Hospitality Included

To Our Valued Customers,

The onset of COVID-19 has sent shock-waves through many industries and hospitality is no exception.  Across the world, restaurants have laid empty.  Our customers and staff have been encouraged to stay home, and rightly so.   

As we plan to reopen Richmond Station, we are looking forward to incorporating some of the many lessons we have learned in the past few months.  An obvious teachable for us is the need for social distancing.  Another is the importance of wearing a mask.  We have reduced our staffing to limit the amount of people in our space.  We have reduced our operating hours as well.  These last two steps together greatly reduce the risk of exposure for our staff and customers alike.  

When you come back to visit us at Richmond Station, our response to COVID-19 won’t be the only thing that is different about the restaurant.   Once we reopen for dine-in service, we will be eliminating tipping in our restaurant.  The first thing you’ll notice, after the masks and the signs everywhere, is that the menu prices are higher.  We have built in an eighteen percent average price increase across our product offerings, and now, the hospitality is included.  In fact, we call this type of restaurant service, Hospitality Included.  We’re asking you not to tip on top of the bill total, and we will be removing these prompts from our payment terminals.   

There are a lot of reasons for this change and our hope is that this page will help explain what Hospitality Included is, how it works and why it is an important step to take.  Before we do though, you should know that this was not a quick decision.  We have researched Hospitality Included and “no-tipping” models since 2016.  That year, we made some major changes to the way the tips at Richmond Station were distributed – specifically, we made that distribution more equitable across all the jobs in our company and simultaneously eliminated “server minimum wage” while implementing a company wide health care incentive.  Those changes made our workplace more equitable by shrinking the pay gap between front-of-house and back-of-house employees.   We’ve been inching towards a version of Richmond Station that has eliminated tipping, and now we’re taking one more important step – this one, together with you.

Sincerely,

Ryan & Carl

July, 2020

 

WHAT IS HOSPITALITY INCLUDED (HI)?

Hospitality Included describes a restaurant that has eliminated tipping.  Instead of tips, all the necessary revenue to properly compensate the staff is already built into the menu items.  At these restaurants, the hospitality is included in the pricing – and you don’t have to pay extra at the end for it. 

WHERE DID HOSPITALITY INCLUDED ORIGINATE?

While there are many cultures in the world that have never needed, or long ago disposed of, tipping culture, the term Hospitality Included was coined by New York restaurateur Danny Meyer in 2017 when his restaurant group began phasing out tipping.   

WHAT DOES HOSPITALITY INCLUDED ACHIEVE THAT TIPPING DOES NOT?

Hospitality Included is designed to compensate the entire team – in both the kitchen and the dining room – more equitably, competitively, and professionally, and provides a clear path for professional development.  Tipping culture has many insufficiencies.  For starters, it leaves many employees living substantially on uninsured cash hand-outs.  Tipping culture is also poorly legislated in Ontario and Canada – there is little guidance from the government on best practices and there is even less oversight.  This means that tipping culture is often predatory, punitive and objectifying. Hospitality Included is a positive step towards improving the compensation model and work environment for all restaurant staff.  Hospitality Included requires team service – and it rewards team service, too.  With HI in place, restaurant staff across the team can be allocated fair compensation that is predictable from day to day, insurable so far as it increases an employee’s government entitlements such as employment insurance, vacation pay and, ultimately, contributions to the Canada Pension Plan.  Not to mention, it also helps all employees plan for life’s big events – getting an education, buying a home, starting a family, filing for maternity and paternity benefits, and retiring.  

WHY HAS RICHMOND STATION ELIMINATED TIPPING NOW?

Richmond Station has always been a professional environment for staff of all stripes, from tenured veterans of hospitality to part time students to travelling cooks to aspiring artists.  And while we have taken significant steps to ensure Richmond Station is always best-in-class for employee compensation and career development, the onset of the COVID-19 Pandemic and the ensuing financial aid packages offered by the federal government, have exposed an enduring gap between workers with fully insured wages and benefits from those employees working in industries entrenched in tipping culture, where cash disbursements are standard forms of incentive and compensation.  Richmond Station has long sought to unravel the tipping culture that is woven into the daily mechanics of the hospitality industry.  Now is the right time to take the final step and to build the price of our service into the price of our product. 

CAN I LEAVE A TIP ANYWAYS?

Please don’t.  We know that your generosity comes from a great place – and as a team we would encourage you to consider how great you feel about your service experience with us, and consider any number of other steps, including; returning again soon, leaving a positive review online, recommending us to a friend or family member, or just saying thank you! 

HOW DO I KNOW THE STAFF ARE STILL BEING WELL COMPENSATED?

