Tipped out: How do gratuities affect restaurant operations?

Abstract

Tipping is a well-established social norm in North American restaurants. Researchers have given considerable attention to the interaction between consumers and servers, but less so to the relationships within a restaurant and even less so to restaurant managers’ perspectives. Our study, the first of its kind, used interviews and a survey to explore the perspectives of both restaurant managers and servers in identifying operational issues arising from tipping. Inequity and unfairness, loss of control of service quality, and difficulties in succession planning and promotion were identified. There is clearly a need to investigate strategies to mitigate some of these impacts.

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Tipped out: How do gratuities affect restaurant
operations?
Bruce McAdams & Michael von Massow
To cite this article: Bruce McAdams & Michael von Massow (2016): Tipped out: How do
gratuities affect restaurant operations?, Journal of Foodservice Business Research, DOI:
10.1080/15378020.2016.1215760
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Tipped out: How do gratuities affect restaurant operations?
Bruce McAdams and Michael von Massow
School of Hospitality, Food, and Tourism Management, University of Guelph, Guelph, Canada
ABSTRACT
Tipping is a well-established social norm in North American res-
taurants. Researchers have given considerable attention to the
interaction between consumers and servers, but less so to the
relationships within a restaurant and even less so to restaurant
managers’perspectives. Our study, the first of its kind, used inter-
views and a survey to explore the perspectives of both restaurant
managers and servers in identifying operational issues arising
from tipping. Inequity and unfairness, loss of control of service
quality, and difficulties in succession planning and promotion
were identified. There is clearly a need to investigate strategies
to mitigate some of these impacts.
KEYWORDS
Gratuities; restaurant
operations; tips
Introduction
At first glance, the exchange of a tip between a customer and a server seems
relatively innocuous and innocent. Perceived as a token of appreciation for a
positive service experience, it seems reasonable. It is, however, not as simple
as it first appears. Tips represent an estimated 40 billion dollars every year in
the United States (Azar, 2009). Little academic attention has been paid to the
phenomenon beyond the primary exchange between the server and the
customer, for example, how tips affect restaurant operations.
The idea that the implications of tipping on a restaurant as an organization
go beyond the interaction between server and customer clearly merits more
attention and is the primary focus of this research. Our goal is to explore
more deeply the operations implications of our generally accepted tipping
practice using interviews of servers and restaurant managers and a survey of
servers. We look beyond the simple exchange between server and customer
to identify themes and evaluate their implications for service quality, human
resources management and day-to-day operations.
Literature review
The origin of tipping for “service”has been traced back to early English
public houses where patrons attached coins to notes that read “to insure
CONTACT Michael von Massow mvonmass@uoguelph.ca School of Hospitality, Food, and Tourism
Management, University of Guelph, 303 MACS, Guelph, Ontario N1G 2W1, Canada.
Color versions of one or more of the figures in the article can be found online at www.tandfonline.com/wfbr.
JOURNAL OF FOODSERVICE BUSINESS RESEARCH
http://dx.doi.org/10.1080/15378020.2016.1215760
© 2016 Taylor & Francis

