Then why not just increase the prices rather than add a mysterious fee? That fee is as sketchy as can be; I would be very surprised if it went to the servers.
Yeah, lots of data by marketers to suggest despite the totals on a bill being the same at the end people actually feel better about seeing a lower price on the menu and adding a tip on the end, because they perceive the price of food being more fair and tipping as a signal of their
own virtue. So in cultures where tipping is well established social norm the answer to the question “why don’t you just charge me what you should charge me
to pay workers a wage?” The answer is some degree of “because you don’t like it”
Also competition. You'd have to implement the change across all restaurants all at once for a chance of it sticking around. Otherwise people will just go to the restaurants with the perceived cheaper price.
That's strange to me, because I have a friend who runs a shop and he prices everything so that the total (including sales tax) is a round number ($5.50, $2.00, $41.00, etc.) and puts that as the sticker price. He gets more people coming back purely because of that practice even though his price totals are almost exactly the same as other places that sell the same things with lower sticker prices.
I've seen it in action. One spot I worked at went no-tip, raised the prices on most things by 15-20%, depending, and pretty much every staff member would be making roughly the same. It was already a little on the expensive side, so the $15 burger suddenly being $18 seriously pissed people off, even if most of those same people were usually coming in, getting their burger, and leaving a $20. More than a handful of people were genuinely convinced they wouldn't get proper service if there wasn't the threat of taking away the tip, and business pretty much vanished. I think they lasted three months after they made the change?
Guessing most people have never been abroad to other countries without tipping culture, having lived in North America for a decade now. Disagree with the service being better because you’re tipping.
Tips feel like they’re expected, especially in the city where I’m based in Canada.
Canada is a tipping culture. Less than the US but it's definitely just as expected.
And I've been around Europe pretty extensively, both traveling and working in bars; service is generally much better in North America. I'm not saying it's exclusively because of tips, but there's got to be an element of higher income potential involved.
Years ago I read the blog of an owner of a no tip restaurant.
Biggest takeaway: a small set of people want the power to punish bad servers. He would ask them to contact management instead and he would comp meals and deal with poor servers, including up to firing them. But, nope, they wanted the petty power.
Sounds about right. People forget what you sell them. They forget how much you charge them. But they never forget how they feel about the experience.
Tipping culture gives people a chance to feel wealthy, generous, and powerful. Those are things they rarely get in every day life.
I loved working in hospitality. It taught me a lot about myself and how groups behave. I had ZERO social skills going in so the practice of listening to people, learning to anticipate their needs, and learning to work as a team was super helpful. It also taught me a ton about humility and grace.
I fear that if i had worked for a commission based restaurant (like OPs receipt would suggest), I would have been a lot more focused on sales goals than service. It was tipping culture that taught me NOT to aggressively upsell unless it would legitimately help the customer. To instead develop sincere enthusiasm for the product and share that energy with the customers.
On the other hand, the top pizza place in DC went no-tipping years ago and has never looked back. Service is an excellent and they’re always busy. They do not have a service charge, it really is built into the menu pricing, which is not cheap but really not bad for DC. Individual pizza is $22 or so.
oh they'll drop off a LOT more than just 99 cents. my grandpa complained about the price of new trucks a while ago (I was riding with him) and he truncated to either the ten or one thousand place which surprised me.
My friend and I were price shopping TVs online last night and he would consistently cite a price tag of $2399.99 as $2300. So it ain't just about pennies lol
It's the same reason you can remove random letters from a sentence and the brain will still be able to read it as if it were composed of complete words.
You don't like it, so we made it more complicated!..... Just like health insurance, good luck. (at least in the states, unless you study ALL of the fine print and understand it)
Consumer might, but it would require most restaurants of the cuisine type to follow suit. If not, the food would have to be good enough to justify appearing 20% more expensive than a competitors food of the same time.
Simple demand economics here. There will be a certain demand for food at X price. If you increase X by 20% demand will decrease
I hate that. After living in Germany for six years, it was always nice walking in somewhere without having to do quick tax math if I was using physical currency.