Everyone on our team is going to be paid more as a result of Hospitality Included.  Our goal is to match the cash distributions that were the norm in our “tipping culture”. Many full time staff will be able to move to salaried positions and that will make it easier for them to plan for life’s big events.  Our part time staff will all see increases in their hourly pay.  This will make it easier for them to budget their expenses and make long term plans for their life – two simple steps that are historically very difficult for all employees reliant on cash disbursements. 

HAVEN’T MOST RESTAURANTS THAT SWITCHED TO HOSPITALITY INCLUDED HAD TO BACKTRACK FROM THAT DECISION, INCLUDING DANNY MEYER?

Many restaurants across North America have attempted to switch to no-tipping models since 2015 and, certainly, many of them have returned to lower menu prices that rely on gratuities from guests to fully compensate staff.  But most of these restaurants are in the US, where the tax code and labour standards are different.
In Canada, the tax code does not explicitly prohibit restaurants from gratuities to kitchen staff as it does in many American states.
In 2016, Richmond Station took bold steps to recalculate the distribution of gratuities in our restaurant.  The recalculation was supported by other initiatives like the creation of a health care incentive, the elimination of “tipped minimum wage” and the addition of other financial incentives like funding for continuing education.  All these steps taken already mean that as we make this final change to Hospitality Included, our focus is less about addressing pay inequity on our team and more about addressing how the social safety net can be woven underneath our staff, so it is as strong for them as it is for other professional workers in our communities.

CAN YOU OUTLINE THE BENEFITS OF HOSPITALITY INCLUDED FOR CUSTOMERS?

We know that Hospitality Included will offer a lot of benefit for customers. 

Foremost, all our employees will now be compensated professionally with guaranteed, insurable wages that include them in national entitlement programs like employment insurance, maternity & paternity leave, vacation pay and our national pension program.  Long term and reliable compensation that is woven into our social safety net is a cornerstone of professional employment.  Raising the floor for employees across our restaurant will encourage them to build a long-term professional career with our company.  This means customers will see the same faces, time and time again.  As you visit with us more, you will get to know our team and our team will get to know you.  

Beyond that, customers will no-longer need to wait until the end of their meal to pay the bill.   The full cost of your experience with us can be calculated in real time as you are ordering.  The technology already exists for us to save your personal preferences and payment information securely – just like when you use a ride sharing app or a food delivery service.   Imagine, when you’re ready to leave we’ll all be able to simply say thank you and good bye.

CAN YOU OUTLINE THE BENEFITS OF HOSPITALITY INCLUDED FOR STAFF?  

While all our staff will likely miss collecting cash on a daily or weekly basis, the fact of the matter is, tipping has been proven time and again to be sexist, racist, prejudiced and predatory.  Every employee hopes to avoid having those traits present in their workplace.  Beyond the benefit of moving away from these negative traits, our staff will now find it much easier to qualify for a mortgage, claim a livable maternity or paternity premium, plan for a vacation or simply look at their bank balance to understand their current cash position.  For professionals that have always earned their salaries as insurable earnings, these problems might seem foreign – but for restaurant staff across North America they are true struggles.

WILL HOSPITALITY INCLUDED MATCH EMPLOYEE’S PREVIOUS EARNINGS? 

In our new model, prices are up 18% and 100% of the additional revenue will be allocated to employee compensation. We have set a few goals for ourselves as we make systems for distributing the additional labour dollars.

First, we aim to meet and exceed the Ontario Living Wage for all of our staff. When Richmond Station accepted gratuities, this was easy enough to achieve for some of our employees, but not all.

Second, we aim to rebuild our wage distribution to meet pre-COVID benchmarks. This part of Hospitality Included is definitely tricky. As of this writing, our labour expense exceeds our total sales by 40%. That is an untenable business model. Truthfully, rebuilding our pay structure at a time when modelling our future business is difficult because of pandemic related business conditions.

All this is to say, as staff return to work in a pre-vaccine/post-lockdown era, we are confident that their increased pay rates will match what they would have made with cash gratuities, accepting that business volumes at present are significantly down. As customers become more comfortable dining out and capacity restrictions decrease on the advice of health officials, the restaurant will see a return to pre-COVID business levels, and Hospitality Included wages can rise as we get there.

 


WHERE CAN I LEARN MORE ABOUT HOSPITALITY INCLUDED & THE CULTURE OF TIPPING?

You can hear Danny Meyer explain his outlook on Freakonomics. 

You can hear a Canadian outlook by listening to Professor Bruce McAdams.  

You can read about a uniquely Toronto perspective here. 

THIS ONE REALLY TAKEs YOU DOWN THE RABBIT HOLE.