promptitude”(Azar, 2009). Although fairly common in early European
times, the practice did not take root in the United States until the start of
the 20th century, introduced possibly by Americans who had traveled
abroad. The introduction of tipping in the United States was not without
controversy. In the early part of the 20th century there was much labor
unrest as a result of tipping and several jurisdictions actually outlawed the
practice. Europeans—originators of the practice—have in many cases
replaced tipping with flat service charges while in North America the practice
is still holding strong.
In some of the earliest known work on tipping in North America,
Freeman, Walker, Borden, and Latane (1975) looked at the relationship
between tipping behavior and the number of people in the dining party
and found that tip percentage dropped with an increase in party size. Early
research on tipping also often focused on the psychological foundations of
tipping behaviors and the resulting variability in tip amounts. Lynn and
Latane (1984) tried to establish correlations between behavior and tipping
percentage in regards to method of payment and server gender. They found
no evidence that server gender was correlated to tip size but did find that
male customers tipped slightly more than women customers. They also
found that customers who paid by credit card tipped more than those that
paid cash. Garrity and Degelman (1990) found that servers would receive a
higher percentage tip if they introduced themselves to their customers before
serving them. Lynn and Grassman (1990) discovered that both alcohol
consumption and the amount of a restaurant bill are both positively related
to tipping outcomes.
Researchers continue to look at influences that affect tipping behavior. In
an extensive study, Conlin, Lynn, and O’Donoghue (2003) used survey data
to identify a variety of factors that influence tipping behavior. As well as
service quality, their work showed that tipping percent was dependent on
age, repetition, group size, the frequency that one visits restaurants, and
cross-gender interactions. An authentic smile is found to affect tipping
intention (Bujisic, Wu, Mattila, & Bilgihan, 2014). Ebesu Hubbard, Tsuji,
Williams, and Seatriz (2003) found that “the fleeting touch”of a server on a
patron can result in a higher gratuity and that this may be more advanta-
geous in cross-gender interactions.
Whereas much of the early literature focused on the variables that affected
tipping behavior, later researchers started to focus on the relationship
between service quality and tipping outcome. A meta-analysis conducted
by Lynn (2001) that considered the tipping-service relationship found there
to be a weak relationship between service quality and tipping outcome. Lynn
highlights the common practice of restaurant managers who evaluate servers
on the percentage of tips they receive. Azar (2009) tries to answer the
“tipping-service puzzle”by creating a theoretical model that looks at the
2B. MCADAMS AND M. VON MASSOW

relationship between quality of service and the size of a tip. His results show
“that the sensitivity of tips to service quality is so small that tipping is not
likely to be the reason for the high service quality”(p. 1925). It appears that
there are other factors that can affect tip size more significantly than the
quality of service.
The role that discrimination might play in tipping has been explored by
McCall and Lynn (2009) who found that servers form impressions of various
demographic groups on their tipping behavior: males were perceived as the
best “tippers,”whereas teenagers and “foreigners”were considered the worst.
The authors also posit a likelihood that these pre-conceived assumptions of
various consumer groups may result in their receiving below average service.
This is clearly not in the best interest of the restaurant as a business. Noll and
Arnold (2004) found that in the United States servers have a preconceived
notion that African Americans tip less than Caucasian Americans. Several
authors have also researched the validity of this assumption by looking into
this relationship between race and tipping behavior. Through the use of a
national telephone survey in the United States, Lynn (2004) found that
African Americans are more likely to tip a “flat rate”than Caucasian
Americans. Other researchers such as Dirks and Rice (2004) contend that
this behavior by African Americans to tip less than Caucasian Americans is a
result of inferior service they receive as a result of their skin color and the
perception that they will be “poor tippers.”
Lynn and Grassman (1990) investigated the motivation for tipping
among restaurant customers. Results illustrated no relationship to “ensur-
ing future service,”but did demonstrate a correlation between tipping to
buy “social approval and equitable relationships.”Conlin et al. (2003)put
forth that tipping is a behavioral “norm”similar to gift giving or recipro-
city. In this work they also looked at the economic efficiency of the
“tipping contract”(i.e., was the level of tip related to the quality of the
experience). Their findings concluded that although there were elements of
efficiency resulting from the “norm”of tipping, the tipping contract is not
fully efficient.
Azar (2004) calls tipping a “social norm,”a convention people follow even
though it is at some cost to them. This adherence to social norms is
motivated by the desire to be accepted and by the fear of social disapproval,
“looking cheap”in the case of tipping. Boyes, Stewart Mounts, and Sowell
(2004) looked in more detail at the idea of tipping as a social norm. They
studied whether or not people are willing to “free ride”in this system and not
tip or pay less than those who do, understanding that others will make up for
their lack of participation. Although no participant in their study would
admit to “free riding,”the data suggested that it was a behavior that existed.
While research on tipping continues, the complexity of the tipping prac-
tice has increased over time. In recent years the tipping system has evolved to
JOURNAL OF FOODSERVICE BUSINESS RESEARCH 3

