Per Se ends tipping in favor of service charge

[rich]

Anthony Dias Blue does reports for CBS Radio and last week he spoke about tipping. Not to bore anyone with the details of the 15-20 percent rule he advocated, I will skip to the last line of his report.

After suggesting the amount of the tip be directly related to the quality of service, he stated - but remember the tip is "still just a reward for good service."

I find the term "reward" interesting. It certainly suggests something beyond a normal salary. While I have commended Keller for placing his staff on a salary based on the 20 percent service charge, I agree with Blue regarding the "reward" issue. It is still my belief that individual servers (or teams in certain restaurants), should keep anything they make above the average tip or service charge. This incentive could be the compromise to keep everyone happy.

[slkinsey]

I was lucky enough to be able to get some information directly from the source at Per Se, so I hopefully can clear some things up and contribute some new information.

Althouth they call it a "service charge system," there is in fact no "service charge" per se at Per Se (pun inevitable). This is to say that there is no item on the menu saying that "prices are subject to a service charge of X%." Rather, prices have been raised -- some by more than 20%, some by less -- and the menu now indicates that service is included. The $175 menu is now being sold for $210, which is a 20% increase.

Contrary to reports, there has not been greater-than-expected or greater-than-usual turnover at Per Se with the rollout of the new structure. In fact, turnover was much greater when the change was made at French Laundry, perhaps because there is a significantly smaller talent pool from which to draw at Yountville.

Per Se is also not dividing up the "extra" take every night and doling it out to various members of the staff based on some formula. Under the new system, everyone in the house is paid an individual salary commensurate with his or her performance, experience, expertise, seniority and position -- just like a "real job." This means that some servers are making less than before, some are making more, and the kitchen all received a nice raise.

There are several things worth expanding upon. Keller's team doesn't view the staff as divided between FOH and BOH, but rather as one unified team. As such, it is important to them that everyone have an opportunity to excel and advance. It is a sad fact that most four star restaurants don't pay the cooks a living wage. Whereas before servers were being paid equally out of a tip pool, they are now salaried according to performance and experience. This presumably means that servers will be rewarded solely for providing good service, as defined and determined by Per Se's management, and not for upselling and other tip-increasing gimmicks that are not necessarily related to good service. Servers who were "riding out the tip pool" or who resorted to tricks of the trade. . . yea, they are likely to see a reduction in compensation. But, on the other hand, if they get with the program and stick with Per Se, they have an opportunity to make a lot more. This strikes me as the kind of person they would rather have around at Per Se. It is also noteworthy that the new system gives Per Se's management much greater ability to manage service at the restaurant, and it was pointed out to me that French Laundry did not win the James Beard Service Award until after they changed to the new system.

[rich]

Three questions:

1. Was wine and liquor raised by 20% as well? If so, does that mean a drink at the bar is now 20% more and the service charge applies there as well?

2. If everyone is paid a salary, does that mean if the 20% doesn't cover salaries, the restaurant will subsidize the rest? Conversely, if the service charge money is more than salaries, where does that go?

3. You mentioned what they don't do with "extra" money, but what do they do with it? Does it go into the "general fund." How do they monitor the cash tips that are given to waitstaff, bartenders, coat checkers, etc.?

I very much like the idea of being paid a salary based on performance et al, at least it solves the incentive issues.

[slkinsey]

1. Was wine and liquor raised by 20% as well? If so, does that mean a drink at the bar is now 20% more and the service charge applies there as well?

I don't know the specifics. What I've been told is that prices increased by various percentages, some more than 20%/some less than 20%. These increases might even be different from bottle to bottle or drink to drink.

2. If everyone is paid a salary, does that mean if the 20% doesn't cover salaries, the restaurant will subsidize the rest? Conversely, if the service charge money is more than salaries, where does that go?

3. You mentioned what they don't do with "extra" money, but what do they do with it? Does it go into the "general fund."

What I get out of this is that the whole "service charge" idea is a red herring. There is no service charge. They salaried their waitstaff, raised prices to account for this expense, and put the words "service included" on the menu to let patrons know that the waitstaff is not working for tips. The raise in prices was so that they could include these salaries in the budget, and while I think it's easier to explain to the public that way, I don't think it's accurate to call the price increase a "service charge." Let us assume for a moment that the ball boys at the US Open had historically been unpaid volunteers who this year had to be compensated. If the price of a US Open ticket were increased to account for this new expense, would it be useful to refer to it as a "ball boy charge?" Similarly, when the price of groceries goes up due to increased transportation costs associated with the rising price of gasoline, do we call that increase a "gasoline charge?"