THIS INTERVIEW DISCUSSES THE IMPACT OF COVID-19 ON THE HOSPITALITY INDUSTRY AT LARGE


In 2014, Kathleen Kingsbury of The Boston Globe won the Pulitzer Prize for a series of articles that exposed the inequities of the tipping system and its impact on restaurant workers. We encourage you to become educated on this topic and you can read Kingsbury’s work here.


On July 27th 2020, Ryan Donovan and Kasra Khorramnejad spoke to Gill Deacon of CBC about how and why Richmond Station eliminated tipping.  Listen Here


On August 1st, 2020, Carl Heinrich spoke to Ted Woloshyn of Newstalk 1010 about the transition to Hospitality Included and the ins-and-out tipping.  Listen Here.


WHY AM I STILL ABLE TO ADD A TIP WHEN I ORDER ON UBER, RITUAL OR SKIP THE DISHES?  

Third party platforms have only recently become part of our daily operations. There is only so much that can be customized on these platforms – and while it is possible to turn-off the tipping functionality, doing so would cause us to have to raise our prices even higher to accommodate for marketplace charges that these platforms deduct. Currently, we are keeping the tip options available on these platforms and the menu prices on these platforms are also lower than our dine-in model. Our hope is that we can dovetail these offerings in short order. In the meantime, all the gratuities earned on these third party platforms are shared equally by all the staff.

WHY WAS IT IMPORTANT FOR RICHMOND STATION TO TAKE THIS STEP DURING THE COVID-19 PANDEMIC?  

Like many Canadians, our staff have been surviving on employment insurance benefits during the lock-down. For so many of our staff whose past income has been dominated by uninsured cash disbursements, the entitlement programs offered under our collective social safety net simply are not high enough for employees that have relied on uncontrolled tips. The pandemic has put into stark contrast the disparity between professionals earning insured wages and service sector professionals whose income is mostly cash. The current situation in our economy has not necessarily created an opportunity for Richmond Station to switch to Hospitality Included – rather, the pandemic has highlighted one of the great inequities of tipping culture.

WHAT IF A GUEST IS NOT HAPPY WITH THEIR SERVICE AND THEY ARE UPSET ABOUT NO LONGER HAVING THE OPTION TO WITHHOLD A GRATUITY?  

We have always aimed to have every guest leave happy and want to come back – that is our core philosophy. Prior to Hospitality Included, we would always insist that guests are communicative with the house, the management, if they are unhappy with any aspect of their experience.  It is simply not true that a guest would communicate dissatisfaction via a punitive tip.  That said, there will be no change for guests, employees or the restaurant going forward.  Richmond Station will always bear the cost if the guest experience is compromised and an employees compensation should not hang in the balance.  Indeed, it is the hallmark of the professional atmosphere enjoyed by pilots, nurses, teachers, etc – their compensation does not float up and down based on the quality of their flights, health care and lesson plans.

Beyond that, staff and guests should know that many studies have shown that tipping culture does not provide customers with better service nor is there any evidence that better service receives better tips nor that worse service receives worse tips. Studies show that guests are creatures of habit and consistently tip within a self-enforced range regardless of the service experience.

ARE THE COOKS GOING TO GET AN INCREASE IN PAY?

Certainly a benefit of HI is that our restaurant can distribute salaries across the team more fairly. But truthfully, Richmond Station took significant steps in 2016 to rearrange how cash gratuities were distributed. That change really flattened out any significant inequalities as we were able to raise hourly wages for front-of-house staff and increase the cash distribution to back-of-house staff. By removing tips from our restaurant entirely, we will be able to complete the project we started in 2016 by firming up wages across all jobs while simultaneously implementing a well defined professional development pathway for all positions. In short, our goal is not necessarily to just increase pay for the kitchen, it is to make their pay more transparent and equitable.

HOW IS TIPPING “OFTEN PREDATORY, PUNITIVE AND OBJECTIFYING”?

In a restaurant that endorses tipping, an employee’s path to more earnings is through the customer.  In our shared society, there are laws in place that ensure that employees are treated fairly by their employer.  For example, there are standards for compensation, time-off allowance, workplace safety and workplace harassment. We all accept that some behaviours are not acceptable in any workplace.

But there are few if any laws that govern how customers treat employees.  And in a tipping system, more than fifty-percent of an employee’s wages can be doled out by the customer.  This creates an ungoverned power dynamic wherein employees wages are too often hanging in the balance, in real time, as they navigate their customer interaction.  While most customer interactions are pleasant, safe and respectful, this power dynamic can lead to employees being objectified and preyed upon – and the customer holds the power to punish the employee for non-compliance in the form of punitive compensation.  Now consider that an employer would never be granted these powers in our society, nor should they.  Why, then, should any work culture enable the presence of this behaviour in any form?  Tipping enables this power structure between customer and employee and makes the employee’s compensation, safety and self-worth subservient to the customer’s tip.

