Traditional Full Service Restaurant Models 2019: A ‘Day of Reckoning’

By: Patrick Maguire

Book Chapter: Rules of Engagement

Posted: 1/21/2019

The Server Not Servant blog and book project has always been about facilitating conversations, in addition to sharing my personal experiences and opinions. This guest post, shared with permission, was originally published via Medium by the former owner of Tawla, a San Francisco, CA restaurant that closed after a little more than 2 years. I personally find the piece to be a refreshing, candid, “behind-the-curtain” look at the trials, tribulations, and thought processes behind an arduous journey in an overly-romanticized industry. A must read for aspiring restaurateurs.

Despite the backlash, and tinge of inherent hubris, in my opinion, there are too many important issues raised here not to share the post. Some issues are specific to San Francisco, but many will resonate with restaurateurs, staff, and customers everywhere. Respectful comments will be published following the piece below. It would be especially insightful to hear from former employees of Tawla. Thank you.

Why SF Restaurants are Suffocating

That Saturday was the last day for our lead line cook. He’s one of the last three people left from the original 25-person team that joined us when we opened Tawla more than two years ago. We saw him grow, take on more responsibility and become a critical part of our team. We also got to know his family and celebrated with him the arrival of his fourth and last kid. Six months ago, he was asked to leave his rent-controlled apartment, another Ellis Act victim and yet another loophole that many landlords exploit to get rid of tenants with rent control. Forced to move, our cook, his wife, and four kids, one younger than 6 months, have struggled to find a place to live, spending more than four months moving from one friend’s couch to a cousin’s couch. We thought hard about all the ways we could help from tapping our networks to find a more dignified temporary place for our cook to stay, to figuring out how to pay him more without having him lose access to different low-income programs for which he currently qualifies. We gave him time off to go search for housing and sign up for the different city-run seminars that are required to qualify for low-income housing. Yet, on those lists, he was never with the highest priority. There were always many others with higher risk and urgency ahead of him in the queue: seniors, those with disabilities, and families with more dependents, and the list goes on and on.

This has become almost a cliche story you hear in the restaurant industry. When I set out to open a restaurant in San Francisco’s vibrant restaurant market, I thought I’d employ all I’ve learned from an MBA from a top school, the rigor of an engineering education and a decade and a half launching and managing some of the most successful businesses for Google and other tech companies. Furthermore, I wasn’t naive to think that I knew better than all those who’ve been tenured in the industry. I actively sought out the mentorship of many titans who’ve been generous with their time and knowledge of the industry. So I opened Tawla, a restaurant in San Francisco’s Mission district. I hoped Tawla would provide a fresh lens onto the culinary cultures of Turkey, Greece and the Levant area that is more humanizing. With food being a most humanizing lens, Tawla was a restaurant that aspired to present the home-cooked food of that region while sourcing local ingredients from farms and purveyors, creating a healthy environment for our employees where they can thrive, be reasonably priced to many, and be a good citizen in our neighborhood. In today’s San Francisco climate, that all seems like a tall order and very few restaurants that don’t belong to large restaurant groups will be able to exist without compromising on one or more of these dimensions.

Over the past two years, it was quickly and often apparent that there’s nothing that a small and young business in SF could do to make the city a living option for its employees. There is no amount of money an owner could pay an employee within the economics of a small business to allow their employee to live within the borders of the city or even within a reasonable radius that doesn’t have them traveling for two-plus hours a day to come to work. This is the reality of where we live. Our line cook’s story is one of numerous we’ve personally experienced within our business, and we hear so many similar stories from other food-and-beverage businesses. Unless you’ve been living under a rock, this shouldn’t be news to you.

We, among others, tried to be innovative. We tried to go the ‘service charge inclusive’ route, automatically including 20% in every check. Currently, tips are only allowed to be claimed by ‘anyone involved in the chain of service’, which includes all Front-of-House (FOH) staff from servers to bussers, to runners and hosts, and excludes anybody who works in the back-of-house (BOH), cooks, prep staff and dishwashers. Unlike a traditional tip structure, the service charge model allowed us to distribute supplemental pay more equitably. That also allowed us to give our employees private healthcare instead of relying on the broken Healthy SF system which has proven to be very hard to navigate by our employees who try to file claims and only applies within San Francisco city lines, which means no healthcare for most of our employees who cross the bridge to where they live. Additionally, we subsidized commuting expenses and offered healthy staff meals to all employees while at work. Our hope was that at least, by doing that, we’d help our team keep more of the money they make knowing that they don’t have to spend money coming to work and they don’t have to spend money on healthcare.

The current situation is dire, saying the least. The front-of-house hated the above pay scheme because they too were struggling in SF, maybe not as bad as our BOH, but they too could not afford SF’s high cost of living. With the service charge, our servers were making $38 per hour (hourly base + hourly service charge) or the equivalent of $70,000 to $80,000 a year if you were working for us full-time. If we assume you’re spending about 36% on rent after tax, normally considered a healthy spend on housing, that would mean you have about $1,460 available for rent per month.

Cheryl Young, an economist for Trulia, found that in nearby San Francisco, only 0.1% of restaurant staff can find affordable housing in the city, with the average monthly rent for a one-bedroom apartment at an insane $3,447, according to a 2018 rent report by Adobo. The U.S. Census revealed in March, the median rent in San Francisco in 2016 was roughly over $1,600/month. These numbers are worrisome in a few ways: 1. The egregious rent amount that is required for somebody to live in the city today. 2. The jump in median rent in a mere two years. 3. The $1,600 median rent from 2016 also included rent-controlled apartments which indicates their rapid disappearance.

Ok. So you may be able to make $70,000 to $80,000 annually and you would need two roommates to be able to barely afford a one-bedroom apartment. What about that is dignified when you’re an adult and you have to share a room or be the one who sleeps in a living room-turned-bedroom? This brings us back to our service charge scheme and the reason our FOH staff opposed it. They had to share some of it, though nominal, with the BOH and they don’t get to pocket the whole 20%. But what we thought would be a welcome steady pay that wasn’t dependant on the whims of diners, wasn’t welcome at all. This has been a classic struggle even in pooled houses that tip out the back-of-house. Servers never want to share tips with the BOH and as they get squeezed because of the rising cost of living, that’s even more the case.

Furthermore, we were astonished when employees asked if we could pay them a better wage if they went without health insurance. Luckily that’s not an option! But we realized that when you’re struggling to live, you don’t even have higher order thinking that allows you to plan for the possibility of a health emergency. Without insurance, an average ER visit can cost anywhere from $150-$3,000 or more and if surgery is required, it may cost as much as $20,000.

