This Sacramento brewery went tipless in favor of paying employees a consistent salary

Mark Melvin, the CEO of Touchstone Climbing, had one request when he agreed to open a brewery as a spin-off of the climbing gym chain — he wanted the brewery to be totally tipless.

Brewmaster Ryan Campagna hesitated but eventually warmed up to the idea.

“I can’t speak for everyone, but I think a lot of us are feeling that tipping is getting exhausting,” Campagna said. “I’m not saying that these people don’t deserve it, but it’s become convoluted. I half expect to get pulled over by a cop and get a ticket, and have him ask me to tip on top of it.”

Tipping has come under fire in recent years from both sides: employees who want to earn a consistent wage, and customers who are second-guessing tipping when mobile order options or on-site self-serve order screens are becoming more common. Despite this, and the fact that in places like Japan and Switzerland restaurants and bars have successfully operated for years without expecting gratuity from customers, the U.S. service industry has been slow to adopt change. They cite concerns that servers won’t be as motivated to deliver good customer service, or that more talented employees will feel that they’re being shorted.

Touchstone Brewing Company, a brewery and taproom in the River District, acknowledges the challenges involved in going tipless, but they’ve decided it’s worth the risk.

The brewery is owned by Touchstone Climbing, a rock-climbing gym chain founded in 1994 with more than 15 locations. One of the gyms, Sacramento Pipeworks, is right next door to the brewing company, and many employees split their time between the two. The treatment of employees has resulted in some sticking with the company for years.

Campagna said making the brewery tipless is just one example of Melvin’s level of care for employees.

“He’s always been the person to stand behind employees and treat them as best as possible, and this kind of goes along with that,” Campagna said. “If we can do it, we should try.”

How does a tipless system work?

Touchstone isn’t the first U.S. company to try going tipless, or even the first brewery. But they all do it a little differently.

Practically, Touchstone informs customers of the system with a sign by the register that reads “We’re tipless.” It also briefly explains why. So far, that’s been enough for customers to figure it out, and Campagna said that most people have been cool with the deviation from the norm.

While California law does not count tips toward minimum wage, the total amount that servers or bartenders earn each night is typically a combination of their hourly pay and their tips, so employers often aren’t motivated to pay them any higher than minimum wage — $15.50 an hour in California.

Meanwhile, Touchstone employees receive health care benefits and are paid a consistent salary that Campagna said is “higher than industry average for those positions.” He said that they’re also playing around with the idea of offering higher salaries to the more talented servers, in exchange for them working the busier shifts. This could help encourage employees to work the busy Thursday, Friday and Saturday shifts that were previously motivated by an excess of tips on the weekends.

“If someone deserves more, we can give them more, within reason,” Campagna said. “I mean, the best employee at the busiest place in Sacramento is going to take on a lot more money. At the end of the day, I acknowledge that’s obvious. And to some that’s gonna be more important.”

The tasks required of servers will also be lessened: Customers will order food at the bar, and servers will bring out food and clear tables, but won’t be involved in consistent table service.

Campagna and other members of management for the brewery have ideas about how the system will work, but they’re willing to go with the flow and make changes as they figure it out — the taproom is open to the public, but they’re still in the final stages of construction for a kitchen that will transform the location into a pub and necessitate more employees. When the kitchen opens, likely sometime at the end of this year or the beginning of next, they will consider offering more incentives for employees and adjusting prices.

“I hope we can keep the prices a little bit competitive,” Campagna said. “But yeah, I mean, our prices will reflect this. They won’t be outrageous, but I think it’s important to be transparent.”

He also noted that he thinks having the climbing company for financial backing and low rent costs due to owning their building will contribute to them being able to keep prices affordable.

What makes the tipless vision worth pursuing?

Kristen Madigan, the product manager at Touchstone Brewery, said that she has previously worked both at a coffee shop and at other breweries, where tips were part of her pay. She said she felt like she worked harder at the coffee shop than in brewery roles, but made significantly less money in tips.