sometimes include the practice of “tipping out”to facilitate “tip sharing.”A
few restaurants have even moved away from tipping altogether, preferring to
use the European approach of a flat service charge. With a variety of options
now present in the marketplace, the literature has grown to include work on
various tipping systems.
The research on the impacts of tipping on the internal operations of a
restaurant is more sparse. Lynn and Withiam (2008) took the first extensive
look at how tipping affects a business, identifying and describing consumer
preference, price partitioning, price discrimination, server incentives, pay
levels, employee recruitment and retention, income tax evasion, and employ-
ment discrimination. In an earlier article, Namasivayam and Upneja (2007)
studied server preferences for various tipping systems and found that tip
systems that are based on a flat service charge to be deemed the most just and
“tip pooling”systems the least just. Building further on this research, Lin and
Namasivayam (2011) found that servers felt individual tipping systems were
the most fair and preferred a flat service charge over leaving the tip up to the
discretion of the customer.
Some research has focused more directly on how tipping systems affect the
human resource aspects of restaurant organizations. Research conducted by
Miller (2010) suggests that the use of tips as a form of compensation may
have a negative effect on an employee’s commitment level, thereby decreas-
ing retention levels. Lynn and Withiam (2008) suggest that although tipping
may attract talented workers because of the high income potential it may also
detract more “professional”workers due to the lack of income security.
Methods
Interviews
We used a qualitative approach to develop impressions of some of the key
issues and to develop a foundation for more detailed subsequent research in
the future. Qualitative research allows one to focus on the rich insight from
the detail of interviews (Miles, Huberman, & Saldaña, 2013). We interviewed
restaurant managers and servers, transcribed the interviews and then coded
the data for consistent themes and patterns. These led us to the propositions
and generalizations highlighted in our results section.
We developed a semi-structured interview guide for restaurant managers
and a separate one for servers based on previous research. Both of these were
reviewed and approved by the University’s Research Ethics Board for
research involving human participants. After an initial general discussion
on the role of tipping in restaurants, we investigated a number of specific
issues in detail. Topics were broken into three primary categories for both
servers and managers:
4B. MCADAMS AND M. VON MASSOW

(1) Current tipping practices
(2) Impact on operations
(a) Do tips improve service?
(b) Are there positive or negative changes in behavior due to tipping?
(c) Do gratuities affect restaurant revenue?
(d) Do gratuities motivate staff?
(e) Do tips create an expectation of earnings?
(f) Do tips affect internal relationships?
(i) Between servers?
(ii) With other front of house staff?
(iii) Between front- and back-of-house?
(iv) Based on who gets tipped out and how much?
(g) Is there informal tip sharing between specific staff?
(h) Does tipping impact how managers manage staff?
(3) Alternatives
Participants were purposefully selected to reflect a broad range of restaurant
styles in which tipping is common practice. We did not talk to any quick-
service staff nor managers, but did include hotels that operated in unionized
environments and private clubs. We interviewed servers and managers across
all restaurant segments from family casual up to and including fine dining. We
interviewed chain operators and independents. We spoke with 52 restaurant
managers and 47 servers. The majority of the managers and servers interviewed
were in the Canadian province of Ontario. We interviewed a number of servers
and managers in other jurisdictions (British Columbia and California). The
regulatory environment is similar between British Columbia and Ontario
(although there are small differences in minimum wage). California is also
similar; however, the tax reporting requirements for gratuities are quite differ-
ent. While the specificity of the geography may risk limiting the generalizability
of findings, we feel that the tipping convention is relatively consistent across
North America so insights garnered have external validity.
Detailed notes from interviews were collated and then coded to evaluate
common themes and to identify factors that differentiated operations.
Themes were identified independently by both authors to provide a compre-
hensive evaluation of the feedback received.
Survey
To complement the qualitative research, we developed a web-based survey to
quantify some of the results relative to servers. Survey items pertained to
average tip rates, tip out rates and beneficiaries, tip earnings, and some
attitudes about tips and tip sharing. Closed-ended questions and agree/
neither agree nor disagree/disagree-type items were included. Respondents
JOURNAL OF FOODSERVICE BUSINESS RESEARCH 5

