Reward This No-Tip Restaurant in Northern KY

Tipping is a remnant of the feudal lords-n-serfs economy and perpetuates the low-wage economy. Long past time to get rid of it.

Think Progress:

Packhouse Meats, a restaurant that opened in Newport, Kentucky in January, doesn’t allow tipping. Instead, it pays its employees a decent wage.

Servers at the restaurant make a minimum wage of $10 an hour. But they can also make 20 percent of their sales in commission — which is based on sales volume, the quality of service, and a few other factors — if it’s higher than that wage. This means that, on average, the servers are making $15 an hour. “Ten dollars an hour becomes a safety net,” explained owner Bob Conway. “When you come in and it’s dead, or you’re working through the middle of the afternoon and we don’t really have any business,” that $10 might kick in.

That’s much higher than the tipped minimum wage, which in Kentucky as well as nationally is just $2.13 an hour. While businesses with tipped employees are required to make up the difference if tips don’t bring that wage up to the $7.25 floor for all other workers, they often shirk that duty.

Conway decided to institute this different model when he opened up his new restaurant. His family owns a restaurant company that runs some TGI Fridays in the area. “I’d just been hearing a number of horror stories from Fridays servers talking about waiting on a table of 30 and getting tipped $5 on a several hundred dollar check, and those stories were happening more and more often,” he said.

While 20 percent is considered a standard tip, three-quarters of customers admit that they leave less and 11 percent don’t leave anything. “We were losing servers because they couldn’t make any money.” He also noted that servers usually have to come in and do work before they start serving customers, often at the $2.13 tipped minimum wage. “I don’t think that’s really fair,” he said.
The new model was “done to protect the servers, and by protecting the servers, reduce turnover,” he said. Since Packhouse opened, there hasn’t been any turnover that wasn’t due to firing someone for failing to meet the requirements of the job. “None of the servers are leaving because they’re not making enough money,” he added. That’s good for the restaurant’s bottom line: turnover can cost as much as 20 percent of a workers’ pay. It has also raised quality. “If we’re paying our servers well, we can get high-quality servers, and if you have high-quality servers then the quality of service is better,” he said. “Generally I think that’s what we’re finding.”