone you can, because in many of the conversations I've observed people saying that there is a lack of awareness about the proper "etiquette," which is a terribly misleading word to use as it relates to gratuity (more on that later).
1.) Gratuity Is Not A Reward/Bonus For "Good" Service
Good service is one of the most subjective things on earth. Did they make eye contact? Did they smile, fold your napkin and incessantly refill your water? What about their tone and inflections? Or their physical appearance? Sure, all of those things matter and impact your experience as a guest. But that has absolutely nothing to do with the gratuity standard. There is no "etiquette" or politeness to paying for things. There is a standard, and then there is generosity above that standard.
Gratuity is a system. Not for rewarding the person standing in front of you, but for supporting the entirety of the venue you're sitting in. Non-unionized independent Food + Beverage establishments are notoriously low-margin businesses. The federal government, and most local governments, have established wage classes and various protections for the service industry professionals. This creates an opportunity of scale, particularly for small, local and independent establishments who wouldn't be able to absorb higher wages without drastic price increases to offset the cost.
You would be understandably angry if your anticipated paycheck was ever short, but when you pay less than the standard gratuity that is exactly what you're doing to others.
2.) Gratuity Is Not "Optional"
Yes, the line is blank. And yes, you can fill in any amount you would like. But when you don't leave the standard gratuity, you are gaming the system. Let me say that more poignantly, you are stealing money from people's paychecks. Not just the server who had the misfortune of you being seated in their section. Depending on staffing structure, that gratuity lands in the hands of several other employees within a venue. The standard gratuity is a cost-of-living adjustment (COLA) formula for the service industry. The line is not blank for you to arbitrarily decide what is appropriate. The line is blank because the standard changes over time with the economy. Generosity is anything above the standard, and that is at your discretion, of course. But anything below it is unacceptable and immoral.
The Food + Beverage gratuity standard in most metropolitan areas is 20% of the pre-taxed amount. It may be slightly less in some rural areas. But I also need to mention a word here about discounts. If your bill is discounted by the house, or if you are using any coupons, deals or promotions that deflate the full cost on what you are served, it is important for you to factor the full cost into the gratuity. So if your $100 check is discounted 50%, you should still be calculating a standard gratuity of $20. That makes perfect sense, right? Good.
3.) Gratuity Benefits The Consumer
That gratuity line at the bottom of your check is at the bottom for a reason. Anything above that line is subject to taxation. So the argument that restaurants should be paying the full wage to its employees is actually hurting the consumer. Food, labor and operational costs are already staggeringly high in the United States compared to many other countries. The average restaurant would have to increase prices by more than 30% to take in enough revenue if they had to pay direct wages. That means the $100 meal that you didn't want to tip $20 on is now at least $130 plus tax. Using a tax rate of 10%, the difference in the gratuity system and a full wage system ($130 vs. $143) is pretty stark.
That's not to say that bars and restaurant shouldn't be doing more to competitively and fairly compensate their staff, but that's a can of worms to open for another post altogether.
4.) Gratuity Should Be In Cash Whenever Possible
Credit/debit card fees are the devil. And that's all I have to say about that.
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