Bill Perry's new brewpub doesn't accept tips.
The Public Option isn’t your average brewpub. Its owner, Bill Perry, was previously a photo librarian for National Geographic. The production is itty-bitty: Perry, a longtime homebrewer, only brews one barrel at a time. He jokes that the brewpub will never even be a pico-brewery.
But what makes the Public Option, located at 1601 Rhode Island Ave. NE, really different from other brewpubs—and nearly every bar and restaurant in the city, for that matter—is what happens when you get your check. You’ll be charged $7 for a Belgian-style ale or coffee porter with no line for a tip. Perry won’t accept them.
“We’re interested in looking at and challenging business models,” Perry explains. He says throughout the latter half of the 20th century, businesses have shed what were traditional responsibilities—from funding pensions to providing health care. And he feels many businesses are shirking the responsibility of paying a living wage. “Famously, some of the largest retailers in the country pay so poorly that their staff has to rely on public assistance to get by. They’re basically pushing off the responsibility to keep their workers alive onto the rest of us.” So instead of leaving it to the public to pay his employees via tips, Perry wants to pay them at least $15 an hour. He also likes the idea that it makes wages more predictable and eliminates some of age, gender, and racial biases that sometimes manifest through tipping.
At this stage in its weeks-long existence, however, the Public Option’s only employees are Perry and his wife, Cathy Huben. But the brewpub aims to hire its first employees by December. For now, the place is only open Fridays through Sundays, and the food menu won’t arrive until November. But what the menu does have is a paragraph describing the no tipping policy. It concludes: “Will it work? One way to see, right?”
The Public Option is among a very small but growing number of restaurants nationwide experimentally doing away with tipping. Last week came the big news that renowned New York restaurateur Danny Meyer would eliminate tipping at 13 of his Union Square Hospitality Group restaurants by the end of 2016 and raise prices instead. His 1,800-employee restaurant group is the largest—and most prominent—to make this move in the U.S. to date. Some D.C. restaurateurs are now watching closely to see if this is a model worth adopting themselves.
“It’s got everybody talking about it,” says restaurateur Jeff Black, who owns Pearl Dive Oyster Palace, Republic, and BlackSalt, among others. “You didn’t pay much attention when other people were doing it. But when Danny Meyer does it, yeah, you pay attention to it.”
Black says he’s considered a no tipping business model in the past—“you have to always be open minded in the restaurant business.” And with a well-respected restaurateur like Meyer doing it, he anticipates the trend will grow. Still, he doesn’t want to be the guinea pig in D.C. “To me, it seems kind of reckless… I would really like to see this thing shake itself out a little bit more,” he says.
Farmers Restaurant Group principal Dan Simons is likewise following the topic closely. He says his group, which operates Founding Farmers and Farmers Fishers Bakers, has been evaluating and researching the idea of eliminating tips for the past three years. “A lot of us in the industry who are really motivated by company culture and taking care of our people are really studying it,” he says. But he’s still in a wait-and-see mode. “This is a topic with lawyers and accountants and it’s a cultural topic in-house… You have to do a lot of work to be ready for this,” he says.
For now, the only other D.C. restaurant besides the Public Option to forgo tipping is Sally’s Middle Name. The H Street NE small-plates restaurant opened in June with a flat 18-percent service charge, which they’re now calling a “fee” because the money is actually split evenly between front- and back-of-house employees. (Meyer, meanwhile, will raise prices rather than charging such a fee.) No one on staff at Sally’s makes less than $10.50 an hour, in addition to their share of the fee.
In D.C., tipped wages can be as little as $2.77 an hour, but must add up to minimum wage of $10.50 with tips. That will rise to $11.50 next July. However, many servers, especially those in upscale restaurants, make far more than the minimum wage.
“Everyone who works for us has been happy with it,” says Sally’s Middle Name co-owner Aphra Adkins, who runs the restaurant with her husband and chef Sam Adkins. So too, she says, are diners: “We’ve even had a few people come in specifically because of that.”
Sally’s Middle Name states but doesn’t explain the policy on its menu. That’s intentional. If people have questions, Adkins wants them to engage in a conversation with their server. “It puts a more human face to it,” she says.