Due to incessant requests from our team, we moved to a hybrid model. We did a 6% service-charge inclusive and a traditional pooled house tip model. The service charge allows us to continue to supplement BOH pay. The tip pool is shared among FOH. And now, we don’t pay for health insurance completely but instead, subsidize about half of it and kick more of that money back to the team.

This yielded unexpected and somewhat unwelcome outcomes. In order to get a few more dollars in their pockets each pay period, most of our staff opted out of health insurance which now they could since our team shrunk to less than 20 employees and employer mandated health insurance was no longer required. FOH staff now makes $42–48 per hour ($85,000–95,000). You’d think that this would allow us to retain staff but we’re still losing FOH staff to either other jobs that are perceived to pay more, to other occupations or more schooling, or to a different geographic location (city and/or state) altogether.

In the most expensive city to live in the world, FOH may be able to find that unicorn one bedroom, but what about saving, investing in a 401K, having a family, and god-forbid planning for old age?

If you thought the FOH situation is unfathomable, let’s go back to my talented, hard-working line cook who’s his family’s breadwinner and made $24 per hour (base pay + share of service charge) or a little shy of $50K a year working full time for us. How is he going to find a place to live, send his kids to school and feed them? Forget saving! He tried really hard. He made it through the spring semester for his kids’ schools and then he packed up and moved.

Nothing about this yields inspiration or ideas of career longevity. Why would you aspire to build a career in this industry? Why would you strive to grow, be better and progress in an industry that doesn’t reward tenure?

It’s become harder for a person to be in hospitality and in aggregate it’s become harder for the hospitality industry to attract professionals.

And those teachers, students, and artists who also worked in the restaurant industry and made for wonderful staff, already moved out of the city because they can no longer afford to live here.

After you think through solving all your team’s gut-wrenching issues, you think about what this does to the economics of running a restaurant.

Astronomical turnover pushes labor costs even higher.

The situation in this industry has created a mercenary frenzy where everyone is running around trying to maximize what they’re able to make per hour. According to culinary hiring service Instawork, annual turnover in the restaurant business in San Francisco has reached as high as 90% and operators pay about $3,000 to rehire and train a new hourly employee. For context, overall national restaurant industry turnover was a little over 70 percent in the last two years. From our experience, the associated cost of turnover for an employee who leaves us is $2,600-$3,200. This cost includes sourcing a new employee, training them until they’re able to be independent contributors and any overtime associated with somebody covering for that shortage in labor. In total, our business has seen a 10% increase in labor costs due to turnover alone.

The quality of the labor pool is quickly dwindling.

As alluded to earlier, the mass exodus of individuals from this workforce leaves fewer people and less reason for those people to excel. Compounded with financial woes that are often a constant in one’s life, it makes it even harder to focus on one’s job and do good work.

When restaurants are desperate for anyone to fill a role and are concerned to lose people because of the aforementioned scarcity and turnover costs, the staff has very little incentive to do good work, to strive to be better and to keep a high-quality work-product. This, of course, has a high impact on the quality of the product and service a restaurant is putting out there. It has high management costs associated with it as you’ll need more exempt managers to ensure training, quality and to pick up the pieces when the quality is just not there.

The combined impact of high turnover and a poor-quality labor pool has resulted in the unoriginal ‘beet and goat cheese salad’ showing up on 5000+ restaurant menus in the city. A phenomenon brought to light by the San Francisco Business Times, restaurants are creating simpler and less inspired food items that don’t require highly trained or talented kitchen cooks to execute.

What was once a celebrated culinary city boasting creativity, innovation, and diversity, is now quickly deteriorating to ‘me too’ concepts.

Not surprisingly, the most celebrated new restaurants right now are yet another ramen, pizza or pasta shop.

We, like many others around us, have also suffered from employees with substance abuse, employee theft, and just frequent ‘no call, no show’ occurrences. We had an employee who was terminated for embezzling thousands of dollars to pay for his cocaine debt, only to go on and be rehired into important roles at four other prominent restaurants that each, in turn, fired him for similar offenses.

Restaurants are so desperate for talent that no one is going through the proper channels to reference check and validate a new hire’s competency and performance history.

There’s no organizational headspace to think about growth or innovation.

In a people business, your team is the oxygen that allows your business to not only function but also grow. That’s the case for any business in any industry. In tech, where I started and built my career, we understood that really well. The job wasn’t just about getting the daily operational work done but it was also about giving you enough room and headspace to innovate, try new things, and explore new avenues for growth from products to better processes to new business opportunities.

If the economics are such that you’re trying to always keep a small team so that you can do better by them then you never have any slack to grow beyond the ‘survival’ stage.

And the city doesn’t help.

Small businesses are highly taxed with very little value offered for those taxes. When you see what the city has done historically and the extensive tax breaks given to large companies to set up shop in the city, it gives you pause. In addition, the tax code is very complex with a high minimum franchise tax and combined with ‘nonconformity’ policy that allows the state to disregard certain federal tax benefits available to small businesses, the state can be very aggressive in seeking state revenues. In addition, the minimum wage hikes, though are very necessary to allow people to earn a livable wage, in absence of other holistic programs addressing housing and healthcare end up being ineffective.

When it comes down to it, diners today don’t care. Really.

Today’s SF is in love with ‘the idea’ of ‘local’. It is in love with ‘the idea’ of ‘small business’. And it is in love with ‘the idea’ of ‘economic diversity’. But it’s all about ‘the ideas’. When it comes to living those truths, few are doing the work to support those ideas.

To be fair, the average San Francisco resident has changed. People who’ve lived in San Francisco for a long time are moving away in droves, seeking more cost-effective cities to call their own. Those people are the ones that have grown up with this foodie city and have learned to appreciate the product that’s being put forth here using superior produce fresh from the farm and our local purveyors. Those are also the ones who’ve learned to understand the importance of small businesses and the role they play in defining what San Francisco is.

They’re being replaced by a younger, wide-eyed high-earning transplant who’s moved here from rich locales such as New York, New Jersey, and Illinois, and is hungry for the opportunity to work in tech and other fast-growing industries. Most of them don’t understand what’s made San Francisco special including not understanding what it means to support small businesses and what it means to offer a high-quality food product.

This new diner also doesn’t understand what it takes to get produce fresh from the farm daily and why one would want to pay more for it and support “eating local”. He also doesn’t understand the history of small businesses in San Francisco and why they’re an integral part of the economy and makeup of this special city.