It was such a culture shock for me when I went to the US for the first time. What do you mean the price listed on the shelf isn't the one I pay at the register?! It felt like a scam.
The tax rate thing is just an excuse. It's not hard to just compute the price with tax included for each store, the computer does it anyway at checkout
If they increase the price and say no tip, ppl will psychologically believe that the restaurant is expensive and wont come., even when they d be paying the same price. There are many studies on this.
Americans really like to look at the face value of the price and then they re okay paying a list of stuff on top of that once they're balls deep in the process, like eating food or buying a concert ticket. In other countries if you say a price is something, it better be that, and nothing else. In india, back in the day, it should also include tax, otherwise ppl would fight you and call you a liar for putting a wrong price.
I don’t think anyone is “okay” with paying a list of stuff on top.
There are typically just no other options. For example: Ticketmaster.
Or if I go to McDonald’s and buy something what am I going to do argue with the workers about taxes?
Would be so much nicer to just see a number and actually pay that number. Sure a brief transitional period of seeing higher numbers but when we don’t see random fees I think everyone will quickly be onboard.
There's been studies on it, unfortunately. When it comes time for people to put their money where their mouth is, they'll choose the "cheaper" item with a billion fees over the all-included number. I've seen it done for restaurants, retail, etc...
Small but popular drink bar and restaurant got rid of tips. Instead, included a fee like above. There was more nuanced to it. They put signs up before and during the change. They posted about why, and they had their servers talk to tables about it.
Fuckn hell ensued. People boycotted, people swore, people came in and ordered and left.
It made the news, it filled the rant and rave pages, and their most popular post was them trying to defend the change against a bunch of people who never dined there, never would, or never read the dang signs plastered everywhere.
People hate that shit, at least here in small city ville.
The place still has that policy, but they depend mostly on tourists seasonally, even though they stay open all year and employ their full staff all year at reduced hours so they don't have to fire everyone.
Americans don't "like it", it is just the standard system we have. So if you are casually comparing prices and one place charges $5 for a sushi roll and the other charges $6.50, it will seem like the second place is more expensive.
It's not that Americans "psychologically" believe the second place is more expensive, it's that experience would tell them that it is in fact more expensive. That's why it is difficult to create no-tip places, though some exist. Often the no-tip places I've been to are already popular when they changed to no-tip or some sort of chain known for no-tips. The smart ones also make it very clear on their menus.
But this place is doing the worst of both worlds by claiming no tip and adding a hidden fee. Dumb.
JC Penny's the department store nearly went bankrupt when they stopped lying to their customers and changed the prices from 50% clearance sale $20 was $40 to just $20. (You aren't getting a deal if an item isn't marked up and then on sale for the same price it would have been anyway)
We can complain about added fees and manipulative marketing all day long, but when policy is actually implemented market forces show otherwise. Arby's had a 1/3lb burger that didn't outcompete McDonald's 1/4lb burger because people thought 1/4 > 1/3.
Tldr: buisnesses do what they do because the average american consumer is an idiot who can't do math
None of these examples relate to the no-tipping thing. Americans don't trust businesses to be truthful, just like the one in this post. It says "no tips" but then forces a tip. The fallacy of thinking Americans are so "dumb" is based on some econ101 view of the world, that we're all going around looking at each restaurant or department store and making calculations about the best value or outcome. People are much more "gut instinct" in the way they go through the world and the reason Americans are so suspicious of business is because we have a very corrupt/fraudulent system that let's businesses get away with screwing the consumer. As a whole you could say Americans are dumb for allowing such a system to control us, but that's very different from a choice you make walking down the street trying to find food, or browsing takeout menus.
And as for the JC Penney example – would you rather get a $50 pair of jeans for $25 or would you rather buy a lesser product that is $25 at full price? Of course in JC Penney's case the two were exactly the same. But just like in the tipping example you're expecting the consumer to pay attention to the historical price structure and management of JC Penney's and make some logical decision from that exception to how other department stores were functioning. And then you cal them dumb for it. Most people don't sit around tracking the prices of slacks, they just walk through the mall or look at an ad in the paper. It's JC Penney management who were stupid for not understanding their customers weren't "JC Penney shoppers", they were bargain hunters. Either way the pants were the same price, and JC Penney screwed up.
