Have you heard about the new proposed change from the Department of Labor? The change would allow restaurateurs to collect tips earned by front-of-house staff and redistribute them as they see fit.

Supposedly, this could help shore-up the growing pay inequality between cooks and servers. This could also mean employers could keep tips for themselves or the business.

The wage inequity between front and back of the house employees has caused some restaurant operators, notably Meyer, to abandon tipping altogether. The practice has been the subject of much-heated discussion in the industry.

Should restaurants include gratuity in the bill? Or should they leave it to restaurant-goers to decide for themselves? Then there’s the issue of service – does tipping actually improve the quality of the service?

This is where online reviews and ratings play a major role in shaping the reputation of a company. But more importantly, reviews can offer penetrating insight into the customer experience and ultimately whether the customer likes or dislikes something.

Believe me – they will let you know on the review sites if they do or don’t like something!

The International Journal of Hospitality Management published a specific study on this subject and its effect on the restaurants’ reviews. Two alternatives to tipping were implemented by 31 independent restaurants in the US: automatic service charges and service-inclusive pricing.

Here is what they found:

  • The negative impact of doing away with tipping was related to how pricey or how cheap the restaurant was. Less expensive restaurants that switched to alternative systems, therefore, suffered a greater hit to their review ratings relative to classier joints.
  • Restaurants that replaced tipping with automatic service charges were rated lower by about a quarter of a point. Those that implemented service-inclusive pricing, meanwhile, experienced a ratings drop of only about a 10th of a review point.

Online reviews have emerged as one of the most reliable and accurate indicators of impact. By listening to what your customers are saying online, you can think, rethink, and make smarter business decisions about the ways to approach change.

Have a great rest of your week!