So far, no one has insisted on leaving a tip. Every once in awhile, someone will leave their change if they pay in cash, and that (extremely small) amount is shared among staff. If people actually left a significant amount of money, the restaurant would donate it to charity.
Justifying his decision, Meyer cited his desire to bridge the pay gap between servers and other staff like cooks and dishwashers, who are legally restricted from sharing in tips and tend to make significantly less. By paying back-of-house staff more, his restaurants will (in theory) be able to attract and retain more talent, which is particularly important given the nationwide shortage of skilled restaurant workers. Meanwhile, Meyer told Eater that he’s looking into some sort of revenue share program for servers.
Sally’s Middle Name has had typical restaurant turnover among the front-of-house staff, but the kitchen staff is the same as it was on day one. Adkins claims the restaurant’s system has also eliminated resentment between the front and back of the house—she believes workers have each others’ backs more.
Adkins says another one of the perks is more consistency for employees. For example, August is typically a slower season for many restaurants. “We didn’t have to worry as much about ‘Are our people able to sustain themselves through this job?’” Adkins says.
This isn’t a convincing argument for everyone: “It’s reliable money, but it’s less. I couldn’t pay my waiters what they make,” says Black. He says some of his servers make $85,000 a year with tips; some make “radically” more. “I don’t know how you run a restaurant and pay that kind of money. The reality is people in Washington, D.C. are very generous with their tipping. It’s one of the most generous tipping markets I’ve ever seen,” Black says. He’s certain he would lose staff if he got rid of tipping.
“Everybody wants to be equitable and fair with their staff, but my staff does very well,” Black says. “My employees are well compensated, and I look after them like a shepherd.”
Perry hopes the Public Option will be able to compete with similar businesses on pay. His daughter, who was a server for a number of places on H Street NE, tracked her income over the course of a month and found that she made $15 to $20 an hour on average with tips. “We’re not going to pluck anybody from the Palm doing $500 tables,” Perry admits. “We think we’re going to be similar to what somebody would make tip-wise to some of the places on H Street.”
Of course, in order to pay servers what they would otherwise make in tips while also raising wages for everyone else, restaurants would have to raise prices significantly. Meyer told Eater his menu prices could go up as much as 30 to 35 percent—for example, a $30 entree would become a $40 entree.
A lot of D.C. restaurateurs say they aren’t sure people are willing to pay those higher prices, especially in a city where prices are already high and competition is fierce. Just a glance at a more costly menu could scare people away altogether.
“It’s a risky proposal,” says Chef Geoff’s owner Geoff Tracy. “Do you raise every price 30 percent across the board? How much can you really charge for a cup of coffee?... What happens to wine pricing? If you’re OK with a $9 vodka on the rocks, are you going to be OK with a $12 vodka on the rocks?”
Simons also wonders if diners might trade down and order a rotisserie chicken over a higher-priced fish dish as a result. He points out that higher prices would mean higher sales tax for diners. “When your tax is much higher, you notice,” he says. “So the tax line, even if you don’t notice the percentage, it’s really relevant to the customer.”
And while total sales revenue may go up as a result (assuming the restaurants continue to do the same amount of volume), so will taxes and credit card fees.
There’s also plenty of contention over how eliminating tipping would impact the quality of service. Black believes servers wouldn’t have an incentive to go to a table, sell another drink, and generally make sure the guest is happy without tipping. “Waiters don’t work for me. They don’t work for the managers. They don’t work for the house. They work for the guest,” he says. “That’s actually a positive thing. They’re the advocates for the guest… I’m a big, big believer in incentivizing.”
Adkins points out there aren’t many other industries where customers assume people aren’t going to do a good job because they’re not tipped. She argues people in the restaurant industry do a good job because they care about their work, not because they want to just get as much money as possible out of people.
And the absence of tips doesn’t necessarily mean there would be no financial incentive for staff. Simons says he’s interested in the idea that an employer would have more flexibility about how people are paid. Rather than the public deciding what employees make via their tip, a restaurateur could make his or her own judgements based on the their skills, seniority, and output.
Even though Sally’s Middle Name has eliminated tips, Adkins believes they model isn’t necessarily “better” than the traditional way. It’s just different. “A lot of people make their living that way and it’s awesome,” she says. “No city is the same, no restaurant is the same. So there’s really no one right way. Just to have more models, more options, that’s always better in any industry.”