Based on how Per Se does their bookkeeping, it may very well be impossible to determine how much "extra" or "less" money they are bringing in through the various price increases under the new system balanced against the new salaries. More to the point, there may be little reason for them to do so. It will become only more complicated as time goes by and the overall compensation picture evolves due to raises, new hires, etc. I'm sure they will proceed to balance income from sales against their expenses -- including compensation, rent, raw materials, electricity, etc. -- to make a profit. Just like any other business. If they aren't making enough money, they will make adjustments somewhere (raise prices, cut staff or reduce salaries, change suppliers, reduce food costs, etc.). Just like any other business. Needless to say, a place like Per Se is more likely to raise prices in this scenario than resort to most other solutions.

How do they monitor the cash tips that are given to waitstaff, bartenders, coat checkers, etc.?

I have no idea, but I assume they get to keep these small amounts, as they are real gratuities.

[dvs]

bravo slkinsey!! thanks for putting all that info together!!

[rich]

How do they monitor the cash tips that are given to waitstaff, bartenders, coat checkers, etc.?

I have no idea, but I assume they get to keep these small amounts, as they are real gratuities.

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Hate to bother you again Sam, but does that mean (since the price has the 20% built-in) if you put an amount on the tip line (credit card), the waiters get to keep that? Or are we just talking cash? And finally, what happens when a customer pays in cash (probably 10% of the time) and leaves additional funds?

Sam, I really don't expect you know - but just some thoughts running through my head. I'm sure Keller has it all figured out.

Does anyone know if the French Laundry built their 19% into the overall prices?

[ulterior epicure]

That's how they do it in France.

And that's why you generally get CRAP service in France... IMHO.

Anyway, it's a myth that good service equals better tips. The number one factor correlating with better tips is . . . bigger checks. Most people tip whatever percentage they tip, within a very narrow band, no matter what level of service they get

... I don't know how you tip. Generally, I agree, but, I do think it adds an incentive for the server to 'go the extra mile.' Also, if I'm really dissatisfied with the service, I am at liberty express this. I think it's only fair. Have you ever worked as a server? The psychology is there...

So the incentive isn't to provide good service; it's to sell as much crap as possible.

Maybe so, but it's still the diner's choice whether or not to order...

In my opinion, Keller's decision is the beginning of snotty service in the United States...

U.E.

Edited November 19, 2005 by ulterior epicure (log)

[Mikeb19]

In my opinion, Keller's decision is the beginning of snotty service in the United States... 

U.E.

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I've seen plenty of snotty servers at places where they are working for their tips as well. 'Bribing' the serving staff (ie. incentive of good tips) does not guarantee good service. I think having the serving staff on salary will do alot more to raise the level of service. It encourages teamwork, whereas paying servers only in tips encourages competition and rivalry.

The 'snotty' service you've seen in France is probably due more to the fact that they're French and you're American, not their system of paying servers.

The biggest complaints I hear coming from servers is the lack of a regular paycheck, and we all know what cooks complain about (personally, I find it completely rediculous that you can work as a cook at the top level, working 60 hours a week and make only half as much as the server who's serving your food working 5 hours a night...).

[Bux]

That's how they do it in France.

And that's why you generally get CRAP service in France... IMHO.

Anyway, it's a myth that good service equals better tips. The number one factor correlating with better tips is . . . bigger checks. Most people tip whatever percentage they tip, within a very narrow band, no matter what level of service they get

... I don't know how you tip. Generally, I agree, but, I do think it adds an incentive for the server to 'go the extra mile.' Also, if I'm really dissatisfied with the service, I am at liberty express this. I think it's only fair. Have you ever worked as a server? The psychology is there...

So the incentive isn't to provide good service; it's to sell as much crap as possible.

Maybe so, but it's still the diner's choice whether or not to order...

In my opinion, Keller's decision is the beginning of snotty service in the United States...

U.E.

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My experience in France is that restaurant service is generally better than in the US, but that like in the US, it varies from place to place. As for tipping as an incentive to provide good service, there are any number of service areas where the service is excellent or lousy where there is no opporutnity to tip and the sales clerks are dependant on their salaries. There have been any number of times I've made a purchase in a shop and could have felt entitled to deduct whatever part of the price went to pay for the clerks salary. Tipping should be abolished in restaurants, or put in place in department stores perhaps.

[ulterior epicure]

I've seen plenty of snotty servers at places where they are working for their tips as well.

... and you may certainly let the restaurant/server know that - not only by being vocal with the management, but in your tip as well.