The impact is seen when we tried the aspirational ‘Service Charge Inclusive’ model. Diners were so dismayed by it. We often heard “why should I be putting money towards your employees’ healthcare?” or “how come I no longer have a choice in deciding how I pay tips?”. It was always the more affluent who complained, the ones who bought that $200-bottle of wine. This disconnect pained us.

Today’s San Francisco pretends to be a liberal city, but when it comes to having a real impact on people who work in small businesses, the majority are not willing to put their money where their mouth is.

And the service charge model only works if all restaurants do it but everybody is scared of the diners’ wrath. We know it works because that’s how it works in the rest of the world but it only works if the whole industry runs that way.

In summary, if small businesses are the backbone of our economy employing more than half of our workforce, and the challenges faced are moving the businesses away from hiring more people, then what impact does this have on the labor economy and on this city that we love, economically and culturally?

I was asked, if I were to do it all over again, would I? Seeing how our industry has been rapidly changing where the core principles behind what I hoped to accomplish are in question, I don’t know if this would have been an endeavor I could comfortably and confidently pursue.

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Dear Parents-Thank You for Raising Considerate Customers

By: Patrick Maguire

Book Chapter: Customer Hall of Fame

Posted: 9/10/2018

Today’s post comes compliments of Fallyn Taylor, a member of the Server Not Servant Facebook Group:

Dear parents of the group of 5 kids who sat in my section today-

As a server, I don’t really expect much from tables of teenagers. I treat them like any other table, give them the same level of service I would an older couple, but I fully expect to be run ragged and tipped poorly. Your kids knew what they wanted when they sat down. They asked for extra ranch while placing their orders. They kept their voices at a reasonable volume while still chatting and having a good time. They were kind and considerate of the other diners in my section.

 When it was time for them to go, they asked for the bill, 59 dollars.  I ran their card and dropped off the slip for them to sign. I saw them using their phone to calculate what the tip should be. When I came back, they had already gone. They stacked up all of their dishes, grouped together their cups, and collected their trash. They tipped me $12. Your kids made my day. I genuinely hope they come back.

I know this is a weird post but these kids were 9-16 years old and the perfect table. When they sat down another server said something to the effect of, ‘that sucks” (dealing with kids). But they were just so awesome, it made my little heart happy.  😊

Thank you for sharing, Fallyn. SO refreshing to read, and nice of you to take the time to share. I was in a pizza joint at a communal table in Boston, with a gentleman and his 2 young kids sitting across from me. When they were done eating, the man asked one of his boys to bring the tray and trash/recycle to the proper spot, and had his other son help him wipe down their area. In front of both of his children he said, “We want to leave it nice and clean for the people who sit here next, the way we’d want to find it.” I looked at the woman sitting next to me–we were both in awe of what we witnessed. It’s unfortunate that these instances are anomalies. Faith in humans momentarily restored…

Please share your stories and comments below. And please share this post on social media if the spirit moves you.

PS- If you are interested in supporting this Server Not Servant blog, and helping to bring the book to fruition, please see the blue box on the right hand side of this blog post labeled, “Support Server Not Servant” to make a contribution. All donations of $20 or more will include a copy of the forthcoming book. I am also seeking corporate and private book sponsors. Email Cheers-Patrick

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Love Trumps Yelp Coward’s Hate at Boston’s Zia Gianna Italian Bakery & Cafe in Dorchester, MA

By: Patrick Maguire

Book Chapter: Customer Hall of Shame

Posted: 8/13/2018

Let’s get right to the cowardly curmudgeon’s Yelp review:

I’m appalled a little more every single time I read this horrific, bigoted, hate-filled tirade.

After reading this review on the Zia Gianna facebook page, I contacted the owner, Nino. I wanted to confirm that the laudatory comments on facebook were true, and I needed to verify a few items. Nino struck me as a very genuine man with a good soul. He confirmed that the following words on facebook accompanying the Yelp review received his blessing, and reflected who he is and what his restaurant represents:

“All are welcome at Zia Gianna, even this gentleman. We’d love to show him some kindness from the LGBTQ community because love always wins.”

Nino is a very easy man to talk to, and I believed him when he told me that he “welcomes everyone, and loves the diversity of our Dorchester neighborhood. We love serving everyone.” He is a proud, gay, married man, and his staff is comprised of folks from a wide range of ethnicities, races, religions, and sexual orientations. He said, “it just happened,” and that he didn’t deliberately assemble a staff with diverse backgrounds. He also confirmed that the review was not a “plant” for PR purposes. (I had to ask.)

Nino works front of the house, interacts with most of the guests, and could not recall an upset customer who fit the profile of the vile (my word), “Restaurant T.” Yelper. A little more about our anonymous Yelper friend:

He’s Sicilian. No doubt, just read his Yelp reviews of other restaurants. Here are a few excerpts of his greatest hits (my highlights):

I’m Sicilian, and I usually cook my own food, and therefore I’m entitled to measure how well a Restaurant stands up to the quality of how me and my family prepare our Traditional Cuisine. A lot of places skimp so much on ingredients that most people have no idea how the dishes are really supposed to be prepared.” (Ok, Mr. T…)

“Most of all the other Italian Restaurants in the North End are NOT authentic Italian and they are often “Fusion Style Italian” restaurants which employ either American, French or other influences into their cuisine and sell you small bites at ridiculous prices where you leave hungry for a whole new plate somewhere else.”

“Now that being said, I am not Puerto Rican, I am Sicilian and we are also an Island Nation and have some of our own fried items, BUT even I can tell that this ISN’T Puerto Rican food.”

“This place was one of Boston’s BEST Restaurants in my opinion, and now it’s gone downhill to be worthless just like all the rest of them.”

“This is definitely the BEST place to go for Italian sandwiches in the area (and even better than anything you can get in Boston’s North End), particularly their Meatball and Italian Subs… A lot of places have horrible meatballs (most Americans don’t know what a good Meatball tastes like), I am Sicilian and the way they make their meatballs here for a sandwich they are absolutely perfect and seasoned well and they stay together and taste so good in the Sandwich! “

I sent him the following note via Yelp messenger:

Hello, “Restaurant T.” – I’m writing to inform you that I am publishing a blog post that will include screenshots of your hateful review of Zia Gianna. I almost always try to give folks mentioned in my posts an opportunity to tell ‘their side’ of the story. Is there anything you regret writing in your review? Is there any additional message you have for the owner, staff, or customers that you’d like me to include in my blog post? Thank you-Patrick

[No response as of this publication. I will update if he replies.]

