Service Charge Frequently Asked Questions.
We provide our whole staff higher wages that allow everyone to keep up with San Francisco’s increasing costs of living. We also offer our whole staff and their families high quality private health insurance that covers medical, dental and vision. In addition we offer commuter benefits that allow our staff to pay less to take public transportation. That is made possible by Tawla sharing in its profits as well as the 20% appended service charge.
We have prepared the following document to answer any questions you may have. Borrowing pages from other Bay Area restaurant' books who'd deployed similar models for many years before us such as Comal, Chez Panisse, and Cala. Special thanks to the Comal Restaurant Management for providing a framework to answering these frequently asked questions.
Why do you charge a service charge in lieu of tips?
Long overdue increases to the minimum wage on both state and local levels have prompted us to move to a new model of compensation that will be sustainable and fair in the long run for our entire staff, especially that minimum wage will continue to rise. More traditional compensation models that are prevalent around the Bay Area today were such that the only people seeing raises from recent minimum wage increases were service staff who were already at the top of our pay scale when tips were factored in.
Though kitchen staff get paid hourly wages that are often above the minimum, their total compensation lags far behind their service staff counterparts. Further increases to the minimum wage will only exacerbate this imbalance unless a new approach is taken that creates a more equitable environment.
Why can’t you get the service staff to share their tips with the kitchen staff?
State and national labor law continue to change as to when companies can mandate that tips be shared beyond the service staff and/or those in the “chain of service”. By utilizingmandatory service charge, it allows us to address the compensation gap between service staff and kitchen staff while also keeping ahead of any legal changes or challenges.
How does compensation for service staff compare to when they made minimum wage plus tips?
On average in the long term, we believe our service staff will make the same amount per hour in total compensation as they would if they were paid minimum wage plus tips. We created a new compensation model for service staff that consists of a merit-based hourly wage that will always be at least 8-10% above minimum wage with a revenue share system that allows employees to share directly in each night’s revenue.
In addition, at the end of every month period, we created a performance bonus structure reminiscent of those that exist in other industries. The merit-based bonus depends on a few items including a server’s individual performance during a specific period from the number of guests they've served to the quality of their service as measured by knowledge of the menu and the ability to give our guests a special, professional and warm experience. Hence, the bonus portion of their compensation varies depending on the quality of their work. By creating a sliding scale, we create the opportunity for growth and advancement, and motivation to excel.
Why did you remove the tip line from the credit card slip?
To eliminate any confusion as to whether a further tip is expected.
Won’t the quality of service suffer?
We really hope it doesn't and hope that we can create a culture that is driven by taking pride in performing better service. Quoting Comal restaurant management, numerous studies have concluded that there is little to no correlation between quality of service and amount of tip (http://tippingresearch.com/uploads/managing_tips.pdf). Studies have also found that women are tipped better than men, that white servers are tipped better than black servers, and that servers who draw smiley faces on the check or touch their customers’ shoulders during service get better tips (unless they are male servers, in which case the opposite is true) (http://tippingresearch.com/uploads/customer_racial_discrimination10-30-06.pdf).
We’d be extremely short sighted to think that only the service staff is responsible for offering our guests good service. Every staff member has a hand in that from cooks to dishwashers to runners to bartenders to servers. When a delectable dish or tasty cocktail makes it to the guest’s table in a timely fashion, that takes a whole team to make that happen. To us, that’s good service.
Why did you choose to charge 20% instead of some other amount?
It’s long been common practice at most restaurants in general to charge a fixed service charge (usually 20%) for parties of six or more – we are simply extending this policy to cover groups of all sizes.
How is the service charge money used?
The service charge is used exclusively for employee wages and benefits. Ultimately, this new system costs us more in labor costs than how much it would cost us if we had a more traditional model, as we are paying our service staff at a competitive level and increasing the pay for our kitchen staff, in addition to paying higher taxes. We feel good about these additional costs because we believe the new compensation system is the right thing to do in the long term for our staff and our business.
Why don’t you just raise your prices and eliminate the service charge?
We have considered doing that but it’s a difficult thing to do in a competitive marketplace where the vast majority of restaurants price their menus based on the assumption that their service staff will make a significant portion of their compensation from tips. As more restaurants move to a service charge in lieu of tip (which we believe will happen in the coming years), the circumstances will be more favorable to taking this additional step.
This system exists across many other countries in Europe and Asia. Since we exist in a new price-sensitive market, we need to keep our overall menu pricing structure similar to the many restaurants in the Bay Area. It’s important to remember that, regardless of whether we accept tips, charge a service charge or move to “all-in pricing”, the ultimate average cost to the customer will remain the same.