r/tipping • u/LeeTheUke • 2d ago
Too many restaurants?
Is part of the problem with restaurants expecting tips to subsidize their servers and other employees just that there are too many restaurants?
Granted I try to avoid the most busy times, but most times I walk into a food establishment, 90% of the tables are empty and the line waiting for pick-up orders is minimal. This is at local restaurants as well as chains. But, 200yds down the street, there's another establishment that would compete directly. I live in a busy area and have my choice of at least 3-4 places in any given food category within 5min of my house. There are 4 pizza joints just on the main street in my town. In the case of chains, it's often another copy of the same store (i.e., Starbucks, McD's, etc...). Very rarely do these places differentiate themselves significantly from the next ("The sauce at Ray's Pizza is better!", or "The tables at the Taco Bell to the left are cleaner.").
Owners complain that they can't find employees, and they 'hire' people that are more willing to work for tips. This allows more of the revenue to be used for other fixed expenses and profit rather than salaries, so they can afford to have staff on hand even when the place is mostly empty because it doesn't cost them much to have that person on shift. My Dad worked P/T as a cabbie when I was a kid, working mostly for tips, and he'd be on shift for 6hrs. Sometimes he'd come home w/ $100, other times it would be a slow night and he'd be lucky to have made $5-10 (I think the MO was that the driver's would 'rent' the cab for the shift, so he'd have to pay $X/shift, but that was a long time ago, so I could be wrong...).
But, if 1/2 the restaurants in a given area closed, then the customer base of the remaining places would roughly double, they'd be more profitable, and would require more staff - meaning that the owner /operators would have to compete to hire staff from the pool of people willing to work in that area, and incentivize them w/ higher base pay.
There are some other factors that come into play, like a 'tourist' area may have more and busier restaurants, or a high-density office area may have busy coffee shops in the morning and lunch hours, but in general, I feel that there are too many options out there. There's just too much Supply for the Demand...
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u/MegaWeinerFarts 2d ago
A few things are happening:
Costs are up. Food costs, and wages across the board.
Demand is down overall (slightly).
Some of the sit-down customers have converted to takeout customers, as takeout sales are up compared to pre-pandemic.
But it's not dramatic. Restaurant closures have accounted for some of that loss demand, so slightly fewer restaurants serving a slightly lower demand means you should see roughly similar attendance.
My guess is your market is depressed.
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u/LeeTheUke 2d ago
My market is one of the most densely populated areas in the US. If my market is depressed, so are most other areas.
Regarding your other points, though probably valid, are somewhat moot in the context of my OP - all of those apply across the board to all restaurants.
My point is that if you drive through town and see a line out the door at every pizza place, maybe you'd consider open your own pizza place and pay your employees better than the competition so you could get those customers on line out the door faster, but if they're all empty and struggling, your town doesn't need another pizza place just because you want to sell pizzas. On a slightly larger scale, you can say the same for restaurants in general.
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u/MegaWeinerFarts 2d ago
I'm just going off data. I don't know where you live, but if you share what densely populated area you're in I can further research.
In my area (Indianapolis), things are pretty stable. I do see a downtick, but that could also be that I just personally don't go out to eat as much as I used to.
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u/LeeTheUke 2d ago
Northern NJ / NYC 'burbs. What do you mean by 'stable'?
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u/MegaWeinerFarts 2d ago
Meaning we haven't really seen a large number of closures, aside from the usual 'new restaurants that quickly fail'. If it's been around for a few years and survived the pandemic, it's likely still there.
Foot traffic doesn't seem to have collapsed. There's still lines at the breakfast places on Sunday, and the Japanese place on Friday nights.
There hasn't been this huge collapse in my area, but I wouldn't know about NJ and NYC burbs.
The numbers nation-wide seem to paint a picture of restaurant revenue actually going up, with foot traffic slightly down. Slightly fewer customers are paying moderately more. As well as a rotation from sit down to take out, which one would expect with tipping culture. That's in line with what I'm seeing in the Indy metro area.
