Post pandemic, consumers have faced all sorts of new opportunities to leave a tip.
Drive-thru fast food chains. The farmer’s market. Dispensaries. A wedding dress store.
“I was really shocked when I was prompted to tip as I paid for my daughter’s wedding gown,” said Paula Reed, from Lakewood. “I had no idea what to do.”
Tipping requests seem to have run amok. For many, though, tipping is just part of life, whether you’re the tipster or the tipped. Many people tip all the time, at least at restaurants, with the vast majority of respondents to a a recent What’s Working survey saying they tip when they dine out and are served. But it’s the unexpected places asking for tips, or new circumstances, like picking up a to-go order, that catch folks off guard.
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“Why am I being asked to tip when I waited in line to pick up my own food in a bag? What am I tipping FOR?” said one respondee who didn’t share a name.
Reed said she always tips at restaurants and her hairstylist. But when a tip request pops up while paying with a credit card for over-the-counter service, it’s off-putting. Other folks mentioned the awkward social pressure “if staff is watching.” Another person said they started using cash to avoid these situations. Tips, after all, are supposed to be left voluntarily as a compliment for good service.
At the wedding dress store, Reed recalled that the tip prompt categorized the gratuity as “tip 10% for good, 20% for great” or leave a custom tip. She tipped 10% and felt “a weird mix of angry to have been asked and guilty that maybe it wasn’t enough,” Reed said. “But the wedding was awesome, and my daughter was beautiful, of course.”
(The etiquette chatter online is that bridal gown consultants often work on commission and tipping is not customary. But for a job well done, tip what you can afford.)
Hands down, though, tipping at a restaurant is a must for 94% of the 160 respondents surveyed. The other 6% didn’t share their tip amount. Tips ranged between 10% and 40%. One person said 100%, but I tossed it out as an outlier.
Some people even tip despite poor service. Said Mark Williams from Erie, who typically tips 20% or more, “If the service is bad, I still tip as the person will soon be out of a job.”
Everything outside of a full-service restaurant was something folks had more questions about.
“Am I really supposed to tip 15% of the $200 worth of pot I just bought?” said one reader.
Pandemic tipping continues
Consider widespread gratuity a remnant of the pandemic when the retail, restaurant and services industries were devastated by business restrictions. Those more fortunate often gave a little more to workers they had never tipped before. Some never stopped.
“During the pandemic I was trying hard to support business and I upped my tipping in a big way. As the pandemic faded, I have continued to tip very generously, almost always. It’s a small amount to my bottom line that I realized can be significant to someone else’s,” said Kathy Owens, of Indian Hills, who tips 25%-30% and adds, “I tip for takeout food just like I would to dine in.”
A curbside pickup sign outside of Potager, a farm-to-table restaurant in Denver’s Capitol Hill neighborhood, on Friday May 22, 2020. (Jesse Paul, The Colorado Sun)
While many readers felt employers should just pay their workers a livable wage, that’s not so simple to calculate. A Denver Metro Chamber of Commerce committee put the number at $68,357 based on the average city wage in 2019. They called $45,000 a “scrape-by” wage. But that was based on years-old data and is still well above the city’s minimum wage. Denver’s minimum increased to $17.29 an hour in January so a full-timer makes $36,000 a year. Statewide, the minimum wage of $13.65 amounts to $28,392 a year.
Businesses can pay a lower minimum to tipped workers, but at $10.63 in Colorado and $14.27 in Denver, but restaurants would have to more than triple the hourly rate to make it more livable. And for their part, restaurants have been increasing pay. According to the Colorado Restaurant Association, 92% of restaurants surveyed in January 2022 had raised wages to attract workers. The result showed up in December when 77% reported they had raised menu prices.
Raising wages, of course, eats into restaurant profits in an industry known as a low-margin business. Toast, the point-of-sale company that offers businesses an easy way to accept tips digitally, estimated that restaurant profit ranges between 0 and 15%, though it usually falls between 3%-5%, according to Toast’s restaurant guide.