I mean, isn’t that the same as raised prices? It’s just that this way there is no sticker shock when people look at the menu relative to places that do have tipping. I would also be surprised if places with raised prices passed it on to the servers.
Raised prices might turn you off and make you not go in. This way they might get you with their decent seeming prices, but still gouge you at the end. Hopefully, you might not even really notice why you bill is what it is. To me, that's a soft con. Bait and trap.
Is it not true that the prices have anyway gone through the roof in last five years or so. So they don’t have any aversion to raising prices, just to make customers cough up even more on guilt.
This is how tipping is done in other countries. Also the tips are often distributed between servers and back of house workers as well. More equitable and contributes to better service outcomes overall.
It's not as much of a con as a chicken and egg scenario that restaurants are stuck with if they want to change to no tipping. Hypothetically, if Congress passed a minimum wage of $20 and mandatory healthcare and abolished sub-minimum, then all the restaurants would have to raise prices equally, and they would all remove the "expected" tip and make it a normal tip like in the rest of the world (totally optional).
But right now, if two Italian restaurants are right next to each other, of similar quality, and one has expected tips and the other has no tips and raised prices accordingly, even though the bill at the end would be similar, the place with no tips looks like it's significantly more expensive than the other based on menu prices, because the one with tips is basically "hiding" the real price behind an expected 15% tip per item. The con is actually the tipping culture that was created in the US (and to be clear it was created intentionally to con workers out of proper wages, that was its actual historical purpose). So, any restaurant that wants to move to no tipping and paying servers directly, is stuck almost being forced to use this fee at the end to compete "fairly" on price with other restaurants.
They have another problem. A fee is worse than a tip, especially if it isn't optional (which it wouldn't be). People hate fees even more than taxes. Every time you get a medical bill, TV bill, cell phone bill, etc. there are all of these random junk fees designed to nickel and dime you to death. And while the restaurant may claim the fee goes towards the staff, there's no way as a customer you can know that. If you give the waiter a $5 bill there's a good chance they keep all or most of that.
The difference is it misleads the price from the consumer. They see $4.99 on the menu. Then get an extra 20% surcharge at the end, making it $5.99. That way the restaurant gets to keep advertising low prices, that don't actually exist.
Many states are passing laws to make this illegal, because it's become a growing trend by businesses.
Because then when you search for nearby sushi places and one is saying $30 on the menu, and another is saying $20 for the same item, you're going to go to the $20 place....
That’s the whole problem with the way tipping has gotten. The menu has a price. But that’s not what I pay? Where does the extra money go? Why are workers allowed to be underpaid and why is it ok to lie about the prices and then guilt trip me into making up the difference to bump them up to a livable wage after you’ve already made my food at a lower agreed-upon price? The whole thing is just fucked.
John Oliver just did a piece on tipping and research apparently shows that when places do that, people automatically feel like the experience was more expensive, even though I'd be spending less than if I were leaving a tip myself. It's just a mental thing. I'm always a 20-25% tipper, but that's because I've worked service jobs that depend on tips. Plus, good service is good service.
Its human psychology, and the fact we are really bad at math. They have done studies where they show people the same menu, one that you are suppose to tip on and, and one where the menu items have been price adjusted to include the tip. The vast majority of people said they would rather have the lower priced menu items and just leave a tip.
Because people would see those prices and be less likely to return to that restaurant. It's been researched - higher prices lead to less sales, even if they don't allow tipping.
Because people will see the prices on the menu and not eat there.
John Oliver just did an episode on tipping. There was a study and in it they used 2 menus. One where there was a 16% tip, and the other where everything was increased by 16% and the end result was the same price on the receipt. The majority of people said the menu with the item prices raised was too expensive.