I learned one more thing about Nino when I spoke with him today…

“Restaurant T.” stated: “Anyone who violates our time tested Traditions and Iron-Clad rules of maintaining Roma Invicta, should be stripped of citizenship and even their surname reflecting our heritage.”

In fact, Nino will become a US citizen at a ceremony at Faneuil Hall in Boston on Thursday, August 16th. Please join me in congratulating him in the comments below. Better yet, stop into Zia Gianna and congratulate Nino in person.


If you are interested in supporting the Server Not Servant blog and helping to expedite the book project, please see the blue box on the right hand side of this blog post to make a contribution. Cheers-PM


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Twitter Tit for Tat on Tipping Etiquette 2018

By: Patrick Maguire

Book Chapter: Human-to-Human Service

Posted: 8/12/2018

I shy away from redundant posts about tipping here and on the Server Not Servant facebook page because tipping is not the primary focus of this project. However, we haven’t discussed tipping etiquette in a long time, and Christopher Muther, travel writer for the Boston Globe, wrote a “Help Desk” piece on 7/31/18 that was spot on.

The piece‘If they touch it, you tip it’: The definitive guide to tipping while traveling, included some recommendations for tipping concierges:

There are general tipping guidelines for all US travel services, but, according to etiquette expert Elaine Swann, if a concierge secures you an otherwise impossible show ticket, or a restaurant reservation in an eatery that is fully booked, consider going higher. Swann said consider at least $20 depending on the scale of the task. Ditto for others who transform your trips from exasperating to extraordinary.

And at the end of the piece:

With the help of etiquette experts, the American Society of Travel Agents, and the American Hotel & Lodging Association, we’ve assembled a handy guide for tipping while traveling in the United States. Remember to do your research before traveling overseas.

Who and how much to tip:

• Concierge

Tip from $5 to $10 depending on how involved the request, or a lump sum upon departure. Consider tipping higher if the concierge has gone above and beyond to procure something special. No tip is necessary for directions or an answer to a simple question.

The Boston Globe writer, Christopher Muther tweeted a link to the piece w/the message, “Ever wonder how much to tip the chamber maid? The hotel concierge? Wonder no longer! Here’s your guide to tipping while traveling.”

A Twitter Guy (TG) responded, “1) You didn’t touch upon the pervasive negative aspects of the American tipping culture. 2) You perpetuated the ridiculous idea that people (concierges) ALREADY paid generously to literally sit on their ass & provide help to paying hotel guests should be tipped. Seriously?!”

Christopher: “Hi, TG. I agree there are issues with American tipping, however this article is intended to inform people of how to tip while traveling rather than diving into the politics of tipping culture. That is definitely an entirely different story. This story is the opinion of experts.”

TG: “Christopher, that’s definitely a fair point, and thank you for at least consulting other experts vs. self-interested groups like the restaurant association, concierge assoc., etc. I hope you’ll cover the other story as well.”

Patrick Maguire (PM) response to TG’s original tweet about concierges, “What a sweeping, negative generalization about concierges. And I believe the article did an excellent job of acknowledging many issues that require a deeper dive, like tipping in America.”

TG: “Patrick, I’d welcome your thoughts on why concierges should get tips for doing their job. Do they make at least minimum wage? Also, please explain why flight attendants, teachers, bus drivers, nurses shouldn’t be similarly tipped for their work.”

PM: (in 10 tweets): “The best concierges I have spoken with while researching my #ServerNotServant blog/book project don’t expect tips because many of them are paid well over minimum wage. However, many seasoned concierges have cultivated a network over a lifetime allowing them to tap into their resources to provide the best restaurants, reservations, recommendations, tickets, tours, guides, events, and services their city/town has to offer. Folks who voluntarily tip a concierge realize that they are leveraging the goodwill that excellent concierges have cultivated. 

I believe that savvy travelers recognize that an experienced concierge can save them a lot of time, effort, and energy, and deliver results that exceed what they might have been able to produce themselves. They choose to show their appreciate via tip because of the access a concierge provides them to vendors in their city, the US, and around the world that they might not have via their own network. And I believe that the article and advice is accurate in that it states at the outset that “Tipping is completely voluntary,” and then proceeds to explain that the “guide for tipping” is a result of consultation from multiple sources.

What was recommended 4 concierges in the article, strikes me as well traveled, common sense, common decency, spot on advice. The only real “social contract” around tipping in America is for folks who are paid a tipped minimum wage, as I’m sure you are aware. That doesn’t preclude us from demonstrating our gratitude w/cash when hospitality, empathy, compassion, anticipation or reaction strike us as timely +/or exceptional, especially if we’re a little flush with cash after cashing a check or getting paid. And that can include flight attendants, bus drivers, teachers, or nurses. Some circumstances and employers may not allow cash and a little creativity in the form of gift certificates or gifts might be more appropriate.

I remember bagging groceries on hot, humid days like today (8/6) in Boston at DeMoulas in Billerica, MA in the 70’s and pushing/pulling 2 overflowing carts to a customer’s car, and carefully loading up the car. A buck or 2 was always greatly appreciated, but you learn not to expect it. That’s often what makes giving gratifying, when folks don’t expect it. Most service industry workers I’ve spoken with aren’t even looking for anything ‘extra,’ they just want everyone to be decent, kind people, and to be respectful. Thanks for asking. I initially jumped in because I disagree with your outrage at the article ‘perpetuating’ the notion of tipping concierges for ‘sitting on their asses.’ Obviously, in many instances, they’re doing a lot more than that, and it’s ok to show our gratitude if we choose. Cheers.”

TG: “Thanks, Patrick, for offering a thoughtful and detailed rebuttal to my admittedly snarky take. I do think our different take on this may be irreconcilable, however, due to opposing philosophies. You feel that showing appreciation for high effort/high expertise is appropriate in monetary compensation. I feel that this ironically cheapens and debases human interactions, and that gratefulness expressed in other ways is more noble and across industries, more fair.