'Bribing' the serving staff (ie. incentive of good tips) does not guarantee good service.  I think having the serving staff on salary will do alot more to raise the level of service.  It encourages teamwork, whereas paying servers only in tips encourages competition and rivalry.

Teamwork - yes, perhaps, service, I'm still not convinced. I've worked on the service side of industry. While competition and rivalry does exist, I've found that to the contrary, servers are generally very team-work oriented - each knows (or quickly learns) that without each other's support, they can't operate successfully alone. If anything, I think the "back of the kitchen" is indeed more united than most might expect/suspect. Especially, if you're at a high-end establishment, the management won't (shouldn't) tolerate any "cattiness." One bad apple can spoil the bushel, but usually, at well-run places, they're gone before they can do much harm.

The 'snotty' service you've seen in France is probably due more to the fact that they're French and you're American, not their system of paying servers.

.... perhaps... perhaps... and if that is the case, then i feel that i should have the right to not pay for the service - which really, at some places (depending on how bad the service is), can be non-existent!

The biggest complaints I hear coming from servers is the lack of a regular paycheck, and we all know what cooks complain about (personally, I find it completely rediculous that you can work as a cook at the top level, working 60 hours a week and make only half as much as the server who's serving your food working 5 hours a night...).

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agreed!

Edited November 20, 2005 by ulterior epicure (log)

[ulterior epicure]

As for tipping as an incentive to provide good service, there are any number of service areas where the service is excellent or lousy where there is no opporutnity to tip and the sales clerks are dependant on their salaries. There have been any number of times I've made a purchase in a shop and could have felt entitled to deduct whatever part of the price went to pay for the clerks salary.

Agreed - but what does that have to do with the restaurant industry? Your example exactly proves my point - if it's true in other industries, then it can be (and I think it is) true in the restaurant industry. Service is service... period. You link it with an "incentive," you'll generally get better service across the board.

Tipping should be abolished in restaurants, or put in place in department stores perhaps.

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I guess we'll just have to "agree to disagree" on this one, Bux.

[Bux]

As for tipping as an incentive to provide good service, there are any number of service areas where the service is excellent or lousy where there is no opporutnity to tip and the sales clerks are dependant on their salaries. There have been any number of times I've made a purchase in a shop and could have felt entitled to deduct whatever part of the price went to pay for the clerks salary.

Agreed - but what does that have to do with the restaurant industry? Your example exactly proves my point - if it's true in other industries, then it can be (and I think it is) true in the restaurant industry. Service is service... period. You link it with an "incentive," you'll generally get better service across the board.

. . . .

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My first response would be to ask which is more important, the food, or the service, when you dine out. Why don't we tip the cooks? Why do diners slip a banknote in the hands of the captain? Why don't they tip the chef? Do you want a better table or a better cut of meat or the freshest piece of fish in the kitchen?

If you believe an incentive is necessary to get professional treatment, those are genuine questions. If you believe the kitchen is capable of giving top professional treatment to the guests without the incentive of a tip, why should the front of the house offer the same top quality service in return for the incentive of a professional salary and professional respect. I know it's not going to happen yet in the real world, but putting the wait staff on a professional level with a real salary should not result in snotty service. Snotty waiters are rarely hired by good restaurants and when they are, they don't usually last long.

[ulterior epicure]

My first response would be to ask which is more important, the food, or the service, when you dine out. Why don't we tip the cooks? Why do diners slip a banknote in the hands of the captain? Why don't they tip the chef? Do you want a better table or a better cut of meat or the freshest piece of fish in the kitchen?

Certainly, I agree the chefs are underpaid. But, unlike servers, they are usually blind as to the diner. And for the record, I don't slip banknotes to anyone... as a customer, I dine on my own terms. Perhaps that means I end up at a table by the kitchen, or cold service, but then I also know to take my business elsewhere in the future.

If you believe an incentive is necessary to get professional treatment, those are genuine questions. If you believe the kitchen is capable of giving top professional treatment to the guests without the incentive of a tip, why should the front of the house offer the same top quality service in return for the incentive of a professional salary and professional respect. I know it's not going to happen yet in the real world, but putting the wait staff on a professional level with a real salary should not result in snotty service.

I don't believe an incentive is necessary, but it is a sad fact of life that some need the extra incentive. I agree that putting wait staff on a professional salary shouldn't result in snotty service. But, as I have experienced in Europe (and yes, I recognize that there is, borrowing John Talbott's terminology, the "Americun" factor), salaried wait staff have no incentive to do anything.

Snotty waiters are rarely hired by good restaurants and when they are, they don't usually last long.

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As I have noted above, I agree with this.