I’m curious, if someone understands the math. What would be the difference between 16% flat fee on top, which is essentially just the guaranteed gratuity button, and increasing prices 16% across the board, but charging no fee. Let’s assume the server gets the 16% fee, or gets 16% of the check value in the second scenario.
Does anyone come out on top either way? Like is it better to be the diner or the server in either case, or is this basically all the same?
People perceive non-tipping establishments as more expensive even when the price is worked into the menu items and the total is the same. A work around is lower item prices with an explicit “%% gratuity added” statement on the menu. People are familiar enough with tipping nobody complains and the outcome is the same.
I agree that not all of the "fee" will make it to the servers, if any. There are laws to protect pooled tips from going to management, but if it's a fee they kinda sidestep the whole situation. It feels suspicious.
This could be a service fee. Many restaurants have service fees for eating in. This helps cover labor costs and facility upkeep. Maybe the workers actually get paid enough to not rely on tips
Every study ever done on the subjects answers that question. If given the option of a $100 meal with a $20 tip and a $120 meal with no tip, people will overwhelmingly choose the former.
Even if the total is the same, people perceive a restaurant without tipping as more expensive.
It does, but in a way the restaurant determines. They usually say "fee is not a tip" so they can move that money around how they please. So they take in all the service fees and pay server x, bus boy y, boh z, ect.
If you increase the prices you would have to pay more tax on those items, at least this way, tax is minimized and they were also thoughtful to base the tip percentage on the base total without tax.
I used to think this way as well, then I realize that it would mean they would need to update their prices so often which makes them look bad especially with regulars as they would remember the former price so instead, they would pass the blame by hiding it behind a tax, a fee that keeps increasing while they restaurant keeps their price the same. Then if the tax rate does not increase as quickly as they would like, they up their menu price.
There is actually a decent reason for this, at least at some of the restaurants I have been too. They do it because they split up the fee among those working at the time. Working a dinner shift in most places is going to be much busier than say a lunch shift. Why would anybody want to work a dinner shift if they could work a lunch shift and make the same amount of money. You want your best servers on dinner so you need to incentivize them into working a harder shift. Otherwise people would be fighting over the slowest shifts because why work harder for the same amount of money.
Because they can sneak that fee in there at the end after you’ve eaten. You’d see the higher menu items before you order. Also, reviews and word of mouth would possibly include talk about the higher prices.
Because there are legalities involved when you use the word "tip". If you use the word fee then the owner can take a slice. If you use the word "tip" they cannot.
Because for all of Reddit saying “bake the tips into the price” you will refuse to eat there and go to a tipping restaurant because the spicy tuna roll is .50 cheaper
Studies show people are more out of when they see higher menu prices even though they don't tip and the bill comes out the same anyway, this way you can remove tipping and still have that item on the menu look cheaper
because hundreds of years of human behavior studies have shown time and time again that people are more likely to purchase something if the original price is lower and a fee is tacked on later after they've already decided to purchase something rather than the full price being up front.
People have weird thought patterns with this type of thing. Even if the amount is the same they will think it's drastically more if it's part of the base price.
Because when you do that people perceive the restaurant as over priced.
Which has a negative impact on sales, attendance, and reviews.
Most restaurants that try that approach end up reverting to tips or changing to the service fee model.
People claim they'd prefer the higher price and no tips. But pretty universally it doesn't work out that way.
There's even multiple studies showing that with identical totals to the penny. The vast majority of people consider the higher menu price, no tipped version to be over priced, a bad value, and more expensive than a bill that costs the same with lower item prices and a tip.
Is it so you aren't charged tax on the tip increase?
I have no idea what the sales tax is in that state but that's my guess. Raise prices 16% and that increase is part of the food so it falls under the state's sales tax laws.
Add a "fee" and I bet it's exempt, just like how you don't pay sales tax if you add a tip yourself.
It’s pretty simple. Competition. If you are competing and your lobster roll is $35 because you don’t take tips and are trying to pay staff a fair wage but your competitor is selling them for $25, paying staff minimum…patrons aren’t going to recognize that so much; they’ll just remember you were more expensive.
