To Tip or Not To Tip: 'Service Included' Pricing VS Tip Based on Service

Age group also plays apart as younger Canadians tend to tip less then Canadians in the 55 plus age group. Image: WikiHow

To Tip or Not To Tip: 'Service Included' VS Tip Based on Service
By Dwayne Reno

Tipping has become a huge topic of discussion amongst the foodservice industry ever since the Ontario government passed the “Stronger Workplaces for a Stronger Economy Act” - passed November 2014. This act would increase the minimum wage in Ontario to $11.40 per hour as of Oct 1, 2016, HERE.

Many Canadian foodservice operators have started to ponder if abandoning the current tip based on service method is beneficially to their employee’s income and more importantly will customers embrace it?

Earlier this month the Angus Reid Institute, a national, not-for-profit, non-partisan public opinion research organization released a study stating that “6 in 10 Canadians who prefer ‘service included’ pricing say that they tipped more do to social pressure”.

In this article I would like to share some of the key findings from the Angus Reid study. Also I would like to look at how US foodservice operators have fared with both the tip based on service and ‘service included’ pricing methods.

Key findings from the Angus Reid Institute study:

• The Angus Reid reports states that 47 per cent of people living in Quebec and Ontario feel that 15 – 19 per cent is the standard amount a customer should tip a server at a FSR.
• The report also stated that income levels play a huge role in the current tipping standard as the more you earn the more you tip.
• Age group also plays apart as younger Canadians tend to tip less then Canadians in the 55 plus age group.
• Two in five Canadians would like to move away for tipping.

The full study can be found HERE.

Tip based on service VS service Included pricing
An Earl’s Restaurant in Calgary has become one of the first to pioneer 'service included' pricing over a tip based on service model. While ‘service included’ is fairly new to Canadian foodservice many US based foodservice operators have implemented this system with mixed results.

New York based Dirt Candy stated on their website that “eliminating tipping and raising prices by 20 per cent” has helped them pay better wages to their employees. The website goes on to say that “originally the 20 per cent was an administration fee but they decided to roll that 20 per cent into the menu prices,” HERE.

In April 2015, Ivar’s Salmon House stated on their website “we raised all employees to $15 an hour and removed tipping. This means we raised our average customer bill by about 21%, and we shared that increase with all hourly employees,” HERE.

But it hasn’t been all peaches and cream. Many US restaurants that made the switch have since switch backed. Joe's Crab Shack was one of the first large chains to adopt the policy but has recently abandoned it after only three months. Other US operators have also made the switch back to tips based on service stating that a ‘service included’ policy is too hard to maintain and not being able to hang on to servers as the main reasons for switching back, HERE.

To tip or not to tip it’s up to you!                                                  
Customers tip when they feel that great service was provided. The question is simple will ‘service included’ pricing eliminate the want for customers to tip? As more information becomes available one thing is for sure, if you are going to make the switch or not, base it on what will work best for your customers and your employees.

Until next time your customers want to know why they should spend money at your restaurant, bar or cafe. So give them the goods!