[Suzanne Podhaizer]

Although I haven't eaten at Per Se, I recently ate at the French Laundry, and the service was anything but snotty. Hopefully this information is still pertinent to the discussion...

Although I do not make much money, I choose to spend a good portion of my income on food--whether this is at the grocery store or at restaurants. I always tip at least 20% (more on smaller bills) in average restaurants because I know that most servers are making less than minimum wage and don't have health insurance. Anything above the 20% I consider to be discretionary and based on service. This is my own rule and standard I've set for myself based on my knowledge of the industry and my system of ethics. When I'm saving up to go out to dinner (which I have to do because of my income), I factor in this extra amount.

I've seen people, both older and younger than me, tip very poorly. Many (the older folks particularly) don't seem to understand how tough it is for waitstaff at most restaurants to make a decent living. Others (generally the younger folks) suggest that they don't make much money either, so they just can't manage to tip well.

I recently ate at the French Laundry. It was my first experience with a waitstaff that was paid via a service charge...here's what I experienced:

1) We didn't order wine initially (my husband doesn't drink) and the level of service did not change at all. In other restaurants, I've had servers treat us "snottily" because we didn't order a bottle.

2) When we told the server it was a special occasion (our wedding night), he comped me 2 glasses of champagne (and sparkling cider for my husband) and the kitchen sent out two extra courses (on top of the 9 regular courses). Later I ordered a glass of gewurztraminer and a glass of port with dessert. However, the sommelier decided to send me a more expensive glass of sherry that he felt paired well with the "extra" dessert course...and they didn't charge me for the wine either. They also gave us 8 FL chocolate bars and two copies of the menu to take home.

3) There were 5 staff members who provided service to our table throughout the evening. Each one took the time to talk to us, answer questions, etc.

4) The people at the next table (a 4-top) clearly had more money than we do (judging by their attire, jewelry, and their conversation). However, they didn't seem to be "food lovers" as we are. For example, one of the women stated that the "oysters and pearls" tasted kind of like Kraft mac and cheese (which she really likes, by the way). These folks also had wine. My perception (and I could be wrong here) was that the waitstaff enjoyed talking to us because we loved the food, and because they weren't worried about their tips, they could take the time to do so rather than focusing on that 4-top. I feel like we got better service because of the arrangement.

4.5) I'd have been thrilled even if he'd just comped that champagne and given us the menus--it was above and beyond to send out 2 extra courses and the glasses of wine and sherry, and the chocolate bars. The only explanations I can imagine for this is a desire to provide good service and a once-in-a-lifetime experience (which one's wedding night ought to be), or to reward us as customers for being so obviously thrilled to be there--it is possible that they were hoping we'd leave extra money, but given that the folks at the next table over were a better bet for a bigger tip, I don't think this was the case.

5) When the bill (which for me represented more than a week's salary) came, I opted to tip on top of the 20% service charge because the service/experience was so wonderful. I don't know what exactly happened to that "tip," although I would be interested to know, but I was happy to leave it.

6) The service charge was a separate line item on the bill. It was 19% of the food and beverage costs, and was calculated before tax.

Whether or not this system would work for the average restaurant I can't say, but I can attest that it is working at the FL (or at least it seemed to that night).

[docsconz]

That's a very nice report, HFK, and best wishes on your married life.

The one comment I have on the substance of the report though, is that I don't see how this policy limits upselling or a waiter's attitude towards selling wine. After all, the service charge is still based upon the pre-tax amount of food and beverage. Given that a lot of people tip less (rightly or wrongly) on more expensive wine, I would think the incentive to upsell would be even greater with a guaranteed 19% service charge. That the waitstaff at TFL didn't is a testament to their professionalism.

I am not sure what the best solution is, but so long as it is a fixed percentage of the total bill, I am not sure that is an improvement from the customer's perspective. I routinely tip 20%, but like the sense that if the service is subpar or rude I can adjust accordingly. Fortunately, the need to do that has been rare in my experience.

[TPO]

I agree that putting wait staff on a professional salary shouldn't result in snotty service. But, as I have experienced in Europe (and yes, I recognize that there is, borrowing John Talbott's terminology, the "Americun" factor), salaried wait staff have no incentive to do anything.

Why are wait staff different from nearly every other type of employee in the US? I get paid a salary and benefits, but I don't think that means I have no incentive to do anything. I routinely go above and beyond the expectations of me at work because I have a good work ethic, and because I really enjoy my job and get good benefits there.

I could, however, see problems if the wait staff were treated like cashiers in a bix-box department store. If they are underpaid and overworkered, it may affect how they treat their customers. But if the restaurant pays a good salary and benefits, then they should be able to attract enough employees so that they can fire the bad ones and keep the good ones.