picked the answers that best fit their responses with ranges available for
hours reported and a 7-point Likert scale for agreement-type items. We used
online recruitment and snowball sampling to find participants. This survey
also received research ethics approval. The survey was administered simulta-
neously to the interviews. Participants were recruited through restaurants
and several online forums for servers.
Results
Survey
We received 160 completed surveys representing a broad range of restaurant
categories from casual to fine dining and including clubs and banquet
catering. All of the servers worked in establishments that accepted tips.
Servers were predominantly from Ontario (76%) and there was representa-
tion from elsewhere in Canada and the United States. Servers worked hours
ranging from a few hours a week to over 40 hours a week thus representing
both part time and full time employment. The majority of participating
servers were female (75%).
Tips represent a significant portion of the income of the servers surveyed
(Figure 1), particularly if we consider that a portion of the cash tip income is
unlikely to be reported and taxed. Minimum wage for servers in Ontario
would have been $8.60 per hour at the time the survey was completed. If we
consider the cumulative distribution of hourly wage reported, 75% of respon-
dents make more than $10 per hour in incremental wages from tips, 50%
earn more than $15 per hour, and 25% earn more than $20 per hour.
Average tip amount ranged from approximately 10% to above 20% with
clustering around 15%. The type of restaurant was the primary factor that
differentiated tip level. The average tip percentage increased from family
casual through upper casual and was highest in fine dining. It is worth
0%
5%
10%
15%
20%
25%
30%
Figure 1. Incremental earnings from tipping.
6B. MCADAMS AND M. VON MASSOW

noting that average cheque also increases as we move from casual to fine
dining which widens the spread in earnings.
The practice of “tipping out”in which servers are required to share a
portion of their tips with other staff was common. Only 7.6% of survey
respondents indicated that they kept 100% of their tips. This was consistent
with what we heard from servers and managers in interviews.
There is considerable variability around both the amount of tip that is
shared and with whom it is shared (Figure 2). When tip sharing is mandated,
there is virtually always sharing with other non-tipped front-of-house staff,
such as bussers, food runners and/or hostesses, when they exist. When the
role exists, bartenders also receive a share of tips. A smaller, yet important,
proportion of establishments (approximately 65% of survey respondents and
a similar proportion in interviews) also share a portion of tips with kitchen
staff—both cooks and dishwashers. The proportion shared is smaller than
that for front-of-house staff and generally represented $30 to $50 every 2
weeks. There were restaurants in which a bigger proportion was shared with
back-of-house staff, but they were the exception.
Tipping out the “house”(i.e., the owner getting a share of tips) happened
in approximately 20% of the establishments. It is worth providing some
context here. There are cases in smaller independents where the owner is
active on the floor or as a bartender and in this case the line blurs. There are
also, however, cases in which an owner was taking a share of tips without an
active role in the day-to-day operation of the business.
Defining a “manager”can be problematic. A shift supervisor who also
serves a section of tables is clearly different from a general manager who is
present but not always active in service unless a problem arises. It was more
common for supervisory staff that were active in service to get a share of tips
0
20
40
60
80
100
120
140
Shared
Should Be
Figure 2. Tip sharing by servers.
JOURNAL OF FOODSERVICE BUSINESS RESEARCH 7

than it was for general managers and chefs. Fine dining was the most likely to
take a share of tips for managers.
There is considerable variability in the percentage of sales required to tip
out (Figure 3). Approximately one-third of respondents reported a level
between 2.1 and 3% of sales as the required amount to share. Less than
15% of those surveyed reported levels lower than that whereas the remaining
60% were at higher levels.
We explored impressions of tip sharing in more detail used scaled agreement
responses to four statements (Table 1). It is clear that servers, for the most part,
do not begrudge sharing their tips as 88.9% agreed, at least to some extent, that
tipping out is fair because others add value to service experience. Only 25.3% of
participants did not like tipping out and felt that they should keep 100% of their
tips to some degree. This is actually quite remarkable given they are giving up
money they perceive is theirs. It is worth noting that the acknowledgement of
others adding value is stronger than the inclination to share. Servers acknowl-
edge that others are creating value for the customer experience and may not be
being compensated adequately for that. Just over half (51.6%) of those surveyed
Figure 3. Percentage of sales shared by servers.
Table 1. Servers’impressions of tip sharing.
Agree
strongly Agree
Agree
somewhat
Neither
agree or
disagree
Disagree
somewhat Disagree
Disagree
strongly
Tipping out is fair because
others add value to service
experience.
36.8% 26.3% 25.8% 2.5% 3.1% 3.7% 1.8%
I do not like tipping out and
feel I should keep 100% of
my tips.
6.5% 3.9% 14.9% 11.0% 9.1% 27.3% 27.3%
I feel tipping out is fair but the
tip out I pay is too high.
21.2% 13.2% 17.2% 15.2% 7.9% 17.9% 7.3%
I would rather earn a lower
minimum wage (and have
non-tipped employees paid
more) and not have to share
my tips.
10.3% 14.2% 13.5% 9.7% 9.0% 23.2% 20.0%
8B. MCADAMS AND M. VON MASSOW

