Food & Drink

Rethinking tipping, wages in Sacramento’s booming restaurant scene

Tony Lovato, a server at The Rind, grinds pepper for a lunch customer on Tuesday, Oct. 13, 2015. Lovato has been a waiter for 25 years in Sacramento. Sacramento City Council prepares to vote Oct. 27 on a gradual minimum wage increase to $12.50 an hour over the next five years, well above the state-mandated $9 hourly wage. That worries many restaurant owners, and they’re supporting a “carve-out” clause that excludes people from the wage hike if their total compensation exceeds $15 an hour.
Tony Lovato, a server at The Rind, grinds pepper for a lunch customer on Tuesday, Oct. 13, 2015. Lovato has been a waiter for 25 years in Sacramento. Sacramento City Council prepares to vote Oct. 27 on a gradual minimum wage increase to $12.50 an hour over the next five years, well above the state-mandated $9 hourly wage. That worries many restaurant owners, and they’re supporting a “carve-out” clause that excludes people from the wage hike if their total compensation exceeds $15 an hour. lsterling@sacbee.com

You just had a nice meal at a restaurant and everything went smoothly. The food was terrific, the pacing was just right and you hit it off with the server. So you leave a good tip, probably something in the 15 to 20 percent range, and call it a night.

It’s something so engrained in our culture that you barely have to think about it. Tightwads and punitive tippers notwithstanding, you, the dining public, are generous with your gratuities. Yes, tipping may be easy – Californians leave $4.7 billion a year in tips, according to the California Restaurant Association. But it is far more complex than you might imagine.

There is plenty at stake as the Sacramento City Council prepares to vote Oct. 27 on a gradual minimum wage increase to $12.50 an hour over the next five years, well above the state-mandated $9 hourly wage. That worries many restaurant owners, and they’re supporting a controversial “carve-out” clause that exempts businesses from the wage hike if they can prove their workers take home at least $15 an hour with tips.

The awkward and sometimes confounding issues of tipping, wages and restaurant profit margins have found their way into the spotlight, but depending on which side of the debate is talking, the city’s decision either could lead to minor tweaks for tipping or to a revamping of tipping as we know it.

Many restaurateurs are fretting, especially if there is a blanket wage hike without the carve-out. Servers? Many are less concerned about what happens to their minimum wage than their tips. The best ones work hard to make customers happy – and happy customers tend to tip generously.

“It’s not something that’s being talked about at work,” said Alexis Johnson, a server at two popular midtown restaurants and bars, LowBrau and Centro Cocina Mexicana. “We concentrate solely on our tips. The paycheck is just a blip on the radar that comes every other week. Ninety percent of my income is tips.”

Restaurateurs, however, say business as usual would have to change – either a little or drastically, depending on the numbers – if the council raises the minimum wage without an exclusion for tipped workers.

Last year’s statewide $1 increase prompted many restaurants to raise prices. But this new measure, limited to those working within the city limits, would prompt a small restaurant like The Rind in Sacramento to revamp its concept and start taking orders at the counter, its owners say. When tips and hours worked are factored in, the owners noted, some servers at The Rind take home more than the owners, a phenomenon that’s not uncommon at busy family-owned eateries.

“We’ve been hit with so many increases. I don’t think the general public is ready to pay $15 for a grilled cheese sandwich,” said Sara Arbabian, who owns The Rind with husband Steve Tatterson. “To increase the minimum wage (at restaurants) would eliminate jobs in a heartbeat. Table service would probably have to be eliminated. ... We might have to reduce the number of hours we operate so Steve and I could be on the floor. It’s crazy what you would have to do to operate.”

Michael Thiemann, the co-owner/chef of Mother Restaurant and the new Empress Tavern, said the proposal “really threatens a lot of us as restaurant owners.”

“Restaurants generally operate on 7 percent profit,” he said. “That’s 7 cents for every dollar. That’s a scary world to be in.”

Industry statistics show the average server makes about $12.50 an hour when tips are factored in. The best servers at bustling restaurants can do much better, with some pulling in $40 an hour and earning more than $50,000 annually, according to local servers and restaurant owners. The elite can approach six figures.

Restaurants generally operate on 7 percent profit. That’s 7 cents for every dollar. That’s a scary world to be in.

Michael Thiemann, co-owner/chef of Mother Restaurant and Empress Tavern

The City Council’s “total compensation” option, if approved, would allow restaurants to voluntarily opt for an exclusion from the minimum wage by documenting each pay period that their employees reached the mandated wage mark. However, a recent state legislative legal opinion says that carve-out could violate state law. Protesters targeted the carve-out at a raucous council meeting Tuesday night, with the Center for Workers’ Rights and the Sacramento Central Labor Council threatening a lawsuit if the city approves the exception.

