Restaurateur Danny Meyer is getting rid of tips at his high-end New York restaurants and that’s causing concern for the restaurant industry, wondering if it’s going to become a trend.

Last October, Meyer cut tips at The Modern, his restaurant inside the Museum of Modern Art, which has two Michelin stars, four James Beard Awards and a Three Star review in “The New York Times.”

 

Setting the stage 📷: @bonvivantval

A photo posted by THE MODERN (@themodernnyc) on


The all-inclusive policy comes from Meyer’s attitude, noted on The Modern’s menu: “Hospitality is a team sport,” it says, concluding, “You are helping our entire team to flourish and for that we are grateful.”

He says the increased prices average out to what diners would have previously paid with tax and gratuity.


Roasted beets, bone marrow and leek fondue in the Bar Room

A photo posted by THE MODERN (@themodernnyc) on


Who’s eligible?

While a good waiter earns tips, the rest of the restaurant staff, including prep cooks and chefs, aren’t tippable. The Fair Labor Standards Act says restaurant employees are only eligible for tips if they interact with customers.

Over four million Americans – waiters, waitresses and bartenders – are classified as tipped workers. Many states pay those tipped employees a nominal hourly rate (the federal minimum wage of $2.13 an hour hasn’t changed since 1991), with the idea that tips will make up the difference and more.

Seven states, including California, pay tipped and non-tipped employees minimum wage. Servers can earn tips in addition to their hourly rate.

Another issue: tipping rates aren’t fixed and can vary from 15 to 30 percent per bill.

Price increases

Following the no gratuity policy, prices at The Modern increased 21 percent. Wait staff at The Modern, who used to make a little over two dollars an hour, now earn nine dollars an hour and receive a percentage of the restaurant’s revenue.



Cooks now earn an extra two dollars an hour, causing more chefs to apply to work for Meyer. Nationally there’s a chef shortage so a bigger pay check is attractive for chefs who need to pay for their culinary education, which can total over $100,000 over four years.

Customer feedback

Diners say they like the convenience of an all-inclusive bill that doesn’t require extra calculations of how much to tip.

Others still tip anyway, saying they want to show their appreciation for good service.

So will no-tipping policies work? Meyer’s restaurants will be the test. He plans to roll out the gratuity-free policy at all of his 13 restaurants by the end of this year.