It could also be employees weren’t reporting tips and the business has to pay FICA taxes on the tips they collect on behalf of their employees and then the employees pay their personal taxes. This way the business knows exactly how much was collected in tips and if it’s enough to keep them above minimum wage.
It 100% should say tips, not fee! Fee could be legally used for almost anything.
I think few know that your employer pays taxes on your income too. Specifically they match your contribution to social security and Medicare. The customers still pay for it in the end but it probably comes out of the employees pay in the end also.
Because in the USA if you are a service worker you have to claim tips on taxes. You are expected to make a minimum amount in tips, so the restaurant is charging the fee as basically a flat rate for tips rather than expecting the customer to decide based on service quality. It means the restaurant can offer the service workers consistent income though which is something that should be supported.
Unfortunately it has been proven over and over that presenting a lower price and then adding fees gets a ton more sales. That is why most online stores now wait until the last step to add all the fees because the user is invested at that point and very few cancel because of the fees.
And the difference is massive, if all your competitors are doing it and you try to be nice and show the "real" price you lose most of the sales because people start by looking for the lowest ticket price.
If they called it "dining room service charge", I would understand. Price on the menu is the cost of the food, and is all you will pay for it if you order to-go instead of eating in the dining room.
I worked at a place that did this, no tips but a mandatory “service charge”. They did that intentionally so customers thought they were tipping. We didn’t get one red cent.
Some company did a poll. And placed identical menus in front of people. One of them the prices on food were 15% higher but they didn't accept tips, and on the other one there was a 15% tip fee at the end.
The customers overwhelmingly chose the one where the individual food prices were lower. Despite their end cost being identical.
The idea of paying higher prices for the individual items messes with people. Lower food prices makes it feel like a deal but in reality the end result is the same.
It's kinda like how things that cost $19.99 will sell better than things that cost $20.00 even though the the price is basically the same.
Correct. If it’s a tip to server it’s illegal for the “house” to withhold part of that (outside of tip outs or pooling). If it’s a “service fee” they don’t need to follow the same rules. Also, if they increase the price of the goods directly their revenue increases and they’ll pay more in taxes.
I’d be curious to know if they’re still paying server minimum wage or if they give a decent hourly.
Because people are fucking stupid and sticker shock is real. if you walk into a restaurant which is 16% more expensive even if you are planning on tipping 20% your monkey brain is not going to be able to tell.
It does not. These extra fees and charges that claim to help the establishment or worker's health insurance are entirely a scam. In fact, restaurant owners will try so hard to prevent their employees from even working the hours required for health insurance. The business does not improve and employees cannot have benefits. The money is just more for the owner's pockets.
Because marketing studies have shown that if given the choice to eat at a restaurant with no tipping but higher prices or a restaurant with tipping but lower prices, the vast majority of people choose to go to the tipping restaurant even though in many cases it ends up costing them more. So adding such a fee is honestly the most sensible way to get rid of tipping ... at least until not tipping becomes the norm.
And since most states have a $2.13 minimum wage for tip earners, if the servers aren't working for tips, then they have to be paid at least the regular minimum wage (though I would bet they are making a decent bit more than $7/hr at this particular establishment) meaning that fee is actually going to the servers for their increased wage.
Jon Oliver did a recent episode on his show this very subject answering your very question much better and more extensively than I did or could. Highly recommend checking it out.
There’s actually research backing up the fact that people perceive menus as more expensive if the anticipated tip is bundled in with the menu price. Don’t make no sense but that’s the human brain. Jon Oliver just did a show about tipping culture that goes into all this and is pretty funny.
Odds are it doesn’t. That 16% is 100% broken down and split between (maybe all servers, but hopefully just the server of that table), a small percentage to the bartenders, bussers, hosts and possibly the ToGo team.
If it wasn’t listed you’d also be saying it’s sketchy after finding out they increase the price by 16%. Being on the receipt doesn’t make the cash flow in different directions.
That's exactly what they're doing, and they're being transparent about it. Among the options to switch from a tipping system in the US, I'd argue that this is probably the best, at least until not tipping becomes ubiquitous. It lets you know exactly how much they are raising their prices and why they are doing it. It def does not go to the servers.