PM: “Please elaborate on expressing gratitude in other, “more noble” ways than “debasing human interactions” with monetary compensation. I’m all for seeking someone out to thank them, talking to their boss, and/or writing a letter or review singling out their ‘high effort.’ I also believe that there’s nothing wrong with the gesture of cash, gift, or gift certificate in the examples I mentioned regarding concierges, teachers, flight attendants, + nurses. My hunch is that the service industry folks wouldn’t feel demeaned. 2 more hypotheticals–If a consumer receives multiple packages a week from online orders and their USPS delivery person does a great job placing the packages exactly where they want them, is it demeaning to give them a card and cash or a gift occasionally or at year end? If you clean your house and leave an unusually huge pile of trash on the curb on pick-up day, is it demeaning to offer the trash crew some cold cash on a hot day? Bonus, if you freak out about going to the dentist (raises hand), and your hygienist uses novocaine and/or topical anesthetics, is it demeaning to give them a card with a gift certificate to their favorite restaurant or retail store at the end of the year? My gut says that if presented properly, most service industry folks would not be offended at a kind gesture that includes compensation.

TG: “I perceive the act of giving money to someone for doing their job inherently a power play, a way of saying, ‘Here, peasant, have a few coins from me, a person in a position of power over you.'”

PM: ” It’s not when a customer in America adheres to the unwritten, but well known social contract of tipping when compensating workers who are paid a tipped minimum wage, like bartenders + servers. In my opinion, it’s a lame ‘power play’ to say, “I don’t (have to) tip,” a la Mr. Pink.”

TG: ” Have you spent time in Japan? It’s so enormously refreshing going out to dinner there. Customers get wonderful service and, in turn, seem to typically show high respect to their servers. No tipping.

PM: “No, but I’ve spent time in Australia where the custom is not as ‘rigid’ as Japan. Australia reminds me of the “tipping included” restaurants in America that have a line on the receipt to include a tip on top of the ‘total,’ similar to Uber and Lyft.”

TG: “I do prefer the AU method to the US method; at least waitstaff are paid a decent base wage there, and tipping isn’t essentially *required*.

TG: “Read up on the sad history of tipping. Read the research on how it exacerbates sexism, discrimination (hint: white women with big breasts make hugely more in tips that short Hispanic guys, and undoubtedly get sexually harassed a lot more, too.)”

PM: “I’ve been living and/or ‘reading up’ and studying tipping for more than 40 years. A lot of the sources of the cherry-picked data + studies regarding the origin of tipping + commingling w/sexual harrassment need to be scrutinized very carefully. More here:”

TG: “Regarding questions about the sexual harassment link…thanks for sharing that page.”

TG: “Also, in real life, nurses do not get tips and (from what my nurse friends tell me, almost never get gifts. My dad–repeatedly Teacher of the Year–probably got an average of 1 gift a year, if that. So tipping is inherently unfair occupationally as well.”

PM: “Thanks for the ‘real life’ lesson. I never said nurses get tipped. And as far as gifts, speak to more nurses, especially those in Oncology or Geriatrics. My father + 6 siblings taught school for a living. Their experiences of gratitude from parents differ from those of your dad.” 

TG: “Lastly, re: delightful surprises… I’m all for it! I gave a big gift card to a server in Singapore once because she was so astoundingly awesome to me. But that’s the opposite of the 20% tip, or “you should give $10 or more to your concierge when…” guidance. PS-You are awesome for doing things like putting in a good word to someone’s boss or writing a letter, review. I am 110% with you on such gestures! I need to do this more myself; I think it’s a powerful gesture and selfishly it makes me feel happy, too :-)”

PM: “I’m with you about letting workers (and their bosses) know when they do a great job. It’s not that hard, feels good, and often takes a lot less effort than the energy that some people expend to complain. Unfortunately, some people aren’t ‘happy’ unless they’re miserable…”

TG: “By the way, I *do* tip generously in restaurants, historically because of the tipped minimum wage, but now out of social pressure in non-tipped-min-wage states :p. And lastly, I’m glad we can both agree re: the awesomeness of unexpected kind gestures to recognize outstanding service… and I think a reasonable consensus on top of that might be that we both hope for a day when no one DEPENDS on tips for their livelihood :-).

PM: “I do hope that, and I thought that Danny Meyer’s ‘hospitality included’ at USHG in NYC was going to add momentum to that movement. The early ‘mixed’/troubling results indicate that American workers, consumers, and culture just aren’t ready for full adaptation of that method. And lastly, like stories, some blog posts ‘write themselves.’ I’ve enjoyed the repartee and have screenshots of every tweet. In the blog post, do you prefer your full name w/link to your twitter or anonymity with a code name? I won’t use ‘Mr. Pink’…” 😉

TG: “Hey, Patrick, it’s been a pleasure…I prefer my tweets not live forever, …at least not with my name on ’em. So if you’d be willing to anonymize them, that would be awesome; thanks! 🙂

It was refreshing to have a ‘conversation’ on social media that included disagreements and testy exchanges result in civil discourse rather than devolve into vitriolic rage followed by blocking each other. Thank you, Twitter Guy.

PS: “Twitter Guy” did apologize for painting all concierges with one brush. That’s the only tweet I didn’t take a screenshot of.

If you are interested in supporting the Server Not Servant blog and helping to bring the book project to fruition, please see the blue box on the right hand side of this blog post to make a contribution. Just don’t call it a tip… Thank you for your consideration. And please join in the conversation in the comments below, and share this post on social media if the spirit moves you. Cheers-PM

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Is Lobbyist ROC United’s ONE FAIR WAGE Really FAIR for All Workers? Tip Credit and Tipped Minimum Wage-Part 2

By: Patrick Maguire

Book Chapter: Human-to-Human Service

Posted: 8/6/2018

There are several updates since Part 1 of this series examining the tipped minimum wage and ‘tip credit’ legislation impacting American workers, restaurants, and consumers.

#1- Washington D.C.

June 19, 2018 from Axios: “Voters in Washington, D.C. approved a ballot initiative, known as Initiative 77, Tuesday that will gradually increase the $3.33 “tipped wage” for restaurant servers and bartenders to match the city’s minimum wage, currently $12.50 per hour, by 2026.

Why it matters: D.C. has become the latest battleground over minimum wage for tipped workers in the restaurant industry. The industry, which opposes the measure, argues that the initiative would force businesses to cut employee hours, pay, and jobs. But advocates and labor rights groups say it will help workers who are currently at greater risk of wage theft, and that they would no longer have to rely on tips from customers as a steady income. 

What’s next:  The D.C. Council — whose members are mostly against the initiative — could pass a measure to overturn the result or make changes that would address concerns raised by both sides.”

Washington City Paper – July, 2,2018After Initiative 77 Passes, Workers Say Customers Are Confused About Tipping:

If Initiative 77 is enacted, the tipped minimum wage will go up in eight increments until it reaches $15 in 2025. From 2026 onward, there would be one wage for all workers. But that hasn’t happened yet. While the “yes” votes led “no” votes 55 percent to 45 percent on election day, nothing is official. 

