How San Francisco Is Pioneering the Tip-Free Model

The Zazie Way

Photo: Zazie/Facebook

Jennifer Piallat, owner of Cole Valley's Zazie, did away with tipping at the beginning of June. She raised prices 25 percent and gives her entire staff a percentage of the sales as salary. As a result, everyone is eligible for profit sharing, paid maternity/paternity leave, fully-funded health and dental insurance, paid sick leave, and a 401(k) with employer match. Piallat says the move hasn't been without challenges — servers aren't elated about being taxed on their entire income and their day-to-day cash reserves are reduced — but for the most part, she says everyone's happy, including customers who love just signing the bill and not having to think. In fact, while she told Eater in June she wouldn't be surprised if about 15 percent of customers now felt the menu was too expensive, Zazie has actually seen an increase in guests and sales are up 28 percent.

Piallat credits total transparency as part of the success of the new system and posts a spreadsheet with all of the numbers. "Everyone sees what everyone else makes," she says. "There's no shadiness about it." That transparency is also what allowed her servers to feel comfortable coming to her and saying 11 percent wasn't working for them (she bumped it up to 12 percent). And though the servers are happy now, Piallat is the one who takes the hit. "That comes out of my profits for now," she says. "Eventually I'll inch prices up, but if someone's going to hurt for a year or two, I want it to be me and not them."

The Old Bus Tavern Way

Patricia Chang

Photo: Patricia Chang

Old Bus Tavern, the new neighborhood brewpub in Bernal Heights, opened its doors in August with a menu that includes service and tax. What you see is what you pay. John Zirinsky says he and his two partners Jimmy Simpson and Bennett Buchanan just wanted to do what was most fair for everyone who worked at the restaurant and decided a revenue sharing system was best. "The back of house is traditionally underpaid," he says. "This is an opportunity to balance things and ensure they're being fairly compensated." So far, he says, everyone tells him they love it. Guests enjoy not having to do "the whole gratuity dance" and appreciate that the wealth is being shared.

His staff likes it, Zirinsky says, adding that there's a real sense of community and cooperation. It also prevents "shift hopping" since now all of the work is equally valuable. "Even if you're coming in on a slow night and doing side work, that's still a benefit to the restaurant" and employees are paid as such.

Of course that doesn't mean there haven't been issues. "The challenge has been figuring out what our system is," Zirinsky says. "In order make it fair, we had to add a lot of complexity and calculations."

Zirinsky says he did expect to have issues attracting great people for the front of the house, but he's been pleasantly surprised to find that people are actually excited about the idea. "A lot of servers and bartenders recognize there's a disparity," he says. "They want to see everyone do well, too." That being said, he echoes Piallat's point that the service staff aren't exactly elated about having to pay more taxes, despite the fact that's something they should have been doing all along.

Also, while Zirinsky and his partners actively work the floor, they don't participate in revenue sharing. "If we'd gone with a traditional pricing model, I think as owners we'd be doing a little better," he says. "We were careful not to raise prices so much that there would be a big sticker shock, which means so far, we've been erring on the side of making a little bit less money." Still, he says, "There's an undeniable component of fairness to this." And it's clear that to him, that is what's most important.

The Sessions at the Presidio Way

Photo: Patricia Chang

Partners Evin Gelleri and chef Michael Bilger, who opened new gastropub Sessions at the Presidio in August are also huge proponents of the tip-free model. Bilger says, "This is something we really believe in as a matter of principle. And not just in terms of protecting our employees; we also really feel it's the most fair thing for our guests."

Gelleri says he and Bilger discussed it for eight months and ultimately decided the best way to approach it was to add a service charge of 20 percent to every bill, of which half goes directly to the server, while the other half is used to provide wages, healthcare, and paid time off benefits. "We knew it was going to be tough to get servers on board, but we stuck with it." He admits they have lost some talented servers because of the unconventional model, but that they've made a few changes (paying weekly instead of bi-weekly is one) that have helped.

Bilger explains their approach by saying they are trying to get ahead of potential issues. "We want to keep things closer to what people are used to instead of just wrapping it all up in the pricing. The menu looks more inline with what people expect, but the servers are still working on commission. They have the opportunity to increase their wages on a nightly basis by being efficient, working hard, covering a good amount of customers, and giving good service."

Of course, not all patrons are elated about a mandatory 20 percent service charge. Gelleri says people don't like that control is being taken away from them, despite the fact that most people would leave that much anyway. He also admits it can be confusing. Bilger is clear that everyone in the restaurant, from the host to the server, is communicating with guests about the policy as much as possible; there's also a card included with the menu that goes into detail about the story behind the service charge.

Even with the four-paragraph explanation, though, Bilger admits it still doesn't always work.

"It's hard to explain to everyone that tipping creates a two-class system in restaurants, and that while minimum wage increases are great, the person who benefits most is the one who's already making three times that of someone in the back of the house," he says.

Many customers don't understand that by law, the front of the house cannot share tips with the chefs, line cooks, and dishwashers.

Gelleri and Bilger have received some negative feedback about the system on social media, but say they expected part of the process to include getting people comfortable with the idea. "If people understand it, we think they'll support it," Bilger says. But they both admit it's going to take leaders in the industry adopting the system for it to ultimately succeed.

San Francisco's Future

Justin Sullivan/Getty Images

Photo: Justin Sullivan/Getty Images

There are a number of other Bay Area restaurants trying to make the tip-free system work (Lord Stanley, Camino, and Californios are just a few), but several have also tried it without success. Daniel Patterson opened his Mission restaurant Aster with a tip-free policy last November. He told Eater at the time that he thinks in five years, every restaurant in America will have service included. However, in May of this year, he quietly did away with the system.

Mission's Sous Beurre Kitchen also announced it will cease its tip-free policy; chef and owner Michael Mauschbaugh says he's upset about it, but the practice wasn’t sustainable due to what he feels are unfair labor laws and small business taxes. He is optimistic, however, that he'll eventually be able to return to a tipless model.

Additionally, Bar Agricole and Trou Normand are bringing back conventional tipping 10 months after going tipless. Owner Thad Vogler told Inside Scoop the restaurants were having issues retaining servers and that it was "impossible to compete with more traditional places in keeping front of house staff who prefer the control and upside of the tip system."

Zazie, however, has actually hired two servers from Bar Agricole in the last four months. "The way Bar Agricole was doing it wasn't as transparent or as equal as the way we're doing it," Piallat says. According to those two former staffers, Thad Vogler's system was quite complex with servers making an initial hourly wage and having to wait six months before getting a profit share. "Anything that's terribly complicated confuses and frustrates the staff," Piallat says. "Waiters just want to know how much they're going to make."

While it's disappointing for restaurants that are embracing going tip-free to see places like Aster, Trou Normand, and Bar Agricole nixing the model, Danny Meyer's big move shows a major vote of confidence in the future viability of a shifted restaurant paradigm. While there are a lot of challenges restaurants have to work out in order to make the new system work, Gelleri and Zirinsky remain hopeful. Gelleri promises that Sessions is going to stay the course, and Zirinsky also has no plans to go back to the old way of doing things, especially when he thinks this is the fairest way to run his business. "I think the future is bright," he says, optimistic that with time, more and more places will adopt this model. "Especially," he adds "in San Francisco."