“Tips are critical to the restaurant industry and its workforce,” said Sonia Riggs, president of the Colorado Restaurant Association. “We encourage patrons to tip as generously as they are able, not only because restaurant workers have been through an incredibly stressful three years but because they rely on tips as part of their total take-home pay. This also applies to takeout orders, which require time, labor and effort, and therefore warrant a tip. Tipping applies in the same way to delivery drivers, for whom tips are a crucial element of their total wages, as it does for any category of food-service worker.”
The organization recommends tipping at least 20% or more on the pre-tax total.
Zoe Ma Ma: No tipping, please
Over at Zoe Ma Ma, a Chinese street-food restaurant with locations in Boulder and Denver, owner Edwin Zoe tried something different. In 2015, he switched to a no-tipping policy.
Like many restaurant owners, he had struggled with the pay gap between waitstaff and the back-of-the-house crew in the kitchen. There were also notable gender and racial inequalities and disparities to address. So after researching how to provide a more fair compensation for all workers, he chose a “No Tips” policy and switched to a service charge, which is currently 15% of the bill. Service fees are used to pay workers, but aren’t considered tips — there are legal differences for the IRS. Customers can choose to opt out.
Dragonfly Noodle on Denver’s 16th Street prohibits customers from tipping and instead adds a 15% service fee to bills that benefit all staff members. (Olivia Sun, The Colorado Sun via Report for America)
“It is really a much more resilient, a much better compensation model for hospitality workers,” Zoe said. “It provides stability for our workers, especially in a team-service environment. The employees don’t have to worry about whether it’s busy or slow. They’re given a set wage regardless of business volume.”
But when asked about foregoing the service fee altogether and building it into menu prices, that’s a sensitive topic for any restaurateur. Zoe pointed to Danny Meyer, the founder of New York’s Union Square Hospitality Group, which did away with tips in 2015 and raised menu prices in order to pay staff a living wage. Five years later, Meyer returned to tipping. Zoe said competitive pressures make it difficult when customers don’t calculate the dish’s total cost with tip, and may spot it a few bucks cheaper at another restaurant.
“If doing away with it is an industry-wide adoption, then we’re all on a level playing field,” he said.
But he understands the confusion. When restaurants aren’t clear about the fees, some customers think those are just tips. He’s been confused too. Dining out recently, Zoe said his waiter pointed out a 20% service fee but also said they don’t benefit directly and would appreciate a tip. Zoe ended up paying an extra 40% that night for the tip and the service fee.
Edwin Zoe, owner of Dragonfly Noodle on Denver’s 16th Street, March 10, 2023. (Olivia Sun, The Colorado Sun via Report for America)
“I think that gives the industry, and especially service fees, a bad rap,” he said. “Just trying to explain the different aspects of tipping highlights how complex and how inefficient tipping is. I feel like as an industry, we really need to move away from the A to B model.”
Eight years later, he’s stuck with it, even rolling it out to the new Dragonfly Noodle, which opened in Boulder last summer and on Denver’s 16th Street Mall months later. He employs roughly 60 people, full and part time.
Hiring and retaining employees will always be an issue for any business in the restaurant industry, but Zoe said that longer-time employees have told him they appreciate the service model. His staff also came up with an idea of what to do when a customer insists on tipping.
“We state this as policy in our ‘Money left behind’ that it’s not a tip but rather our team will vote to donate the money to a charity of the team’s choice,” he said. “I’m very proud of our team.”
Dragonfly Noodle on Denver’s 16th Street prohibits customers from tipping and instead adds a 15% service fee to bills that benefit all staff members. (Olivia Sun, The Colorado Sun via Report for America)
Speaking of restaurants…
Another restaurant week is heading Denver’s way for the first year: Black Restaurant Week starts Friday. It’s part of the national effort that began with one event in Houston in 2016. The purpose is to promote Black-owned restaurants, chefs, food trucks and others, in addition to African, African-American and Caribbean cuisine.
