This Restaurant Banned Tipping, And I Think It’s A Good Idea

Packhouse Meats in Newport, KY. Image courtesy of

Packhouse Meats in Newport, KY.
Image courtesy of

From the time I was 16 until my early 30’s, I worked off and on in the service industry in a variety of positions. Bartender, bouncer, cook, server, host, bus boy, dishwasher – you name it, I did it. The weekend double shifts where one lousy table after another garnered you just enough to buy a tank of gas and a six-pack of beer, or that Christmas Day at Waffle House 16 years ago when all but one of the other employees failed to show up for work, those are just a few unpleasant memories from those years of experience.

The service industry is very hard work, and all too often, employees are taken advantage of by management and have to survive on the tipping whims of the customers. I’m sure that many people who have waited tables all have their personal stories of being forced to work off the clock or that 10-top that comes in right before closing, runs up a $300 tab and only left a $5 tip. The last place I worked at had a practice of adjusting employee hours to avoid paying overtime on $2.13 an hour as well as a kitchen manager who would steal seafood from the freezer for personal use, get belligerently drunk, sexually harass female employees and verbally abuse the male staff on a regular basis. On top of that, employees were required to report that they made enough each day so that the restaurant did not have to pay them difference between their earnings and the minimum wage, even on the absolute slowest of days.

So, as a retired veteran of the service industry, I found the following story of Packhouse Meats and how they compensate their employees a welcome change of pace in the casual dining concept.

Bob Conway, owner of Packhouse, said he got “pummeled” for it on review site Yelp by people accusing him of taking advantage of employees. Said Conway: “We did it to protect the servers.” He thinks it is actually the established custom of tipping that takes advantage of servers, especially in the casual end of the market. Packhouse Meats is his experiment to find a better way…

Conway is the former president of the Bistro Group, which runs local TGI Fridays and McAlister’s Deli restaurants, and he is now on its board of directors.

“I’ve heard the horror stories – $3 left on a $100 tab,” he said. “How much a server makes has nothing to do with how hard they work. Servers had quit because they couldn’t make ends meet.”

So, in his new restaurant, he had a chance to try a different approach: “We wanted our servers to participate in our productivity by giving them reasonable compensation based on sales. It takes the whim of the customers out of it.

Packhouse servers earn $10 per hour or 20 percent of their individual food sales per shift, whichever is larger – almost always the 20 percent. And servers have to meet certain goals – sales and service targets, for example – to get their 20 percent.” (Source)

Sure, some of the people who left reviews on Yelp! weren’t pleased with the concept, but to be fair, many of them didn’t even realize that the gratuity was built into the food cost as evidenced in their reviews. “Well, if you include the tips into the food cost, that’s going to drive prices way up!” is a common refrain from people. Well, let’s look at Packhouse Meat’s menu and you’ll see that the prices really aren’t any different from other casual dining concepts in their league like TGI Friday’s (disclaimer: I worked for two different TGI Friday’s locations while in college) or perhaps Chili’s which now uses computers at their tables to allow them to have fewer servers on hand to cover more tables.

Packhouse Meats’ no-tipping policy is actually a smart move when you think about it from a business standpoint. First of all, there’s no way for employees to fraudulently alter tip amounts (something I have seen done on a number of occasions) in order to add a few extra dollars to their take-home pay. Second, it eliminates the ability of a customer to stiff a server on a bill. Anyone who has worked in the industry knows the anger and frustration of working a large table that runs up a huge tab, only to leave little or nothing on the tip. Third, it creates an incentive for employees to sell more which ends up benefiting the business by increased sales. Finally, by properly compensating employees you reduce turnover and absenteeism which means less money spent on training employees and less lost sales due to being understaffed.

The takeaway from this is that it is possible to pay a living wage without driving food prices up astronomically, despite the protests from those who oppose raising the minimum wage and the disingenuous meme going around that by raising the wage, a McDonald’s meal would somehow end up being $64. When even the CEO of McDonald’s has admitted that a wage hike won’t hurt his business much, and a small business has shown that it is possible to compensate employees fairly, I think it is safe to say that the arguments against raising the minimum wage to $10.10 an hour are null and void.


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