Why Tipping Has Gone Off the Rails… and Why We Need to Stop Treating Every Tip the Same

Canadians are tired of tipping.

Not because we’ve suddenly become cheap. Because we’re being asked to do it everywhere.

You buy a coffee. Tip.

You pick up takeout. Tip.

You buy a sandwich. Tip.

Every payment terminal seems to swing around asking for 18, 20 or 25 percent before you’ve even finished paying.

I understand the frustration. I feel it too.

But I also think we’re making a mistake by lumping every tip together as though they’re all the same thing. They aren’t.

I’ve owned restaurants. More than one. I’ve signed the payroll. I’ve worried about whether we’d have enough customers on a Tuesday to make it through the week. The economics of a full-service restaurant are unlike almost any other business.

When I was in the restaurant business, we worked on a simple formula. Every dollar that came through the door was divided into thirds. One third paid for the food. One third paid for the labour. The final third belonged to the house. That paid the rent, the hydro, the gas, the insurance, the payroll taxes, the advertising, the equipment, the cleaning supplies, the credit card fees and everything else it took to keep the doors open. Whatever was left after that belonged to the owner.

The problem is that formula doesn’t work anymore.

Food inflation has driven costs through the roof. Labour costs have climbed. Rent has become astronomical. Utilities keep going up. Credit card companies take a piece of every transaction. That final third that used to belong to the house gets eaten alive before the owner ever sees a profit.

People drive past their local restaurant on a Saturday night, see a full parking lot and assume the owner must be making a fortune.

Don’t fool yourself. Go back on a Tuesday. Or a Wednesday.

Better yet, drive by five nights out of seven and look through the window. Birds chirping outside? No problem hearing them. That’s how empty a lot of dining rooms have become. That busy Saturday night isn’t proof they’re making money. In many cases, it’s the one night that’s keeping the lights on.

Now let’s talk about the tip itself.

Most people picture the server putting that twenty-dollar bill in their pocket at the end of the night.

That’s often not what happens.

At my restaurant, servers tipped out six percent of their sales, not six percent of their tips. That money helped pay the bartender, the support staff and the people who made the dining room work. If a server sold $1,000 worth of food during a shift, the tip-out was based on sales, not on what customers happened to leave.

That was important because it kept the incentive where it belonged. If a server gave exceptional service and a customer left a larger tip, the server still benefited. The support staff still received their share based on sales, and the server was rewarded for going the extra mile.

Today, many restaurants have moved to tip pools because cash has almost disappeared. Most tips arrive on debit or credit cards. Before anyone sees a penny, the credit card company has already taken its processing fee. If customers leave $100 in tips on cards and the processing fee is three percent, there isn’t really $100 left to distribute. There’s $97. Then that money is divided among the people who helped make your evening happen.

That’s the part many customers never see.

Now here’s where I think we’ve gone off the rails.

I understand tipping in a full-service restaurant because I understand the economics behind it. I understand where the money goes and how many people are involved in delivering that experience.

I’m not convinced the same logic applies everywhere else.

If I walk into a coffee shop, order a coffee, watch someone turn around, fill a cup, turn back around and hand it to me, I have a hard time understanding why I’m suddenly being asked for a 20 percent gratuity.

That’s not table service.

No one spent an hour looking after my meal or coordinating with a bartender, a busser or the kitchen. I ordered a coffee, someone poured it, and I paid for it.

If a large national chain believes its employees deserve more money, I think the first responsibility belongs to the employer, not the payment terminal. A gratuity shouldn’t become a substitute for a wage policy. That’s especially true when many of those same companies have argued for access to lower-wage temporary foreign workers while still asking customers to chip in at the checkout.

That’s a very different conversation from the family-owned restaurant down the street that’s trying to survive in an industry where the old math simply doesn’t work anymore.

Maybe that’s where we’ve gone wrong.

We’ve stopped asking what we’re tipping for.

A gratuity was never meant to be an automatic surcharge attached to every transaction. It was a way of recognizing service, rewarding effort and helping support one of the toughest businesses there is.

Somewhere along the way, we took a tradition that made sense in one industry and spread it across almost every retail counter in the country.

So no, I don’t think every tip request deserves the same response.

A full-service restaurant and a coffee counter aren’t the same business, even if the payment terminal looks identical.

Maybe it’s time we stopped treating them as though they are.

 

What do you think?

Has tipping gotten completely out of hand, or are we confusing full-service restaurants with every other business that has decided to put a tip prompt on the payment terminal?

I’d genuinely like to hear where you draw the line. Let me know in the comments. I read them all.