“Tipping is the main reason people work as servers, besides their love of food and their passion for serving people,” said Jennifer Lambros, a server at highly regarded Kru who waits tables at night to supplement her income as a teacher.

“A server is happy when people tip 20 percent. When we get 10 percent, we’re wondering what went wrong, even though we should be happy to get anything from a guest.”

Lambros, Johnson and other servers at their level consider it a solid night if they take home $200 for a five-hour shift. Then there’s the matter of spreading the wealth, known in the industry as “tipping out.” Servers dole out some of their gratuities to the host, the bussers and the cooks in the “back of the house.” Sometimes it’s cash. Sometimes it’s also a beer or two after the doors are locked for the night.

Servers who are generous or tight with their tip-outs will often learn that it comes back to them much like karma. When the restaurant is busy, for example, and servers need something expedited, cooks have long memories. Maybe they’ll go to bat for some and take their time for others.

“We tip out our support staff 1 percent of sales at a minimum,” said Lambros, explaining that Kru usually has three such employees, meaning her 20 percent tip is now down to 17 percent. Then she pays the kitchen another portion.

But tipping out is a hot topic in its own right. Despite long-standing practices throughout the restaurant industry, it’s actually illegal for a restaurant in California to require its servers to tip out. Some states have extended the so-called chain of service to the kitchen to allow tip pooling, but California does not. California is also one of seven states that does not permit a lower-than-state minimum wage for tipped workers, the kind of potential exemption the city of Sacramento’s task force has recommended.

“The frustration is that the people they have to give the raises to are those who are bringing home the most money,” said Jot Condie, chief executive officer of the California Restaurant Association.

“There is definitely an imbalance,” Thiemann said. “You can have some servers making $100,000 and front-of-the-house managers making half that. And cooks at most restaurants make minimum wage.”

Thiemann, who pays his cooks above minimum and often counsels them not to fret about those lucrative jobs out front, does not discount the crucial role service has at restaurants.

“If you have good service, your restaurant is going to be successful. Then, if you have good food and good service, your restaurant is going to be one of the best,” he said.

The frustration is that the people they have to give the raises to are those who are bringing home the most money.

Jot Condie, chief executive officer, California Restaurant Association.

Tipping and wage equality prompted the owners of Magpie Cafe to institute a new policy: On the restaurant’s credit card receipt, they created two tip categories: one for servers and one for kitchen staff. While the new policy was awkward at first, most customers were sympathetic to what Magpie was getting at.

“One thing we learned is that people actually want to tip the kitchen and a lot of people thought the kitchen was already getting some of the tip,” said Magpie co-owner Ed Roehr. “Most servers say they do the right thing, and most owners will say that doesn’t always happen.”

Roehr said he has fielded numerous complaints about the dual-tip policy, but he says the awkwardness could all go away if California followed the lead of other states and extended the chain of service to the kitchen and allowed tip pooling.

“A lot of servers are very generous with their tips, and a lot of servers aren’t,” he said. “We wanted to create a system that didn’t rely on the servers but gave the guests control over how much they want to tip.”

He said the average gratuity for the kitchen has been 2.5 percent. But for now, no other local restaurateurs have been willing to follow Magpie’s lead.

“I get a lot of calls, and I get a lot of quiet conversations asking me how it’s going.” Roehr said. “They’re watching us, they’re very concerned about the minimum wage increase, and they’re looking for a way to survive. Maybe this is a way to survive.”

Thiemann said a significant minimum wage hike would not stymie his restaurants, but it might change the way many restaurants do business. He said a blanket wage hike might prompt him to eliminate voluntary tipping and instead follow the lead of restaurants in the Bay Area and Seattle that factor the gratuity into the bill as a service charge. Those restaurants have argued that their employees deserve a living wage and that a service charge allocates the money more equitably.

“We would have to change the model. I’m nimble. I can think out of the box,” Thiemann said. “I’m not saying it would kill us, but it would force us to change the way we do business. Basically, the costs will be deferred to the customer.”

Locally, The Kitchen Restaurant is believed to be the only restaurant that attaches a regular service charge to the bill. The special-occasion restaurant has a $135 fixed price, then adds 20 percent. Guests are still provided the option to tip if they want to give more. Some hotel restaurants factor a service charge into the price for special holiday dinners.

For many servers, the notion of a change to the tipping structure is concerning enough that they’d rather not rock the boat on minimum wage. Johnson said she worries that a lofty wage increase might prompt customers to tip less and that a service charge that spreads the money around “would be awful.”

“I work so hard at what I do,” she said. “I know I make a lot of money because people enjoy my service and I enjoy what I do. But that would be a nightmare.”

Blair Anthony Robertson: 916-321-1099, @Blarob

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