SO HOW MUCH WILL YOUR STAFF BE MAKING NOW THAT TIPS ARE NOT ALLOWED?

Our goal is to become part of the Ontario Living Wage program and we are excited to remodel how compensation works in the restaurant industry.  We’re aiming to meet Toronto’s Living Wage for all employees across our staff, and also want to match the gross income levels that tipped employees could rely on prior to Hospitality Included.

Truthfully, there are a few reasons we do not discuss in public what employees will make going forward.

The first reason is that it is unprofessional for us to publicly discuss our staff’s compensation, and indeed, the expectation that the community at large feels entitled to know what tipped employee’s earn in-and-of-itself illustrates the subservience that tipped employees endure compared to their professional counterparts.  It is not polite to ask the pilot of your plane what they earn, nor is it reasonable that a clinician lays bare their compensation package for public judgement.  Employees are entitled to keep their wages private.   A move away from tipping to Hospitality Included affords service staff this privacy.

The second reason we try not to discuss employee’s compensation with people other than our staff is that we are only now rebuilding after the COVID-19 closures.  In 2016, 2017, 2018 and 2019, we modeled the change from tipping to Hospitality Included.  But now those models are invalid.  Currently, we operate a patio, which we did not have before the pandemic – and the patio will not last long.  We are also reliant on take-out and delivery revenue, which brings new business margins we are only now learning.  Most of all, with Toronto only recently entering Stage 3 – we can’t be certain that case numbers will remain low and that our dining room will stay open. Hopefully it does and our seat capacity only increases. However, public health information seems to suggest that outcome rests greatly on the production and distribution of a vaccine.

To be sure, we will distribute the full additional 18% price increase as wages.  In our old business model, this would be one million dollars of additional wages for our team.  But in the model we have now, not only is it a fraction of that, we simply do not know how much wage will be too much for our business model to bear.  What we do know, is how much wage is too little – and we are committed to exceeding that threshold as a starting place, and then moving up from there.


Other restaurants in Toronto are taking up the banner to eliminate tipping and secure employee wages.  Check out this article to learn more about where else you can eat out to support this cause.


In the second week of August, our own Chef Carl Heinrich took the hot seat on BNN Bloomberg to discuss Hospitality Included. Watch it here.


Ofer H. Azar studies behavioral economics and, along with this students, has undertaken several studies to provide data that can help frame the discussion around tipping behavior.  Azar’s most recent article on the subject can be found here. Is tipping culture sustainable?  Does tipping have a connection with welfare?  These are all questions Azar has addressed in years of research.  Any why do people tip, anyways?  This has always stumped economists, so much so, it is rarely studied.  Why is it rarely studied?  Well, economists often see no reason why guests tip after the service is provided – since their action then has no bearing on the service they will receive.  If the tip happened before, that might make more sense.  Azar’s work sheds light on how people tip and the downstream impact of that economic activity.


SO, NOW THAT YOU HAVE BEEN DOING THIS FOR A FEW WEEKS, HOW ARE CUSTOMERS REACTING TO THE CHANGE?

Customers in our restaurant have a range of reactions.  We communicate the change to every guest when they reserve, when they are sat and shown to the menu, and again when they are brought the bill.  Many guests don’t notice the change and are pleasant as we explain to them what we have done.  Some guests reserve their opinions until the end of their meal, cautious about the service experience they are about to embark on.   A few guests each day will remark on the change right away, and indeed, some will mention it has why they have paid us a visit.  And of course there are so many guests that say they are from France, Australia, Japan, etc and that tipping is not part of their culture and they look forward to North America moving away from the practice.

Beyond our immediate customers, we have been answering emails from across Canada and we like to think these people are all potential customers – as do all entrepeneurs.  The support for the change has been overwhelmingly supportive.  We hear people say that they have never wanted to be responsible for adjudicating the staff’s effort and that they often have anxiety at the end of their visit as they try to navigate the tip amount, hoping not to offend.  Any entrepreneur will tell you that helping clients be less anxious is a good step.

Certainly, we have received input from people that disdain this change, and feel their opportunity to secure prompt service has been taken from them.  We’re certain that is not a risk as we remove gratuities.  Our staff are professionals: they are empathetic, educated, committed and well trained.  We know that compensating them fairly, consistently and through insured and pensionable earnings will only bring about a better guest experience as our staff are empowered to make the decision we teach them to make.  We work as a team, and always have.

For our most dedicated clients, they see the change to Hospitality Included not as a change, but as a better reflection of how we have always been.


HOW CAN I LET YOU KNOW WHAT I THINK?

We always want to know what you think.  Please email us at info@richmondstation.ca and include the words HOSPITALITY INCLUDED in the subject line.