thought that, more or less, tipping out is fair, but that the tip out they pay is too
high. It is also worth noting (Question 3) that only a small majority of respon-
dents felt that what they have to share is too much—again remarkable in the
context that they are giving up money that they feel is theirs. Question 4 tested
an alternative approach to tip sharing. A small majority (52.2%) clearly did not
like the idea of earning a lower minimum wage (with non-tipped employees
getting paid more) and not having to share tips. However, almost 40% of
respondents thought that this alternative had some appeal. This merits more
investigation. At first glance it may suggest that servers do not want to give up
the security of the guaranteed cheque. It may, however, suggest that they do not
feel that this would equalize it sufficiently. There is clearly room to explore
alternatives.
Interviews
We interviewed staff and managers that worked in establishments in which
tipping was encouraged with the exception of one restaurant that had a fixed
service charge and would not accept tips. We recognize the risk of drawing
conclusions based on a single restaurant but will contrast our observations
from this enterprise with the broader foundation of the tipping restaurants to
highlight some points for illustration.
It is very clear that tipping is a social norm. Very few participants had
given serious consideration to the reason that tipping exists. That said,
there was a strong initial consensus among participants, both managers
andservers,thattippingensuresgoodservice.Thisappearstobe
aspirational. When pressed, respondents perceived there to be little
correlation between the service experience and the size of the tip. This
conundrum has real implications for performance management and
service delivery.
The potential for a tip is perceived as a motivator for servers to work hard
and deliver a good experience. It is also clear that tips are used by both
servers and managers to compare performance and ability between servers.
Servers in tipped environments almost universally prefer receiving tips rather
than a higher wage. Interestingly, they usually see themselves as above
average and as earning more than their peers, something that would not be
the case if everyone was paid the same amount.
Servers generally did not begrudge supervisory staff a share of tips, but were
generally less positive about sharing tips with higher level managers or owners.
This caused some friction and resentment in these operations, but did not cause
turnover as these restaurants generally had a higher cheque average so server
income was higher than in places that did not tip out managers.
The most common approach to tip sharing was a managed pool. Servers
were expected to remit a share of total receipts into the pool. The pool is
JOURNAL OF FOODSERVICE BUSINESS RESEARCH 9

generally administered by a member of the staff during work hours rather
than by a manager. This is intended to increase transparency and trust and to
keep the financial administration at arm’s length. In most cases, the fund is
fully documented and servers feel that the money is managed fairly and
effectively. There is not full transparency as to whom receives what share, but
the totals are fully documented and individual groups (e.g., cooks) see how
their share works. The pool is then paid out on a predetermined formula
based on hours worked.
Servers generally do not worry too much about where tips go once they have
been forced to remit. There is some concern about who receives a share, but most
servers do not begrudge other staff a share. When servers were aware of who got
a share, they were most concerned when managers received a share of tips.
There are mixed feelings about this approach where tip out is pooled and other
staff are paid from the pool. Some servers feel this works well and that it precludes
individual servers from currying favor with support staff by providing financial
incentives out of tips. In fact, this concern is one of the reasons that managers
highlight as a motivation for coordinated pooling. Others servers would rather
have an individualized system where they have the choice of how much to share
and with whom but this approach is universally unpopular with managers.
In a small number of establishments, servers are required to pay out at the
end of each shift the prescribed monies to each relevant staff member. This
approach is reserved for cases where only bar staff and other front-of-house
workers receive a share.
The genesis of tip sharing (and the ongoing rationale) is that there is
considerable inequity in wages between staff who are tipped and those that
are not. Tip sharing was introduced as a way to attempt to reflect that
inequity and make an effort to narrow the gap. There was also concern
relative to informal tip sharing in which some servers were distributing
money to other staff. This could cause concerns with respect to favoritism.
While there remain serious concerns about the tip sharing model, it is much
preferred to the alternative. Restaurateurs generally feel they are making the
best of a bad situation.
Remittance requirements ranged from a low of 0.5% of sales to a high of
7.5% of sales in our interviews. Two factors were key in influencing the size
of the remittances:
(1) The number of employees getting a tip out. If the kitchen was receiv-
ing a share then the size of the tip out would increase.
(2) The level of dining—fine dining generally had a higher tip out than
upper casual dining which in turn tended to be higher than casual
dining. This may be related to factor 1 as there are generally more
people involved in service and more kitchen staff as the level of dining
increases.
10 B. MCADAMS AND M. VON MASSOW

