Will eliminating tipping crimp wine sales?

eliminating_tippingDanny Meyer’s restaurants will phase out tipping next year. Simultaneously, they will raise prices 25% and remove the tip line from diners’ checks.

“There will be one total, as if you were buying a sweater at Brooks Brothers,” Danny Meyer told the New York Times. No more tipping at the coat check or the bar either.

It’s part of a growing trend across the country at both high-end restaurants and low. The Times piece presents reasons to eliminate tipping include simplicity for the diner (Brooks Brothers sweater) as well as being able to better pay kitchen staff (federal labor laws prevent pooled tips from being shared with the kitchen staff). Union Square Hospitality Group, headed by Meyer, employs 1,800 people and serves about 50,000 meals a week.

What do you think? Many people find America’s tipping culture irksome while others say that it is the basis of superb service.

One thing is for sure: the already high prices of wine in restaurants is going up. If you order a $100 bottle of wine at a Danny Meyer restaurant today, you pay $115-$120 after tip. Post-reform, that wine will be $125. Is that going to prevent you from ordering that bottle of wine? Probably not. But it is more than you paid before.

Marvin Shanken probably does not like this news. The publisher of Wine Spectator set off a firestorm in 2006 when he tackled the subject. In discussing a wine-drenched meal in which there was $300 of food ordered and $1,200 of wine, he suggested tipping 20% on the food portion and 7.5% on the wine for a total tip of $150. Under the new USHG policy of including a service fee, the bill for that meal would be $375 higher.

Whether eliminating tipping and raising prices will crimp high-end wine sales remains to be seen. I doubt that the total spend will be that different, frankly. But there may be some “trading down” in some categories, especially as diners adjust to the higher sticker prices. And it would be interesting to know how this will affect sommelier compensation; perhaps this will remove a (perceived?) incentive to steer diners toward higher priced wines and foster greater trust between sommelier and diner.

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12 Responses to “Will eliminating tipping crimp wine sales?”


  1. I think it’s a great idea, if the staff actually gets all of the 25%.
    I know of more than a few who will tip only 10% no matter what, and one guy who only gives a dollar, no matter what. It will also keep those sticky fingered maitre d’s and others from lifting what was not for them.
    The hard part will be figuring out how to make sure it gets to the staff. Do you pay people on busy nights more than on the slow ones? Somehow I don’t have much faith in the money making it to the workers.
    And I will shed no tears for fat cat Marvin.
    Perhaps the mysterious and elusive market pressure will find its way to those overpriced Napa Cabs.


  2. The 25% price hike is closer to 27% when taxed. The customer currently doesn’t pay tax on tips.


  3. Having lived in Japan for several years where tipping is NOT the norm, I find tipping a weird counter intuitive business. Staff should provide good service and should be paid an appropriate wage as a matter of course.


  4. I feel that restaurant staff should be treated like employees at any other job (at least ideally): those who perform well get to keep their job and can hope for a promotion and those who perform poorly can get ready to look elsewhere for a paycheck.


  5. 1. In answer to the headline question, I think that servers and sommeliers will give more straightforward advise. The New Yorker cartoon with a waiter saying “May I recommend the most expensive entrée and the highest price wine” is always a concern when this is correlated to the waiter’s tip.
    2. Responding to the pricing. Danny can choose to price the wine however he wants – not necessarily adding 25%.
    3. Will all the increase go to the staff? It does not matter. What does matter is whether the wages paid are competitive. If not the staff will disappear.

    Cheers,

    Richard Corles


  6. I would be happy to see the tipping go. The rise in wine prices would not shock me any more than does the current wine prices. Sometimes we just go home after dinner and have our glass of wine then.


  7. This could actually backfire for wine sales because of BYOB.

    Gramercy Tavern corkage is $35 now. Let’s say you bring a $60 retail wine that would sell for $150 on their list today. Today you would pay a $30 tip on that wine you brought. So you hand them over $35+$30=$65 to drink your wine.

    Now that $150 wine becomes $188 and even fewer people have interest in paying that, so they bring your wine but now they only pay $35.

    Gramercy Tavern would have to more than double their corkage to over $70 to remain whole.


  8. Actually, part 2 of the analysis:
    Old model:
    $60 cost of BYOB wine + $65 restaurant fees = $125 vs. $150 restaurant price. There’s only a $25 difference so maybe not worth the slight embarrassment many feel.

    New model:
    $60 cost of BYOB wine + $35 corkage = $95 vs. $188 = $93 difference… basically it costs you twice as much to drink the restaurant’s wine.

    No brainer for me.


  9. Good questions, Michael. I wonder if they will modify the corkage fee/BYOB policies?


  10. I think they’ll have to. BYOB might not be a meaningful part of their customer base today, but if they change the economics so drastically it will.

    My guess is that they’ll effectively drop BYOB.


  11. Michael – I wonder if there will be a “corkage cowboy” clause?

    http://munchies.vice.com/articles/corkage-cowboys-are-scamming-restaurants-out-of-wine-fees


  12. The hard part will be figuring out how to make sure it gets to the staff. Do you pay people on busy nights more than on the slow ones? Somehow I don’t have much faith in the money making it to the workers.


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