Because of its unique relationship with the District, Congress has a chance to interfere with the measure during its 30-day review period for D.C. legislation. Even if Congress doesn’t act, the D.C. Council could overturn the measure. A supermajority of the 13-member Council, Attorney General Karl Racine, and Mayor Muriel Bowser oppose 77. A similar referendum passed and was then overturned in Maine in 2017. 

“Ever since it passed, there have been more than a few [people who haven’t tipped],” says Kingfisher bartender Peter Pruitt. “I understand during the course of a shift, you get some people that do not tip generally. But it’s more prevalent. I had two customers that said, ‘Hey man, sorry 77 passed, you’re not getting a tip.'”

Joey Allen, who works some shifts as a manager and other shifts as a tipped worker at Jake’s American Grill in Chevy Chase, has also seen a handful of receipts with zero tips since June 19. One was for $53, another $31. “They’re thinking that they voted to abolish tipping,” Allen says, referring to customers. “One woman said, ‘Thank god I don’t have to tip anymore.'” Another said, “This initiative just passed, so I didn’t put a tip on there,” according to Allen. 

Joseph Hudson bartends at Nellie’s Sports Bar. He says he’s been serving people who leave no tip for years, so he can’t firmly blame 77 for him being shorted a few times since the election. He has two receipts that show zero tip on checks for $20 and $16. “It’s hard to tell, but 77 definitely muddies the waters,” Hudson says. “I presume some people think the situation is resolved—that I get $15 an hour now. But that’s not the case. I think people are really confused.” 

According to the Washington Post on 6/20/18, “Before Tuesday’s vote, 10 out of 13 council members opposed the measure, as did the mayor. One of those members, David Grosso (I-At Large) even urged opponents to apply pressure on the council to overturn the measure if it passed.”

The initiative did pass, and the D.C. Council then moved to enact legislation to repeal it.

Washington Post July 10, 2018:

A majority of the D.C. Council on Tuesday backed repeal of a ballot measure approved by voters last month that would force businesses to pay more to servers, bartenders, bellhops and other hourly workers who depend on tips.

Seven of the council’s 13 members co-introduced a bill that would overturn Initiative 77, which was passed by 56 percent of District voters in June’s primary election.

With the council about to break for a summer recess, the repeal legislation will not advance until the fall. It was nevertheless an ominous development for supporters of Initiative 77, who have suggested they may be willing to compromise with opponents rather than face a total repeal.

July 24, 2018 ROC United Monthly e-news response:

One Fair Wage Updates:

DC – DC Initiative 77 won with nearly 56% of the vote. Now the hypocritic DC Council wants to overturn its own people’s vote. It’s nothing more than an undemocratic black voter suppression. ACTION: Tell the Council to respect the will of the voters.

On July 27, 2018, the facebook page, No2DC77 , supporting repeal of the initiative, posted the following graphic:

The caption to the graphic reads: “In 2014-2015, Initiative 77 sponsor group ROC-United received $1.1M in funding for its ongoing outsider attempt to outlaw the tip-wage system in DC – merely part of $Million$ fueling an effort opposed by tipped workers.” [Below in this post, I  asked ROC for confirmation of these grants and a breakdown of how much money they have spent lobbying in each state. I also emailed all of ROC leadership to notify them of this blog post, the unanswered questions from Part 1, and the requests for information herein.]**

 It will be very interesting to see if the outcome in MA influences the pending decisions in D.C., New York, and Michigan…

#2- Massachusetts.

The Legislature passed the “Grand Bargain” with the MA House vote of 126-25 and Senate vote 30-8 on 6/20/18. The phase-in of the tipped minimum wage from $3.75 (current) to $6.75 on 1/1/23 is a very reasonable compromise. The original legislation called for $15.75 tipped minimum on 1/1/25, then elimination of the tipped minimum wage and tip credit altogether. ROC supported the original legislation with their One Fair Wage and ‘High Road’ campaign. The Raise Up MA ballot initiative originally proposed a gradual increase of the tipped minimum wage to $9, but on 6/7 sent a letter to Senate President Chandler and Speaker DeLoe proposing tipped min wage at 50% of the full minimum wage, retaining the tip credit for restaurant owners. Here are the new, scheduled phase-in increases of the tipped minimum wage for Massachusetts:

Noteworthy is the change that “Workers must make at least minimum wage for each shift worked (rather than pay period as required under current law).” It is also very important to note that Raise Up MA made a decision to drop the tipped minimum wage ballot initiative, provided that MA Governor Charlie Baker signed the “Grand Bargain” compromise into law by July 1. On Thursday, June 28, Governor Baker signed the legislation into law.

From Mass Live, “By 2023, Massachusetts will be tied with California for the state with the highest minimum wage in the country, unless other states follow suit. Washington, D.C. and New York have also passed a $15 minimum wage, but New York’s law will go into effect more gradually. The [full] minimum wage will increase gradually, from $11 today to $15 on Jan. 1, 2023. There will be a lower increase for tipped workers, from $3.75 today to $6.75 by 2023.”

The tip credit in MA will remain intact, which pleased many servers and owners of full service restaurants who have been carefully following the legislation.

Katie Johnston in the Boston Globe-June 21,2018: “$15 minimum wage, mandatory paid leave remain rare.” From the piece:

“The wide-ranging “grand bargain’’ bill emerging from Beacon Hill would make Massachusetts just the third state in the country to approve both a $15 minimum wage and mandatory paid family and medical leave.

The bill, which the Legislature passed Wednesday, would also impose a small payroll tax on workers and employers to pay for the paid leaves of absence.

As the provisions in the legislation became public, business owners worried that they would have to raise prices, cut employee hours, or possibly even close their doors. Workers, on the other hand, rejoiced at the prospect of more money in their paychecks and a greater ability to care for family members in need.

Paid-leave requirements — which allow employees five months off for medical reasons and three months to care for a new child — could also cause complications for employers who need to fill the gaps while employees are away.”

The cost and length of paid family and medical leave in MA is a concern with the independent restaurant owners I communicated with. They note that menu prices could rise significantly to cover the costs, and several full-time positions may be eliminated in favor of part-time positions. From a veteran restaurateur I exchanged emails with shortly after the legislation passed who requested anonymity:

“As an operator in an industry with razor thin margins we just do not have the extra capital to conduct social experiments. All of us are having a difficult enough of a time handling all of our current expenses. Higher prices will fix all of this and that is where we will be in several years. The $64,000 question is which restaurant/s will be the first to raise them? Once enough competitors raise their prices the rest will follow.