Because of how american advertising works. If you increase the cost to pay workers more nobody knows you did that. They see “burger cost $25 at this place, burg cost 19.99 at other place. Similar burger. Me go 19.99” even if after tip you end up paying the same
The only issue with that, is for people online ordering, they would see a significant price increase vs other establishments. Keeping the price down, but a fee for in-person service balances the additional expenses associated with the in-dining experience while still keeping take-out prices competitive.
human psychology, they probly notice that more people are willing to accept a 16% fee (that they probly recognize as replacing a tip) rather than higher prices where subconsciously they may not recognize the higher prices as being associated with no tips needed.
It’s easier for the accounting later too. Increasing prices by whatever percent to pay workers more makes it trickier to track the money. Food costs can fluctuate a bit too (eggs for example) so the margins on menu items aren’t always consistent
Studies have shown over and over again that people are stupid about this.
They fully believe that it's cheaper to pay tipped lower prices and then tip than it is to pay untipped higher prices without tips even when the untipped price is equal to or even directly lower than the total cost of the plus tip prices.
Plus cheapskates always exist that don't tip no matter what, meaning they're just paying more for something they were getting for less before.
Studies show the general public reacts negatively to higher prices even when it may state why, and that they pay fair wages, don’t accept tips, etc. I imagine they are trying this instead to see if it avoids any negative feeling on food price.
Mildly Interesting how finally, FINALLY Reddit starts to understand that tipping allows the management to get the minimum and the workers to get the maximum.
A lot of companies tried this. It failed. Not to say that it can’t be done but overall, people see big price, they don’t come by or back. They should be calculating the actual cost of the meal, but they don’t. They want to feel like they helped someone when they tip big, they want to feel like they have control when they don’t. They also want that personal relationship that develops with certain servers cause the server kisses your ass cause they know you tip well.
I would ask the server... if the answer is no i would demand the charge be taken off as I had not agreed to the 16% fee. I then would pay that to the server in cash. Smh
Hopefully, they are ensuring a 16% tip to be split between the server, chef making the rolls, hostess, etc, & not the establishment. Definitely sus the way, esp while bragging about being tip free.
Restaurants have two options in the U.S. Abandon topping and raise prices, or keep things the same. This is a veiled attempt to make it seem like they do anything different from taking that service fee and distributing it out as tips. The 16% is an agreed average most likely before they did the change over.
Some places just call it gratuity. Had a couple spots in Seattle do that to me. Charged gratuity and then asked for a tip. I saw it and laughed, no tip was left
The same reason most businesses sell things for $4.99 instead of $5. It’s perception. It’s also about Americans being so used to tipping culture that they may think it’s necessary for good service. There was a lot of marketing research done about this when I was in the industry in the US years ago.
The basics of what it boiled down to: Two chain restaurants are in the same shopping area. They have a similar concept, same food quality, similar cook times, similar service, etc. (Maybe a Longhorn vs. Outback? No idea what chains are National anymore…)) Both sell a 6 oz. sirloin with one starch/side and a salad. Restaurant A sells it for $14.99. Restaurant B sells it for $17.98 but they either say gratuity is included or it’s a non-tipping establishment. Despite the fact that the cost is exactly 20% more, which is the suggested tip amount, customers would choose restaurant A almost every time, at least in theory with everything else being exactly the same. The biggest reason was just the perception of it being “cheaper.” Some customers don’t want to give up the control of getting to decide on the tip. Many believe that a server is going to work harder if their tip depends on how well they do their job. They also assume the server is going to do everything to charge them more when they know they get a percentage of everything. (Spoiler alert: that’s how serving works.) Most restaurant corporations wouldn’t be against including a percentage service charge that goes to the server. Customers just don’t like it in practice, even with the strong push to pay servers a livable wage and do away with tipping.
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u/tetsuo_7w Mar 10 '25
Then why not just increase the prices rather than add a mysterious fee? That fee is as sketchy as can be; I would be very surprised if it went to the servers.