“Can’t we just support our employees?” Madigan said. “We shouldn’t change what our employees make based on if they have a good day or a bad day. They deserve to make money either way.”

That’s where Campagna stands too — especially after years of hearing about servers being treated poorly and not standing up for themselves in order to make sure they still received their tips.

“Folks in the service industry will take a lot of bulls--- from someone because they need their tip at the end of the day,” Campagna said. “I think it’s important that our servers know that they can be firm in those settings. You shouldn’t have to say, ‘Well, man, I need my cash, so at the end of the day, I need to try to make this person happy.’”

Although he doesn’t necessarily experience it himself very often, Campagna said that he knows harassment happens in the service industry, and that it sometimes happens in discriminatory ways — one of the main arguments for going tip-free is that it equalizes the wage playing field for servers of different ages, races, genders or levels of attractiveness that might play into the tips they earn.

A tipless system also has the potential to shrink the gap in pay between front-of-house workers and those behind the scenes in the kitchen or brewery.

“In a lot of breweries, bartenders are making tons of cash on tips, and the people in the brewery are sweating their brains out on a super physical job but end up making far less at the end of the day,” Campagna said. “Personality should be compensated, that’s an important trait, but (the gap) can breed animosity.”

For Campagna, other life factors come into play. Namely, childcare. Beyond the benefit of Touchstone paying for his health care, and 80% of his kids’ health care, the stable income is essential to him when he’s making sure his 1- and 4-year-olds have a place to be while he’s at work.

“I don’t know if you’ve ever researched daycare, but having stability in income for budgeting is insanely crucial right now,” Campagna said. “If I didn’t know how much I was coming home with every month, how do you deal with that? I want to know my paycheck will be the same.”

That’s at the heart of how Campagna thinks the tipless system will work best: finding the people for whom stability, rather than quick cash.

“We acknowledge that it’s not for everyone,” Campagna said. “To find the right people that want that stability, it’s going to take time, and it’s gonna take some turnover. But I have faith that they’ll find their way here.”

Without tips, what could be missing from the brewery experience?

Campagna and Madigan certainly aren’t expecting every waiter or bartender to want this kind of pay, knowing that some people prefer the cash up-front. But as it turns out, servers aren’t the only ones who have something to lose in cutting tips.

The system is likely impossible for many small businesses to adopt, when they’re already struggling to pay employees minimum wage in locations with high rent. Even for bigger companies, the switch is difficult: Union Square Hospitality Group restaurants switched to a “hospitality included” system in 2015, but reverted back during the pandemic for various reasons, and Joe’s Crab Shack moved away from their no-tip model after only three months.

“In the end, if you can’t afford more than minimum wage, tips help you retain employees,” Campagna said.

Businesses also often lose customers when they raise menu prices, even if they’re cutting service costs via tips in exchange. And research shows that customers, to some extent, come away feeling like they’ve had a better experience at a bar or coffee shop when tipping is in place.

They like having the chance to monetarily influence or reward service, and they worry that without the lottery of tipping, servers won’t have an incentive to provide quality service — even though research has found that tip amount is only weakly correlated with good service. So even if customers say that they’re tired of tipping, there may be some mental benefit to them doing so.

Milka Coffee Roasters, a coffee shop in Mansion Flats that opened in 2019, also has a no-tipping policy. Their menu prices include tips, taxes and alternative milk fees, and a note at the top reads, “What you see is what you pay.” Baristas earn a set salary each month.

Campagna doesn’t know yet if going tipless is going to work long-term for Touchstone. So far, the customer response has been good, and they haven’t had any employee turnover, largely because all of their employees are currently shared employees from the next door climbing gym. But he knows that there could be challenges in their future — and thinks it’s worth a try anyway.

“If it fails, you can always change,” Campagna said. “The reverse wouldn’t really work, to add hourly and take away tips — that would be mass exodus for sure. So we’ll try it this way, and hopefully it’s the right fit for the right people.”

This story was originally published September 12, 2023 at 5:00 AM.