Operational issues arising from tipping
Interviews of both managers and servers resulted in a number of issues being
identified that arise within a restaurant as a result of the practice of tipping. We
categorized them into six key themes: inequity of value distribution, second
compensatory system, lack of control of revenue, quality management, rivalry,
and career management. We describe the issues as presented by interviewees and
provide some discussion.
Inequality of value distribution
Managers almost universally highlighted the issue of the inequality of wage
distribution as a challenge accruing to tipping. Servers in our study averaged
approximately $18 per hour in tips earned. Combined with the server mini-
mum wage of $8.60/hr servers are making on average approximately $26/hr.
When operators in our survey were asked what their cooks earned per hour
the answer ranged from $11–$16/hr. Cooks who worked in a shared tip
system earned between 1$ and 3$ an hour in tips on top of their hourly wage.
The evolution of service in restaurants is such that more individuals contribute
value to the dining experience. There are often more roles in front-of-house and
the increasing importance of the food experience means that kitchens are adding
more value to the customer. That variety in value creation cannot be reflected from
a portion of the money spent by guests as it is paid directly to servers in the form of
a tip. This creates challenges for managers and potentially resentment in some
restaurants.
Second compensatory system
The majority of restaurants in our study operated in a shared tip system that
involved servers “tipping out”a percentage of their sales into a pool that was
then redistributed to other employees. This process essentially creates a
second compensatory system, for example, tips create income for servers
outside the direct control of management. When tips are pooled there is
additional administration required. An hourly employee who is trusted by
other staff usually does this administration. This costs the management extra
money as it is not completed by a salaried employee.
While it has surprisingly not been an issue in Canada to date, managers
are aware of the potential for tax liability issues around tips and tip pools.
This is a source of ongoing concern for many managers.
Lack of control of revenue
There is an expectation that customers take the cost of tip into account when
deciding when and where to dine out. This means that, at the tip averages we
JOURNAL OF FOODSERVICE BUSINESS RESEARCH 11

saw (15–18%), a significant component of the customer’s expenditure is
outside of management control.
As this revenue is outside of the control of management, different
approaches to rewarding good performers have emerged. Good shifts—those
with a high potential for tips—are given to good performers. That can lead to
resentment and difficulty in getting top performers on poor shifts. This can
cause variability in service quality. Managers also admitted to “punishing”
servers for things such as uniform violations by giving them poor shifts.
The separate tip system also has the potential for abuse. Managers can play
favourites with servers and control income by assigning shifts or cutting
specific staff early. If this is malicious it is tough to catch or control as the
basic pay structure is the same.
The combination of tight margins and this “grey”revenue was the impetus
for tip pooling plans.
Quality management
Managers expressed concern consistent with the findings of McCall and
Lynn (2009). Tips are outside management control, so it is difficult to
manage service quality. The different expectations of tips from different
customers means that servers will treat different customers differently
which is not positive outcome for the restaurant. It is clearly not ideal if
servers are tailoring the service experience to their perceptions of the size of
the tip. This means restaurants have employees working toward individual
goals rather than organizational goals; servers acknowledge that this happens.
The monetary link between individual staff (servers) and specific custo-
mers can also make it difficult to foster teamwork within the restaurant. This
is a concern for managers and is validated by servers. Servers focus on “their
guests”with whom they have a financial tie rather than looking to the needs
of other guests who might “belong”to a different server. In fact, it is true that
some managers have made this an explicit objective for servers, for example,
to treat their sections as private businesses. Growing sales (which increases
tips) can be positive. It can, however, increase competition between servers
and tension with the kitchen.
The individual tie to a customer can be both positive and negative beyond
that individual service experience. Servers highlighted the impact of a very
good or very bad tip at the beginning of a shift. A bad tip early in a shift can
cause a hangover resulting in poor service of a server’s whole shift.
Conversely, a high tip early in the shift can generate a halo of positive service
for the entire shift.
Tips are not tied to hours worked. Both managers and servers highlighted
the phenomenon of the “quota server.”These individuals have a fixed tip
total in their minds and keep a running total. Once the tip total is achieved
12 B. MCADAMS AND M. VON MASSOW

