[00:00:00] Speaker A: Hey there.
[00:00:00] Speaker B: Chip Close here, host of the Restaurant Strategy Podcast. Again, if you've been following for a while, Every summer I do this crazy thing. It's a 10 episode arc, all revolving around a different theme. This year it's about crazy ideas. We have to reinvent and reinvigorate our industry if we are to continue to be profitable and therefore sustainable. If we want to take our business, our model, the thing that we love so much, if we want to take it forward and have it be alive and thriving in another 50 or 100 years, we have to be willing to evolve. So I'm sharing a bunch of crazy ideas. Not to talk you into it, but just to get you thinking, to think outside the box. So today, here's a crazy idea. What if we totally got rid of tipping?
[00:00:44] Speaker A: There's an old saying that goes something like this. You'll only find three kinds of people in the world. Those who see, those who will never see, and those who can see when shown. This is Restaurant Strategy, a podcast with answers for anyone who's looking.
[00:01:03] Speaker C: Foreign.
[00:01:15] Speaker B: Thanks for tuning in. My name is Chip Close. This is the Restaurant Strategy Podcast. Two episodes every single week, I run live events. Every single year, two live events. And they sell out every single year. The next one is coming up. The P3 profitability summit happens in Fort Worth, Texas in October. If you have never been to one of my events, you have to come to this event. We cap attendance at 100. So we make a really heavily curated, very tight group. It is an intimate event, tons of knowledge, guest speakers, panel discussions, Q and A, and all kinds of tactics, strategies, playbooks, scripts to help you level up, to be more profitable.
[00:01:55] Speaker A: How do you manage cogs?
[00:01:56] Speaker B: How do you manage your labor? How do you grow revenue from an operational perspective, meaning increasing check average, getting catering sales, alternate revenue streams, and from a marketing perspective, how do you get more people in the front door? How do you increase customer retention, increase the frequency of the visits? How do you get people talking about you? We are going to cover all of that over the course of two days in four in in Texas, right? Fort Worth, Texas. If you want to be there, you're going to find the link in the show notes. You can go check out the different ticket options, watch a video that highlights the event from last year when we threw the party in St. Louis. And I want you to be there. Again, we cap the event at 100. Tickets there are less than.
If you want to be there, I want you there.
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[00:03:18] Speaker A: Million hourly job seekers. They have 11 million plus job seekers on their platform. You can pay employees their wages and tips on a daily basis after every shift. And you can communicate proactively with your staff using messaging, surveys and more. And that's not all. Time Forge integrates seamlessly with most POS systems, giving you full visibility into labor and sales performance and suggesting when you should staff up or staff down. Whether you manage one location or dozens, Time Forge saves you money, time and stress so you can focus on what really matters, delivering exceptional service and growing your business. Thousands of restaurants trust Time Forge, so why not you visit timeforge.com restaurantstrategy today and see how Time Forged can help your team and your restaurant run like clockwork again. Timeforged.com RestaurantStrategy Strategy as always, that link is in the show notes Pop Menu has reimagined the restaurant. They're breaking the mold of the menu, taking the kitchen doors right off the hinges and serving up their most comprehensive technology solution yet. Pop Menu Max.
[00:04:26] Speaker B: It comes with the previous ingredients that.
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[00:06:00] Speaker B: Okay, so again, every summer I do a 10 episode arc revolving around different theme. This year is crazy ideas.
The only way that we are to survive is if we continue to evolve. That is true for every species in the planet. That is certainly true of our industry. And there are all kinds of industries that we've watched get upended, right all the way back. You look at the railroads, they got upended. Now you look at the music industry, the movie industry, retail, hotels, airlines, they've all had to evolve and they've been upended and they've been dragged kicking and screaming. And I think we have to be willing to think outside the box to have new invigorating ideas. We have to be able to iterate and evolve. So here's the crazy idea today.
[00:06:41] Speaker A: What if we totally got rid of tipping? Something that is happening in real time.
[00:06:46] Speaker B: Is we are getting rid of the tip credit. The tip credit is the first step in getting rid of tipping. Because when you have to pay everybody minimum wage, it makes no sense to also have servers make additional tips.
So what happens if we just bring everybody up and pay them what they're worth and do like every other industry does in the world where you pay them based on experience and based on performance.