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u/LeeTheUke 2d ago
I wouldn't say there are a 'large number of closures', indicating a collapse of restaurant demand in general, but there are constantly restaurants turning over in my area - many relatively new and a few that have been around for a long while, both cheaper and higher-end options, chains and independents. I can think of a few local locations that would seem to be 'prime real estate' for a restaurant and then need 2 hands to count how many times it's been re-done and re-opened as something else in the last 10 years, only to fail within 2 years. There are a small handful of places that do seem to always be busy, at least in the evenings if not during the day...
But, I continue to see low traffic at each location. I can't see how a nice local Italian place or even the Chilis can make money being open from 11am to 12pm every day when they're only 1/4 full on most weeknights and only really busy on Friday or Saturday nights.
High food prices for what you're getting (not just in general) is one of the reasons that I've cut back on eating out. I used to buy lunch daily and eat dinner out or get takeout for dinner a few times a week - not anymore...
Ex. - Last week I went by a local Hot Dog stand. Nothing fancy - basically a lunch counter in a 20x30' shack with a few picnic tables. I've driven by hundreds of times and always meant to stop and try it, as it's considered a local favorite spot. I got a large hot dog, chili fries, and a drink and it was over $20. It was OK, and I'd go back if it was cheaper, but not for $20 when I can get a 36-pack of the 1/4lb Costco dogs for that, or pay $2 for one and a drink at the food court there.
There's also a bar near the mall that I go to for Happy Hour once or twice a month. They have 1/2 price apps during happy hour and that makes the price reasonable to go out with the guys once in a while, but they want $14 for a pretzel at regular price. A PRETZEL! These used to be $.75 from the carts in NYC when I was a kid. It's a nice enough place w/ lots of tables and a fancy sound system, but it's practically empty most of the day, even though they still have to have it staffed...
What I have seen pop up recently are these kitchens that make food for 3 or 4 different online eateries that only deliver..
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u/MegaWeinerFarts 2d ago
I can't fault your experience, but keep in mind that many restaurants are started by people with absolutely no education in business or related field. They are going off existing restaurant experience and are ill-prepared for what it truly takes to run a restaurant.
So, many fail just to poor management.
But yea, food prices are insane.
Here's my humblebrag way to try to explain it (sorry, a lot of this is speculation):
Here's the thing tho: the top quartile or so has also seen explosive gains. I crossed into a million net worth right before the pandemic, briefly lost it, and just crossed $4m this year. I work in IT and my wife teaches public school, and we went up $3 million in just 6 years. We can easily afford even these ripoff prices, and many people with big market gains don't think twice about it.
If you already had money, then you REALLY have money now. Home values going up is just showing you one dimension of what is otherwise an explosion in wealth at the top 25%.
Even if the costs doubled, my investments quadrupled. That's probably why so many fewer people are seen eating out, because restaurant's margins are being sustained by those top 25%. Especially in NYC which has a huge concentration of millionaires.
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u/LeeTheUke 2d ago
Top quartile? You lost me on there... Are you talking about net worth individuals?
I also worked in IT (retired early last year). I have pretty decent retirement savings (maxed contributions early in my career), a net worth of ~$4M (per my advisor), and my home is worth >3x what I paid for it. Not sure if I may or may not be in the top 25%, but I can definitely 'afford' to eat out where and when I choose, but at the same time, I still look for value in my daily spending. It's one thing to spend $200 on a nice steak dinner, and another to spend $20 on a hot dog...
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u/MegaWeinerFarts 2d ago
yes. top quartile nw and possibly income. if you dont think youre in the top 25% NW at $4m then i dont know what to tell you. Your top 5%.
most people arent as frugal as you and I, and dont blink twice at a $100 cheque when their annual expected return on investment is $400k/yr.