I remember the airline industry had a very tough time making money for a long time. Then one day a few years ago, one raised their prices and then they all did. They put fewer flights in the air. All the planes are full now. They make money. We get where we need to, though it costs quite a bit more. As a hospitality guy, I of course want to see these things work out for everybody and manage to have some profit at the end of the day!”

I attended a rally at the Massachusetts State House on June 12th organized by Andrew Farnitano and Raise Up MA, the folks behind the original ballot initiative to raise the tipped minimum wage to $9/hour on 1/1/22. There were about 20 people gathered around the designated rallying area waiting for the marchers and chanters to arrive when a woman repeatedly yelled, “Do we have any servers or bartenders here?” No one raised their hands. A few minutes later, a group of about 30 people came marching down the hall carrying this banner:

All of the speeches and chants led onlookers to believe that servers and workers making the current, tipped minimum wage of $3.75 were expected to ‘survive’ making only $3.75/hr. It was never mentioned that all servers are guaranteed the full minimum wage, which is currently $11/hour in MA on the way to $15. (And that is the same in every state that an increase of the tipped minimum wage is being debated.) Tipped workers are guaranteed the full minimum wage that their state mandates. One MA server at the rally stated that he was afraid to speak up if his employer neglected to pay him the full minimum wage because he didn’t want to be retaliated against with reduced or ‘bad’ shifts.

Failure to pay tipped workers the full minimum wage (wage theft) is illegal everywhere. We are in the midst of a “buyer’s market” for restaurant industry workers. Staffing shortages are one of the biggest challenges facing restaurant managers and owners today. It’s one of the best times in history for restaurant industry workers looking for jobs. Unless servers are working in an isolated, rural area with only one restaurant within several miles, they need to speak up, report the restaurant in violation of wage theft, and move on to another job. And even if a restaurant is the only show in town, there is legal recourse to address wage theft. The martyrdom and deception at the sophomoric MA rally truly undermined the Raise Up MA cause for observers who have done their homework. It’s unfortunate, because I believe that, in theory, their cause is noble.

I met Andrew Farnitano, a key member of the Raise Up MA coalition after the rally. Andrew was extremely cordial and has always been very responsive when I have emailed him for information or comments for blog posts. He informed me via email a few days later that no one participating in the rally was paid to participate as I had speculated.

It is interesting to note that in a letter that Raise Up MA sent to MA legislative leadership on 6/7/2018, they proposed a $15 full minimum wage with a 50 percent tipped credit, or corresponding $7.50/hr tipped minimum wage. That is down from the original ballot initiative of a $9/hr tipped minimum, and a little higher than the $6.75 tipped minimum wage that was eventually signed into law.

I also think it’s very important to note that Raise Up MA never proposed $15+/hr (ROC “ONE FAIR WAGE”) eliminating the tip credit and the tipped minimum wage that ROC United lobbied for.

Two nagging questions have been haunting me since I started digging deeper into these issues (and these apply to all states and groups considering changes to the tipped minimum wage):

A- If tipped workers are already guaranteed to make the prevailing full minimum wage, despite the lower tipped minimum wage, why change the current law? Who wins besides the states making more money in payroll taxes? Why not just enforce current ‘wage theft’ laws more aggressively?

B- How many independent, established, medium to large, full service restaurant operators have legislators, lobbyists, and interested parties consulted with to review their current Profit and Loss numbers, and the projected impact of the minimum wage increasing from current to $15 (or whatever proposed)? Out of all of the restaurant operators they spoke with, how many supported an increase in the tipped minimum wage above 50% of the full minimum wage?

A reliable source familiar with the negotiations at the State House told me that hundreds of MA restaurant operators proactively reached out to educate MA legislators on the impact of an increase in the tipped minimum wage, and that made a significant difference in the outcome.

In an email exchange I had about financial modeling with Nai Collymore-Henry, VP of Partnerships at The Alliance for business Leadership, I stated that MA restaurateurs are operating in an environment where thousands of seats and units have been added over the last few years, and competition for staffing is at an all-time high. And before anyone says, “they’ll just have to lower costs, be more efficient, and increase sales,” please show us the proven models for full service restaurateurs to do that and thrive. In my opinion, not enough people are digging deep enough to examine the math, and if the math doesn’t add up, there is no merit to the proposed experiment of significantly increased labor costs.

Nai’s response: “The Alliance for Business Leadership is an organization whose mission is to ensure that economic growth and social responsibility go hand in hand. A lot of our members in the restaurant industry are super skeptical about the ballot initiative and legislation and want to ensure that they can stay open with the increased operating costs. Essentially, we convene business leaders around things like housing, transportation, and taxes and are at the negotiating table as the progressive business voice.

Long story short: We want to be able to do the math for full service restaurants and point people in the direction of some sustainable models that have allowed restaurants to stay open during this transition. We have a lot of HR firms as members who have helped restaurants make similar transitions and are struggling with how to convene people around the information in a way that people can ask questions…We just want to be able to provide a forum for restaurants to discuss this and engage with the payroll and HR specialists who have worked on the back end of similar transitions. We also want to be able to stress the importance of supporting restaurants during this transition to local lawmakers.” 

He also stated that Raise Up MA obtained their data from MassBudget which has not really looked into tipped wage specifically in the restaurant industry and has just aggregated data that’s not really restaurant specific.  It blows my mind that some of the biggest players at the negotiating table didn’t invest more time soliciting input from veteran operators of full-service restaurants.

March 19,2018 in Carol Wood, a director at Homebase, an HR solutions company,… points out that many restaurants are small businesses and labor is a significant portion of their expenses. And when these smaller restaurants try to compete against larger chains that enjoy economies of scale, any move to boost wages will invariably result in the consumer footing the bill.”

This critical factor is not being taken into consideration by many of the key players involved.

Sidenote: I won’t shame him by naming him here, but privately, after the State House rally, I asked a current MA Democratic candidate for governor how many established restaurateurs he spoke with while conducting his research and he said, “A few.” When I asked again, “How many?” he walked away and said he didn’t want to argue with me. As I walked past him on my way out, I left him with the parting comment, “No credibility.”  I sent him the same question via email, and he never responded. This same candidate spoke at the rally preaching the same loose narrative about sexual harassment and “ONE FAIR WAGE” that many misinformed celebrities are preaching. You can’t take a credible stance on these critical issues without doing your homework. And it was apparent from his campaign rhetoric and timid response to me that he barely scratched the surface while researching these complicated issues. There are real people and livelihoods at stake here that too many selfish, egotistical people are manipulating and exploiting for personal and political gain. And with a little bit of digging, it’s easy to determine whose motives are genuine and who is full of shit.

