National chain Joe's Crab Shack tests no tipping at 18 U.S. restaurants

Reuters News
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Posted: Nov 11, 2015 4:16 PM

By Jon Herskovitz

(Reuters) - National seafood chain Joe's Crab Shack has dipped its toes into fresh waters with a test program to remove tipping from 18 of its more than 130 restaurants, the U.S. company said on Wednesday.

No timeline is in place to implement the plan nationally but the test comes as a nascent movement has been launched to remove a more then century-old tradition of tipping in U.S. restaurants.

At the test locations, Joe's has paid some workers a minimum of $12 an hour, but did not specify how much workers made previously. The Houston-based company raised menu prices less than 20 percent to compensate for the higher labor costs. Initial surveys have shown improvement in service at places with the no-tipping policy, it said.

“We believe that consistently great service should always be included in the menu price, so we are taking the responsibility for paying the service staff," said Ray Blanchette, chief executive officer of parent company Ignite Restaurant Group Inc .

Critics say the tipping system allows restaurants to pay some staff a pittance and puts the burden of labor costs largely on customers as opposed to employers.

An employer of a tipped employee is required to pay a minimum of $2.13 an hour in direct wages, according to the U.S. Department of Labor.

Joe's said the move to test a removal of tipping will lead to higher, fixed hourly wages for its employees, which will help it to retain staff.

Influential restaurateur Danny Meyer announced last month he would eliminate tipping at 13 of his New York City restaurants and increase base wages by about 25 percent for cooks and servers while raising base prices.

For restaurant owners, a removal of tipping raises their labor costs but also makes it easier for them to keep track of money coming in, and what needs to paid as taxes going out.

But a poll from Quinnipiac University released this month said New Yorkers, by a margin of 56 percent to 39 percent, oppose the budding trend to eliminate restaurant tipping by increasing menu prices.

David Bojanic, a professor in the department of marketing at the University of Texas, San Antonio, said the move by Joe's is ground-breaking for a major U.S. chain that had relied on a tipping system.

"In Europe they pay their wait staff a pretty good wage, and the prices in Europe are not higher than they are here, even when you figure in the exchange rate," he said.

(Reporting by Jon Herskovitz in Austin, Texas; Addiitonal reporting by Jim Forsyth in San Antonio; Editing by Lisa Shumaker)