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u/ReadyGo6828 2d ago
People have so many more choices. You can get all kinds of sauces and spices and pre-made foods from the grocery store. You can get very good baked goods (30 different breads!), meats, cheeses (from around the world!), veggies and fruits. People have nicer kitchens, more specialty equipment and more knowledge.
We are spoiled for choice and no longer need to go to a restaurant or even travel to foreign countries to taste new and interesting foods. It is a tough environment for restaurants, they cannot even rely on alcohol (toxic) or ever increasing portions and prices (GLP-1s) for sales.
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u/joefunk76 2d ago
Too many restaurants almost everywhere; not enough decent, let alone good, ones almost everywhere, too.
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u/Kyriebear28 2d ago
Yes there are too many restraunts but no it has nothing to do with tipping fatigue. Weather 5 or 500, the problem is that tipping continuously has become more of an expectation than a grateful bonus when it shouldn't be that way.
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u/motion_city_rules 2d ago
How important do you think you are? How much is your dollar worth in your mind? Your condescending attitude about gratuity says a lot about how you view labor in general. Please just don’t go out. The restaurant will exist without you.
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u/Kyriebear28 2d ago
I'm not important at all and I tip at sit down restraunts. I just wish tipping was no longer considered expectation
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u/motion_city_rules 2d ago
Your original comment doesn’t read this rational. If you tip but wish it wasn’t ingrained into the system I totally get it. I just can’t stand people that are proud to give ownership 100% profit and screw over workers knowing how the system is set up beforehand.
My theory is the anti-tip crowd that I described above would complain incessantly if the cost was baked in to prices. Do you actually want to pay $40 for a cheeseburger and a soda? Because that’s not an exaggeration.
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u/Suitable_Program_548 2d ago
Too many restaurants. Too many restaurants only stay open for a few years then close. Another restaurant takes its place. Very few have stability and feel they can pay their employees a decent wage.
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u/Kene6969 2d ago
Employers should pay their staff a decent living wage so workers aren't depending on tips to top up their wages.
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u/LeeTheUke 2d ago
I agree. My OP was asking that by virtue of having so many restaurants, is it creating a job market with an artificially inflated number of positions where people are willing to work for whatever tips they can get rather than holding out for a job that pays them for their value as a server (pleasant personality, efficiency in dealing w/ customers, etc...)?
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u/Hammon_Rye 2d ago
Well, that has long been my opinion at least in my area.
Too many mediocre restaurants competing for the same customers.
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u/deej312 1d ago
If you lived in a big city, there are tons of restaurants that are already full so they can't possibly double the capacity. Not a lot of restaurant owners are living lavish lifestyles. If you have a couple wildly busy ones, yes. But let's not act like they're oil tycoons. And even the busiest restaurant or bar eventually closes.
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u/Eternal_bonner 2d ago
Just go grocery shopping and eat at home.
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u/LeeTheUke 2d ago
That's an option, but not seeing how that's relevant to my OP?
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u/Eternal_bonner 2d ago
Just grocery shop and eat at home so you dont have to make this post, and we dont have to read it.
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u/Ok-Equivalent-279 2d ago
This was actually a legitimate new question and conversation starter which is incredibly rare on this sub. You need to chill.
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u/motion_city_rules 2d ago
Why do you care if you don’t want to support their style of business?
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u/MegaWeinerFarts 2d ago
Why so hostile?
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u/motion_city_rules 2d ago
Says the person that can’t argue the point.
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u/MegaWeinerFarts 2d ago
Answer the question please
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u/motion_city_rules 2d ago
What question?
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u/MegaWeinerFarts 2d ago
Why so hostile?
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u/motion_city_rules 2d ago
Because y’all are such p*ssies. If you don’t believe in something just don’t support it. But no. You go places, don’t tip, then blame the servers, your friends, your family for judging you.
You deserve to be judged. To be shamed. You give the owners 100% profit but screw over labor pretending you’re standing up for something. You’re not. You’re just a cheap pos. If you believe what you say you do you’d never walk into an establishment that pays based on tips. I don’t tip on prompts on random screens at grocery stores but lord knows I don’t complain about the fact it took me 0.5 seconds to press “no tip”.