they shut down and service quality declines. There were also examples from
both servers and managers in which servers dragged their feet in busing
tables so that no new customers were seated their section.
Conversely, managers interviewed also saw that tipping helped with mana-
ging labor costs. During slow times it was easier to get servers “off the clock”
as hourly pay was not motivation for them. In essence, if servers don’t have
tables to make tips from they will look to finish up quickly.
We also spoke with management and staff at a restaurant that charged a
fixed service charge and paid higher hourly wages in both front- and back-of-
house. They refused tips and if customers tipped anyway, tips went to a
charity. The feedback from these individuals was in stark contrast to the
others. Servers were willing to work any shift because they were compensated
the same regardless of customer. Servers and managers spoke with pride
about serving all customers and covering for one another. The institution of
tipping seems to preclude that in most situations.
Rivalry
Tip “ownership”can cause unhealthy rivalry between staff in a restaurant.
We heard several examples from both managers and staff:
●Tension when tabs are transferred from the bar to a table.
●Assignment and/or splitting of large parties. Large parties tend to tip less
per person than smaller ones.
●Servers who linger to finish a table to keep the tip which costs the
restaurant extra money as the person should be finished the shift.
●Competing for guests that look like good tippers and guiding them into
a specific section.
Career management
Tips are income that is out of control of management. Managers highlighted
the difficulty in promoting servers to salaried positions because of the
possibility of earning tips as a server. Many servers echoed this. Servers
were hesitant to take a role in which they worked longer hours and their
take home pay decreased. This makes succession planning and leadership
development extremely difficult. This is perhaps reflective of the low rate of
entry level management pay in the restaurant industry, but it is also a
function of the lack of control of the revenue that is tips. This is particularly
problematic when management shares figure into the tip sharing equation.
Also, there are legislative initiatives in some Canadian provinces that would
make providing a share of tips to managers illegal.
JOURNAL OF FOODSERVICE BUSINESS RESEARCH 13

Managers also highlight the difficulty in keeping and developing kitchen
staff. In many cases, the only way a young chef can make a decent living in a
restaurant is to open their own restaurant. This increases capacity and
competition and makes it difficult to maintain experienced staff. Managers
also highlighted how many young kitchen staff lose their passion and move
to industries with better hours and, more importantly, better pay.
The ability to earn tips also appears to attract transient staff for the
prospect of quick, easy money. Servers acknowledged that many of them
don’t see this as a career. A mercenary attitude diminishes the commitment
to the industry generally and the organization specifically.
Conclusions and further research
This is the first work, to our knowledge, that has investigated the perspectives
on tipping and operations from restaurant managers.
The practice of tipping is well-established as a social norm in the North
American restaurant industry. From the literature it is not clear that tipping
improves service quality. There are, however, clearly implications of the practice
within restaurants. We identified a number of key issues such as inequality of
value distribution, managing a second compensatory system, lack of control of
revenue, rivalry, difficulty in career management, and perceptions of unfairness.
Many North American restaurants have introduced practices such as tip sharing
in order to address some of the issues that arise within individual operations.
While these have helped, issues remain and some new ones arise. Europe and
other jurisdictions have moved away from a tipping convention and there are
some, though few, restaurants moving to models without tipping in North
America. If tipping is to continue, restaurants will continue to have to manage
the significant issues that arise. The industry needs to take a hard look at the best
model for customer interaction and staff remuneration for long-term success.
This study is an initial attempt to identify some of the key issues arising
within the current tipping environment. Our approach precludes developing
insight into the overall relative importance and impact of the various issues.
There is value in more formally quantifying the impact of these issues on
restaurant operations and establishing how widespread the issues are. While
we got valuable insights from our survey, a bigger random sample would
enable us to evaluate differences in current practices and impressions by type
of restaurant, server gender, and earnings from tipping. Randomness plus a
good cross-section would yield the most accurate, representative and general-
izable data. This is worth considering in future work. There is also clear merit
in initiating a discussion within the industry and research on structures and
alternatives that could mitigate problems. Identifying and evaluating plausi-
ble alternatives is an important first step in attempting to change the
industry.
14 B. MCADAMS AND M. VON MASSOW

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