Danny Meyer To Banish Tipping And Raise Prices At His Restaurants

By NPR Staff / NPR

Published October 14, 2015 at 12:01 PM PDT

This story was published more than 9 years ago.

Staff in the kitchen of The Modern, a restaurant operated by Meyer's Union Square Hospitality Group and located in the Museum of Modern Art.

Gramercy Tavern, in New York City, one of Danny Meyer's restaurants. Meyer says he will try to keep the new prices on par with a 21 percent tip — what diners have been adding on average lately.

In mid-November, diners at the New York restaurants Gramercy Tavern and The Modern may notice something new on their menus: higher prices, across the board.

Why? Because the man in charge of those and 11 other celebrated eateries is doing away with tipping. Danny Meyer, the CEO of Union Square Hospitality Group (who also founded Shake Shack), says tipping is actually a big problem for his industry.

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"I think that restaurant patrons have unwittingly believed that they could, if they wanted to, use their tip to punish bad service and, or to praise great service," Meyer tells All Things Considered's Kelly McEvers. "What that's done over the years is actually been quite the opposite because the average American restaurant goer leaves the exact same pit irrespective of the service they receive. And unfortunately none of those tips that you leave in a restaurant may be shared with the full team, i.e. the cooks, the dishwashers, the prep cooks, the butchers, etc..."

But it might not be easy to bridge that gap between what the servers make and what the dishwashers make. Meyer says that since he started in the restaurant business 30 years ago, he's seen "something fascinating and completely unfair: waiters' income in a fine-dining restaurant has gone up over 200 percent."

That's happened for two reasons: "menu prices have gone up and tipping has gone up from 15 percent to about 21 percent today."

Meanwhile, Meyer says workers at the back-of-the-house who don't get tipped have seen their hourly wage go up only 22 to 25 percent.

"So by incorporating everything in the menu prices, and therefore having it be the restasurant's responsibility to pay everybody a fair wage, we think we have the opportunity to make a great place to work for everybody — not just servers, but also for our cooks."

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Meyer says he hopes it'll also solve the problem of servers having to take a pay cut of about 25 percent if they want to move up and become managers. "We're going to change that," he says.

Of course, this sea change in how his restaurants are run will result in higher menu prices. How much? Meyer says, "when you get your bill, it should look just about exactly as it would have if you had left your gratuity in the old days."

That means, Meyer says, he will be trying to keep prices on par with a 21 percent tip — what diners have been adding on average lately.

This strategy could also help fine-dining restaurants in expensive cities like New York City hold on to cooks who now might find even better opportunities at fast food restaurants, Meyer says.

"We've never faced a labor shortage the way we have right now," he says. " ... he fast food industry is by law going to be raising its minimum wage to $15 an hour. So why would you tell your parents, 'Gee, please help me pay the bills for a culinary education so I can make less than than in a white-tablecloth restaurant."

Will other restaurants follow?

"There's a huge number of colleagues in our industry who will be watching very, very closely," says Meyer. "We felt a responsibility to go first, and we're proud to do it because it's the right thing to do. And I really think you're going to see this all over the country."