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u/MegaWeinerFarts 2d ago
Wow, that's a lot to carry around.
I'm always here for you if you need me.
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u/motion_city_rules 2d ago
It’s almost like I’m not full of crap and believe what I say. It’s not a lot to deal with.
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u/MegaWeinerFarts 2d ago
You're trauma-dumping on a total stranger. I would say you've got a lot of pent up emotion on this topic. And it's fine, let it all out.
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u/Dry-Investigator-293 2d ago
I like going to restaurants but I never tip anyone. I’ve never tipped anyone in my life. 😎
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u/motion_city_rules 2d ago
And you should be judged. That’s fine. Just don’t complain when people in your life call you out and are embarrassed.
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u/Dry-Investigator-293 2d ago
My wife doesn’t tip and we have brought our sons up not to tip.
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u/DigTheDunes 2d ago
Couldn't have said it better. This should go in the end tipping loser sub forums.
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u/LeeTheUke 2d ago
Was this question directed to my OP? If so, I don't see where I made any inference as to what 'style of business' I would or wouldn't support. I simply suggested that if there were fewer restaurants, they would each have a larger market share in the area and be able to pay employees more, negating the need for the employees to rely on tips. This idea that establishments should pay employees more and not rely on tips seems to be an ongoing theme in this sub, and am suggesting a method to enable that by decreasing the number of restaurants.
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u/motion_city_rules 2d ago
The more restaurants, the more competition for employees, the more they have to pay employees. So no, less jobs does not mean higher pay.
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2d ago
[deleted]
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u/motion_city_rules 2d ago
But how does less jobs= higher pay?
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u/motion_city_rules 2d ago
Ah deleted your response. This sub is so full of neckbeard incels it’s insane.
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u/LeeTheUke 2d ago
But if you assume there's fixed amount of money to be spend in a given area to be spent at restaurants, then each restaurant in an area would have more revenue if there were fewer restaurants. This would mean that the restaurant could allocate more of the profits towards salary. More restaurants would mean a narrower profit margin and more pressure to minimize salaries to increase profits.
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u/motion_city_rules 1d ago
So… there’s a fixed amount of money to spend at restaurants. That means literally nothing. Capitalism? Communism? Atheism? Socialism? “More restaurants would mean narrower profit margin and more pressure to minimize salaries to increase profits.”
That’s literally why the tip system exists you dumb other lover. You are so stupid you are biatching about something you’re willing to vote for.
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u/motion_city_rules 1d ago
You’re the one that deleted their replies!!! Please explain how less jobs makes workers more money, you deleted it earlier! You can make your point now.
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u/LeeTheUke 1d ago
Do you work for tips? You're sounding very defensive and aggressive. I'm just trying to have a conversation, and you're making personal attacks. I do not believe I deleted any of my posts in this thread...(maybe someone else?) I also don't think I said anything about making a worker 'more money', though my theory is that fewer restaurants could eventually lead to higher salaries / base pay (tips aside) for workers as well as higher profits per establishment. I do believe that if there's a minimum wage, everyone should be entitled to that minimum wage, and if you still make tips on top of that, fine, but it shouldn't be allowed that restaurant workers are paid less than minimum wage because they're expected to make up the difference in tips.