According to organizers, 1,250 Black-owned culinary businesses participated across the continent last year (including in Toronto and Vancouver) “and generated an average of 15% sales increase,” for the restaurants.
Denver is part of the Southwest week, which is from March 17 to 26. There are five Colorado participants, at least so far: Sweet Sweetz Ice Cream & Desserts, TeaLee’s Tea House & Bookstore, TK’s Surf & Turf Kitchen and Walia Creamery — all in Denver — and Endless Grind Coffee in Aurora. Falayn Ferrell, managing director of Black Restaurant Week, said they’re hoping to add five more before festivities begin.
In an email, Ferrell said the point of expanding to Denver is to “grow more businesses in the Southwest region to help create sustainability across the region. Many businesses are working to overcome labor shortages, supply chain issues, and inflation. So a campaign to help drive local dollars and traffic is very important to small businesses.”
>> Check out the BRW restaurants
Related:
➔ Denver Restaurant Week ends Sunday. The event helps attract customers during the slower season. There’s also a post-pandemic record number of restaurants participating, or more than 225 that are offering menu specials, said Denise Mickelsen, a spokeswoman for the Colorado Restaurant Association and Foundation. >> View menus
Poll: Tax season is upon us
Thanks to everyone who take the polls. They’re for fun, but they do offer some insight into what Coloradans are thinking , or at least Coloradans interested in local economic news and read The Colorado Sun. Up next: taxes. Take the poll at cosun.co/WWtaxes
Take the next What’s Working reader poll at cosun.co/WWtaxes
FAMLI paid-leave deadlines
Colorado’s mandatory paid-leave plan provided to all workers who need paid time off to take care of a new child or serious family health issue isn’t so mandatory for local governments. More than 1,250 have opted out. But the deadline to do so without having to pay any premiums is March 31.
Private employers can also submit their own paid-leave plans and get it approved by the state. So far, according to the Colorado Department of Labor and Employment, no business has done that yet, but that’s likely because insurers themselves must get plans approved by the state so they can offer plans to customers, said Tracy Marshall, division director of the new Family and Medical Leave Insurance Program, or FAMLI.
Workers can start requesting up to 12 weeks of paid leave in January. The program pays up to 90% of a lower-wage earner’s weekly paycheck with a maximum of $1,100 a week.
➔ ICYMI: More than 80% of local governments have opted out of Colorado’s new paid family, medical leave
➔ Get FAMLI questions answered. The next webinar hosted by the state Department of Labor and Employment is March 21 at 11:30 a.m. in English and 3:30 p.m. in Spanish. >> RSVP for English, RSVP for Español
➔ More answers >> HERE
Other working bits
➔ Gigawatt factory headed to Brighton. Amprius Technologies picked Brighton to be home to a new 775,000-square-foot facility to support its lithium-ion battery production and capacity of up to 5 gigawatt hours. The Fremont, Calif.-based company plans to hire 302 workers at an average annual wage of $68,516. Colorado’s economic development board approved a $5,491,784 state tax credit if the company does hire all those workers. The City of Brighton also approved incentives valued at $929,050. That includes a five-year property tax rebate of 100% plus a 50% rebate on the city’s use tax for construction materials, according to a news release.
➔ U.S. unemployment rate rises to 3.6%. The Bureau of Labor Statistics said Friday that the U.S. unemployment rate rose two-tenths of a point to 3.6% in February. Notable changes in the labor force? A workforce decline in information and in the transportation and warehousing industries, even as there were gains in the leisure and hospitality, retail trade, government and health care. At 3.6%, that’s still quite low, according to the New York Times. Colorado’s data is expected to be released next week. >> BLS report, NYTimes
Thanks for sticking with me for this week’s report. As always, share your 2 cents on how the economy is keeping you down or helping you up at cosun.co/heyww. ~ tamara
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