The one comment I have on the substance of the report though, is that I don't see how this policy limits upselling or a waiter's attitude towards selling wine. After all, the service charge is still based upon the pre-tax amount of food and beverage.

I think the difference would be similar to the difference between clothing store employees on commission and clothing store employees on salary. Typically the employees on commission will tell you that you look fantastic and try to sell you things you may not want or need because their income depends on it. Salaried employess sell because they know the success of the store -- and subsequently their jobs -- depend on it, but not because every individual item you buy specifically increases their pay.

[ulterior epicure]

Why are wait staff different from nearly every other type of employee in the US? I get paid a salary and benefits, but I don't think that means I have no incentive to do anything. I routinely go above and beyond the expectations of me at work because I have a good work ethic, and because I really enjoy my job and get good benefits there.

Right - you get benefits... these are the incentives that keep us tied to performing our jobs well. I don't doubt that you enjoy your job, indeed you're very lucky in this respect, but besides the pure enjoyment, can you honestly say that your salary, benefits, and hope for promotion (ie. higher salary, better benefits) don't give you some incentive to work harder?

But if the restaurant pays a good salary and benefits, then they should be able to attract enough employees so that they can fire the bad ones and keep the good ones.

But, as the system works now, the bad employees "weed themselve out" because they can't afford to be bad employees...

Salaried employess sell because they know the success of the store -- and subsequently their jobs -- depend on it, but not because every individual item you buy specifically increases their pay.

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In this respect, I would agree that putting wait staff on salary might theoretically produce better service - especially in the volatile restaurant industry. I think, however, the danger is in the extremely high-end establishements that bank on their "glossy" reputation for dumb diners who'll pay anything for a not-so-cheap classy "thrill."

[ulterior epicure]

Although I haven't eaten at Per Se, I recently ate at the French Laundry, and the service was anything but snotty.  Hopefully this information is still pertinent to the discussion...

hungry for knowledge.

thanks for the awesome report! i'm thrilled to hear that service hasn't declined in the face of salaried staff. let's hope that any other american establishment that ventures down the same staff can maintain such a high level of service.

as for the obligatory 20% - i'll have to agree with docsconz... i generally tip generously - partly for the reasons hfk articulated, and moreso because i've been there on the server side of things. it's not an easy job!

for example, i was recently at tru in chicago. my friends and i sat at the chef's kitchen table. i paid for the party and told the hostess to discreetly give me the bill - with service charge added so that as to expedite payment as seamlessly as possible at the end of service. if i'm not mistaken, the tip came out a little over 20%. as we had great service, i was more than happy to pay that amount... in this instance, i too received great "salaried" service - the only difference being that the staff members who were serving us didn't know that i had already authorized their tip at that level. admittedly, i doubt it would have made that much of a difference had i reserved tipping to the end of service.

however, like docsconz, i feel i should reserve the right to "adjust accordingly." tru was in special case where i felt confident that our experience would not be affected by the tip. i don't know if i could say that at all the restaurants i (have) visit(ed).

u.e.

p.s. hfk - service aside, how was the food?

[PCL]

It seems that Per Se is receiving press over here (Australia) for the tipping policy.

This article in Epicure, part of The Age newspaper, compares how the other half lives. Registration might be necessary to read the article.

[chow guy]

From the Op ed piece:

In addition, the practice of tip pooling, which is the norm in fine-dining restaurants and is becoming more common in every kind of restaurant above the level of a greasy spoon, has gutted whatever effect voting with your tip might have had on an individual waiter. In a perverse outcome, you are punishing the good waiters in the restaurant by not tipping the bad one.

So, thanks to tip pooling, I'm supposed to be guilted into paying out a 20% tip for bad service just so the good waiter (which I didn't get this time around ) is going to suffer because I'm not properly tipping the moron who poorly served me?

Think again, pal.

Not that I plan on eating at Per Se anytime soon but since I don't agree with the flat rate service charge I will take my dining dollars elsewhere.

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Exactly my "sediments"! And I'll bet, It won't take very long for the really good wait staff to find other jobs.

[pam claughton]

"I'd have been thrilled even if he'd just comped that champagne and given us the menus--it was above and beyond to send out 2 extra courses and the glasses of wine and sherry, and the chocolate bars. The only explanations I can imagine for this is a desire to provide good service and a once-in-a-lifetime experience (which one's wedding night ought to be), or to reward us as customers for being so obviously thrilled to be there-

Whether or not this system would work for the average restaurant I can't say, but I can attest that it is working at the FL (or at least it seemed to that night).

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