Category Archives: Business / Economics

Restaurants that got rid of tipping are bringing it back.

Because, as I’ve relentlessly insisted, tipping works better for everyone: the server, the customers and the establishment.

From our friends at THE RAIL a great industry publication:

CAN’T END TIPPING
Why it matters to you: restaurants have not been able to successfully end the tipping system. 
The tipping debate has caused controversy in the restaurant industry for years now. Some establishments believe that tipping is an unfair practice that puts servers ahead of the back of house staff whereas others believe the tipping is a fair practice that shouldn’t be changed. It’s been less than a year since the Oregon-based restaurant, Le Pigeon and Little Bird Bistro decided to enforce a no-tipping policy and as of last week, they have reinstated tipping. The original deal was that they would raise food and beverage prices an average of 20 percent to include tip, but unfortunately the higher prices were too much for some diners. The prices are now reduced to not include the tip and it will now be given manually.

This restaurant made a vast effort to change the system which is incredibly noteworthy. Unfortunately, the tipping system is so ingrained in the restaurant industry that it becomes incredibly difficult to interject a new structure. According to a tipping expert and professor at Cornell University of Hotel and Administration, there is really no obvious solution to the problem. “The biggest reason for restaurateurs to keep tipping is that it allows them to reduce menu prices, which increases demand.” He goes on to recommend that restauranteurs look at the level of difference between employees specifically BOH and FOH, and replace the tipping system if this is where “the highest pay discrepancies exist.”

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SURPRISE! Raising Wages = Higher Prices.

Chipotle just raised its prices in San Francisco 14%, exactly the same % as the raise in wages with the new minimum wage in the city. A popular chain like Chipotle has the option to do this, while most Mom and Pop restaurants and less trendy chains typically cannot raise prices.   They (we) just have to take a 14% hit.

There is no willingness of consumers to pay a little more so their fellow citizens who work in food service can make a living wage. Instead, “the dollar store mentality” rules with most customers. The lowest prices for the fattest burritos and self-throat-cutting “deals” drive sales. Thus, small businesses seem likely to lose out and possibly go out of business under the new inflationary scenario where operating costs rise but prices mostly cannot.

One lesson to be learned from Chipotle is great branding and marketing can help a business weather the storm.  Every business needs to give customers a compelling reason to look beyond the lowest prices.   Great marketing and branding can attract a high number of less price sensitive customers.  Volume plus profit margins equals survival in a time of rising costs!  This is something we are happy to say we’ve been able to help with for more than 40 hospitality locations.  Shoot us a note at A-List Marketing for a free consultation on how to beat rising costs and cheap customers.  It’s the only way to cover the ever rising costs in our businesses!

I liked this “Take Part” article about the Chipotle price hikes, as the writer seems shocked at basic economics.

Have a great day and enjoy every burrito! — TTBG

PS – I just want to add since I saw this – if you don’t tip because the minimum wage went up, you are a cheap ass.  You are not doing it on principle, you are a cheap ass.

http://wp.me/p2g9q8-CS

 

On #EqualPayDay : There’s Gender Pay Gap Improvement to Celebrate

~~ Equal Pay Day is an important day for the hospitality business, as our industry has provided more management and ownership opportunity to women than most fields. Recent NRA research found more than 45 percent of today’s restaurant managers are women, compared with 38 percent in other industries. Further, the number of restaurants owned by women increased 50 percent between 1997 and 2007.

~~ Equal Pay Day is the day on which the average woman will make what the average man made in the previous year. So in all of 2014 plus every day of 2015 up to today the average woman’s earnings = the average man’s year 2014 earnings. There are many ways to calculate this and it is no where near an unassailable number or date. Yet the issues of why women lag in earning power are important and fair to debate. Here is a well-documented, balanced analysis from Pew Research Group, which shows improvements to be celebrated as the wage gap closes, yet still areas of opportunity for improvement.
~~ My take is that we have to be very careful not to choose “solutions” that will make things worse for women and the workforce as a whole, such as banning salary negotiation.

~~ To read more on the issue of diversity from the National Restaurant Association here.

 

Hospitality Business Hit Hard by Falling Millennial Wages.

Many hospitality business leaders and local operators are pulling their hair out over why traffic, sales and profits are falling at most bars and beverage driven restaurants. One big reason is a huge drop in the earning power of our primary market – young people. Read about it here, and here, very helpful in understanding the factors driving recent troublesome trends in sales and customer spending patterns.

At A-List we specialize in helping operators beat the trends toward discounting and lower margins by creating an exciting environment with exceptional customer experiences, that beats the competition in the war for customers’ shrinking entertainment budgets.