I understand that the economics of the menu, how we price the menu need to change. But I bet you, I bet you our people would go along with it much more than you realize. I know this because more Americans are traveling than ever before. And they are traveling to Europe, they are traveling to Asia, they are traveling to Australia and New Zealand where they have a whole different system of doing this. And even as a stopgap, now maybe this is where we land, but maybe even just as a stopgap, maybe it's just a flat 10% service charge like they do in the UK, right? A flat 10% service charge that gets distributed again here In America, you can distribute that however you want. So you offer everybody an hourly wage and the service charge then goes to cover that, goes to the employer or gets distributed. I think there is a way out of here. And we know the history of tipping. We know, we know its roots, its racist roots. We know that it can lead to discrimination. We know all that. This is not a conversation about that. This is a conversation about nuts and.
[00:08:12] Speaker A: Bolts profitability of restaurants.
[00:08:14] Speaker B: Again, these episodes are short. And what if we just got rid of tipping?
What would our books look like and what would we have to do to just take that off the table? I will tell you that over the years across America, when I go into places that are no tipping establishments, it is a better experience.
What I see is what I'm going to pay. There's no extra charges on the back end. And I gotta tell you, it feels really good when you get that bill and you're like, oh, I don't have to leave another 20%.
What I agreed to pay is what I have to pay. And again, I'm watching countries all over the world who don't have tipping the way that we have tipping here in America. And it works. Now, here's the one pushback I always get. The pushback I always get is, well, people won't work hard if they're not incentivized, right? Meaning that they won't be nice and hospitable if they're not being compensated at the end of the meal for being warm and hospitable. And that, that is truly, totally, 100% false.
[00:09:13] Speaker A: Running restaurant means juggling a lot. Staffing, inventory, customer service and finances. Sales tax has to be done. And while no one plans to miss a deadline or miscalculate a payment, mistakes happen.
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[email protected] RestaurantStrategy. I will add in here. This fits in perfectly with what we're about to talk about. Again, davosalestax.com restaurantstrategy and yes, that link is in the show notes.
[00:10:20] Speaker B: There are other ways to incentivize people by performance through other metrics. And you pay them, you compensate them appropriately. Again, you pay them right. You give them raises based on longevity, based on seniority, based on performance.
Table turn times for example, with your waiters, or check average or upselling or whatever it is, or lack of call outs for consistency. There are so many other ways to invent to incentivize great behavior and great work ethic. Not just that if they are nice to the people, the people will leave them an appropriate tip. By the way, we now know that that has been disputed and overturned time and time and time again.
So the crazy idea I wanted to leave you with today is what if we just got rid of tipping?
[00:11:07] Speaker A: I think it's totally possible.
[00:11:09] Speaker B: I think it's closer than we think and I think it's going to be key to our success over the next hundred years. I think if this has gotten us through the last 200 years, I think it is dying and we are watching it die in real time. And especially right now, we look at the political side and this is not a political conversation.
But if we really pass a tax code that says, oh, we don't have to pay taxes on tips, that's gonna be crazy. Then nobody is gonna want to cook.
Everyone is gonna wanna just be front of house and wait tables. It already is lopsided like that anyway. Because the disparity in pay between front of house and back of house, what do you think? When that is tax free money generated, it's only gonna exacerbate the problem.
And tips really should be just a little something extra. And if it really were like the way a doorman gets tipped, the way a cabbie gets tipped a little something extra, then fine, we shouldn't be taxing that.
But when it is the majority of what they bring in, that's crazy to tell somebody who works as a bank teller or in a grocery store or retail or as an accountant that 100% of their pay gets taxed. But just because you work in a fine dining restaurant and you make the same as an accountant, but 100% or 80% of your income is not taxed, man, that is crazy to me. And I don't think that works. I don't think in the long run that makes sense. So the crazy idea is, what if we got rid of tipping? That's what we're doing. This is the second episode in a 10 episode arc All about the Crazy Things One reminder before I leave you today, the P3 Profitability Summit happens in Fort Worth, Texas in October 2025. Tickets are capped at 100 attendees total. We have already sold over 70 tickets. I think it's like 76 tickets. Sol if you want to be there, I want you there. It's an incredible event. I'm not just saying that because I throw it. I am in the room every single year. We sell out this thing every single year. This is an event you do not want to miss. You're going to find the link to tickets in the show notes, go check it out and come on back for more crazy ideas.
[00:13:25] Speaker C: Sam Sa.
