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Regulating your staff's tips is a dangerous gamble in food franchises

Written by Angus Shaw on Wednesday, 14 November 2018. Posted in Analysis, Franchise

The tipping culture in Britain is well-established. But given it can spark protests if restaurants get it wrong, how should franchisors treat it in their businesses?

Regulating your staff's tips is a dangerous gamble in food franchises

Tipping used to be as casual as tossing an arbitrary amount to your server without much thought. In fact, according to the scholar John Schein, the term may have originally stood for ‘to insure promptitude’ – just a way to get a quick drink. And these days it may seem like a second wage both servers and kitchen staff expect. However, if you fail to get how tipping works right in your franchise, you may face some serious backlash. 

While the average Brit splashes out roughly 9% of the bill in tipping, according to OpenTable, the restaurant reservation service, who’s to say it won’t spiral out of control like in the States, where the income tips generate workers just can’t be ignored? “It does seem that lots of these trends you see in America tend to make their way over here at some point,” speculates James Ebbage, franchisee of Café Rouge, the French bistro franchise. “It wouldn’t surprise me if one day that would happen with their high tips.” With the average US tip comprising 16.4% of the bill, according to Square, the point-of-sale platform, it’s a daunting prospect Britain may need to live up to one day. “I don’t know what you really could do to stop that from happening,” Ebbage admits.

For franchises, it’s difficult to stop the tipping culture from migrating to Britain. “In a very structured, non-franchised business it’s easy to have a policy that says we do this and the staff adhere to it,” says Patrick Duffy, founder of Beatons Tearooms, the tearoom franchise. “With a franchise business you have staff speaking to a franchisee and the decision on that is something we would expect the franchisee to be more involved in.” Indeed, while taking on numerous franchisees can see franchises reach impressive heights, nitty gritty details like gratuities are difficult for franchisors to micromanage. “We would hope [franchisees] would follow the approach that we recommend but we’re aware that’s not always the way it’s done,” Duffy adds.

But that’s not to say it’s impossible. This is something Yousif Aslam, co-founder of Heavenly Desserts, the luxury desserts franchise, knows a thing or two about. “If we look at it in the context of our own franchise, franchisees coming into our network are basically buying into the whole franchise system,” he explains. “They’re obligated to adopt all of our policies, procedures and processes no matter how big or small they are and that includes issues of tips.” Indeed franchising works both ways. So being upfront about what each side of the table expects is a must – even over seemingly trivial details like tipping. 

For starters, franchisors must realise most job hunters in the restaurant sector expect gratuities as an unwritten extra when taking up a service gig. “The whole package does include tips and staff know that,” Duffy says. “Some of them know it very consciously and some just look at it as a little bit extra at the end of the week or day.” Indeed, considering 87% of Brits always place a tip, according to OpenTable, even customers know the score. And with employment rates seeing all-time highs, it’s more important now than ever for bosses to ensure all is fair and not lose talent to competitors. “These days it’s increasingly important to be attracting staff so you do need to look at the whole package,” Duffy continues. 

Keeping staff happy also applies to those manning the kitchen. “Certainly for us, when we look at what’s fair we’ve got to weigh up the trigger points for the customer to actually make the decision of leaving a tip, so [our] back-of-house team get a fair distribution,” Aslam says. Implementing tip redistributions – otherwise known as a tronc – is a great way to reward every cog in the restaurant machine. “We believe the food [customers] eat, which is produced by our kitchen staff, has equal weight when it comes to a good customer experience,” Aslam continues. But enforcing equality is sometimes easier said than done. 

For example, TGI Fridays faced staff protests after taking the plunge and sending 40% of card tips to kitchen employees to remedy high chef turnover. Although back-of-house members enjoyed a bigger share of tips, it’s said they were dismayed when told they wouldn’t receive wage increases in line with the new national living wage. These kind of dealings could be quite normal. “I think certain chains or operators will try [and] do that for as long as they can get away with doing it,” Aslam says.

Moreover, franchisors should also be weary about allowing gratuities to be used as a disciplinary tool. “We had a confidential conversation with one particular franchisee who believed they should deduct tips from [staff] for broken crockery, which is something I absolutely disagree with it,” Duffy recalls. “It’s a lazy way of managing performance and it’s too easy for a franchisee or manager to abuse tips in that way.” It turns out only 56% of consumers refused to tip because of a rude server, according to Simon Jersey, the uniform provider. So even if you think you know what deserves a reward, remember the customer is always right. “Tips are intended to go to the staff. If you said to customers ‘tips will go to staff if they do the right thing,’ customers would not give tips,” Duffy says.

Indeed, giving the consumer a final say on the matter may be the most fair way to deal with things. And printing automatic service charges for cards ensures workers will more likely enjoy a tip. “I see it as a good thing, really,” Ebbage argues. “Especially when you see there’s a 12.5% optional service charge added to the bill, I quite like that. Because I don’t really carry any cash, I do my best to avoid cash altogether and pay everything on a card.” Considering Britain will see just 21% of transactions use notes and coins by 2026 according to UK Finance, the trade association, letting customers avoid the embarrassment of fumbling around for non-existent change is a win-win for them and the employee. “It just means you then don't have to worry about finding some loose change or something that you might not have on you,” Ebbage says.

Whatever tricks franchises use to deal with gratuity fairness, it may just be inevitable Britain’s heading towards tough times with its tipping culture. “We’ve got Brexit coming up so there's going to be a clamour of fear when it’s executed next year,” Aslam says. “I think that will have a significant impact on the way consumers decide to tip and how restaurants will deal with it.” 

However, as long as employees are paid fairly and in lieu with ever-increasing inflation, there’s far less risk gratuities will become as integral as wages. “My personal opinion is that for some time I can't see it getting to a $20 or £20 tip per meal to be honest,” Aslam concludes. “So I don’t think we have that problem.” 

About the Author

Angus Shaw

Angus Shaw

With a keen eye for politics as editorial assistant, Angus can often be found scanning the horizon for the next big waves crashing against business shores – which makes up the time when he's not setting sail at Radio Caroline, the former pirate station, on weekends. Follow him on Twitter @Angus_Shaw for his latest cognition

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