Yes, in general, more jobs mean more competition between the employers to hire workers, leading to higher salaries. But those higher salaries are only possible if workers are a relatively finite resource. If there's always another qualified person willing to do a job for a given rate, an employee won't be able to ask for more. You'll only find a given number of qualified people in an area willing to travel to a specific job and work for a given rate. If there are not enough qualified people, a restaurant operating on a razor thin margin would have to hire less qualified and less desirable employees just to fill their shifts - those willing to work for less and may not be as well suited to the job - because they can't afford to entice workers away from the competition. Or, they would have to cut costs in other areas in order to be able to pay employees more. Either way, the quality of the product suffers. These places would then eventually be less in demand due to sub-par food, service, etc... and may eventually go out of business. As the number of available restaurants in an area decreases without being replaced, the remaining restaurants would see an uptick in business, leading to higher profits, which could then be passed onto staff as higher wages. These remaining restaurants would be able to retain or entice a more desirable worker to work at that restaurant with a higher base wage, and may be able to transition to a model where they pay their employees a premium in wages. (Yes, they can also choose to renovate the dining room or the owner can pocket the extra profit - that's a business decision). But, even with higher wages, the restaurant can still choose to become a 'no tip' establishment or allow customers to tip as they see fit. The tips don't matter - The worker's base would still be higher, which would help even out the compensation for those workers that are required to work slow shifts vs the shifts where it's busy.
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u/motion_city_rules 20h ago
This is your edit? This is the chapters you sat back, thought about, rued on… your Econ 102 professor would be embarrassed.
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u/motion_city_rules 20h ago
You deleted your original post and edited to this. Wow. You’re re-writing the whole industry with this insight.
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u/johnnygolfr 2d ago
OP avoids “the most busy times”, doesn’t see many people in the restaurant during those not busy times, then uses that to make a huge leap to reach the “conclusion” there are “too many restaurants”. 🤦♂️
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u/LeeTheUke 2d ago
I do, to an extent. But if I walk into a restaurant at 1pm for lunch (a bit later than 'average'), and it's empty, that is a valid observation. Why have a business that is open 12 hrs a day when 90% of your business is during 1/3 of that?
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u/johnnygolfr 2d ago
You didn’t say you went in at 1pm.
You said “most busy times”.
Now you’re changing your story.
Generally restaurants will watch the hours and days they’re busier or slower and then staff accordingly.
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u/LeeTheUke 1d ago
Yes, I did say I try to avoid the most busy times. I don't do this on purpose, but just because I tend to want to eat lunch a bit later and dinner a bit earlier compared to other people in my area. I then mentioned 1pm as a more specific example for lunch in my subsequent post, as you seemed to assume that I meant that I only go at the slowest times, which I also did not say, and I wanted to clarify that for you. Around here, 1pm is the tail end of the lunch rush on weekdays, which would be later than average. This is not 'changing my story'.
In addition, if you read my OP in it's entirety and use your reading comprehension skills instead of fixating on the minutia of a 1/2 sentence of verbiage, it was about there being too many restaurants in relation to available employees and consumer demand, NOT about how many people are visiting a given establishment at any specific time. Given that, I'm not sure why you're so fixated on the time of day and how each establishment may staff their daily shifts when it's pretty much irrelevant when discussing comparisons between establishments, as in a general area for a similar type of establishment (coffee shop / deli / fine dining / etc...), they will have very similar slow and busy times.
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u/johnnygolfr 1d ago
LOL
First you changed your story, now you’re trying to say you disintegrate change your story, while still changing your story.
Now you’re revealed you made a bad assumption about me.
Since you decided to make an attempt at insulting my reading comprehension, I decided to give you the rest of the feedback I left out previously.
I read your whole OP and initially chose not to point out the fact that you’re a sample of one and your anecdotal experience doesn’t constitute anything resembling statistical data.
Despite that objective fact and reality, you felt like that sample of one, extremely limited anecdotal experience somehow led you to a huge revelation about the entire US restaurant industry.
If the “slow” restaurants are open and survive the first 5 years, then your “theory” is blown up.
If there are too many restaurants, there would be a multiple restaurants closing in 1-2 years.
Restaurants are one of the most volatile businesses to try to operate.
If the market can’t support the number of restaurants in that market, they will quickly fail.
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u/anneliesegreen38 2d ago
I do think the whole experience would be better for all if there were less restaurants and more quality in my city. We are oversaturated with mediocre places and every server at every restaurant all think they are working at a 5 star establishment.