The end result in MA is a triple increase for tipped workers; A) They are guaranteed the full minimum wage, and that amount is increasing every year. B) Operators will raise prices to pay for increased minimum wage and benefits, therefore tips will increase. C) The tipped minimum wage will be increased.

#3- Michigan

Detroit Free Press June 8, 2018:A battle is brewing in Michigan over tipping in restaurants that could fundamentally reshape the industry. The outcome may be decided at the ballot box this November.

In May, the Michigan One Fair Wage coalition submitted more than 373,000 signatures in support of a ballot proposal that would, among other things, incrementally increase the state minimum wage to $12 by 2022 and eliminate the so-called tip credit that allows employers to pay their tipped employees as little as $3.52 an hour. The initiative would bring tipped employees’ hourly pay in line with the state minimum wage by 2024.”

A provision of Fair Labor Standards Act currently requires employers to make up the difference if a tipped employee earns less than the minimum wage, which in Michigan currently stands at $9.25 an hour. But according to the One Fair Wage website, “enforcement is so lax and disorganized that wage theft has reached epidemic levels.”

Several assertions about wage theft claim that it is “rampant,” or reaching “epidemic levels” without substantial,  detailed data supporting the hypothesis. If wage theft is a systemic problem in the restaurant industry (and I believe it is, to a degree), why not drastically improve enforcement rather than upend the the entire industry?

As noted in the MA update above, proponents of ONE FAIR WAGE often neglect to mention that restaurant owners in every state are legally obligated to pay tipped workers the difference between what they make in tips and the full prevailing minimum wage in their state. Efforts to portray tipped workers as struggling to get by on the tipped minimum wage only are misguided, misleading, and manipulative, and undermine the “high road” being preached.

#4- New York

December 17, 2017: Governor Cuomo Unveils 5th Proposal of 2018 State of the State: Examine Eliminating the Minimum Wage Tip Credit to Strengthen Economic Justice in New York State:

“Governor Andrew M. Cuomo today unveiled the fifth proposal of the 2018 State of the State: direct the Commissioner of Labor to schedule public hearings to examine industries and evaluate the possibility of ending minimum wage tip credits in New York State. In certain workplaces, such as car washes and restaurants, where wages and tips are both generally low**, workers’ income can rely entirely upon tips. These tips, meant as a reward for good service, instead serve as a critical wage subsidy that brings workers’ wages just up to the legally mandated minimum wage.”

Fast-forward 6+ months later, from The New Food Economy on June 28, 2018: The New York State Department of Labor on Wednesday [6/27/18] concluded months of public hearings about whether or not to abolish the tip credit and put all workers—including those who receive tips—on the same minimum wage. Here in New York City, that would be $15 an hour by 2020…

Follow the money.

Dropping the tip credit would also line the state’s coffers. Higher wages would result in higher payroll taxes for the state, said Ron Mathews, director of the New York City chapter of the New York State Restaurant Association, an industry group for restaurateurs. He was one of 349 registered speakers at the hearing on Wednesday, which was held at Hunter College before a panel of four Labor Department officials.

“The reality is, New York state stands to gain tremendous tax revenues and talking points for, let’s say, political gain and budgetary benefit,” Mathews testified.”

The public debate over this issue has been contentious, including misguided, uninformed celebrities joining the moral crusade.

The New York State Department of Labor tweeted highlights during their hearings, including this statistic from Andrew Rigie, Executive Director  the NYC Hospitality Alliance:

[**$25/hour is not “generally low” as the 5th Proposal initially stated above.]

Mark Hurley bartends at Pastabilities in Armory Square in Syracuse, NY. He penned an Op Ed on 4/10/18 for

“Gov. Andrew Cuomo’s “5th proposal” in his State of the State address would reduce tips, exacerbate income disparities and severely strain already thin operating margins. But it seems, barring a change in course, this city’s service class is about to find out that their stomachs (and savings accounts) don’t agree with the “economic justice” his administration is currently forcing down their throats.

To unpack this a bit, let’s start by introducing a couple terms. The “tipped wage” is a reduced minimum wage paid to service workers earning income from tips. In New York state, it is $7.50 an hour. Employers claim a corresponding “tip credit” ($2.90/hour) on these wages under the condition that an employee must be compensated the full minimum ($10.40/hour) after their tips are counted. Any shortfalls must be reimbursed by the employer, and this obligation is subject to state audit, though it is seldom necessary. (My effective hourly wage is triple the state minimum as a bartender at Pastabilities.) Restaurants use this system to offer reasonably priced fare and, more importantly, adequately compensate non-tipped employees in a notoriously socioeconomically stratified industry.

Having established this, enter the Restaurant Opportunities Center United (ROC United), a national labor organization spearheading the campaign to eliminate the tipped wage in New York state. Abolishing this system, they claim, has the potential to halve the rate at which service professionals experience sexual harassment. Their advocacy and research on this subject has become a cause celebre backed by the Time’s Up movement, repeated breathlessly in the media  and referenced in Cuomo’s policy proposal. There’s only one catch: Their conclusions are bunk. ROC United’s claim — that sexual harassment rates are doubled in states using a tiered wage system — is founded on a cynical manipulation of their dataset that fails to accurately measure the customer-server harassment it purports to. It is not reproduced using more forthright statistical methods and it is not observed in federal data.

Local service professionals should not be content to sit by as the administration imperiously dictates our compensation rates. You can push back: Workers successfully overturned a similar referendum in Maine after expressing anger over reduced tips in addition to the issues outlined above.”

On 4/25/18, Juliet Masters-The Edge Harlem Cafe, Melba Wilson-Melba’s Restaurant, and Crizette Woods-Sylvia’s Restaurant, all female restaurant owners in New York, authored an OP-ED in Crain’s New York Business: Wage hike is tipping point for restaurants- Jacking up base pay for servers would sink us.” The piece was co-signed by 17 additional female restaurateurs in New York: 

“In February many of us were featured in a Crain’s cover story as female entrepreneurs who were instrumental in Harlem’s restaurant renaissance. The story provided concrete examples of the success of the area’s minority- and women-owned businesses. Unfortunately, that status is now being threatened.

Hollywood celebrities are pressuring Gov. Andrew Cuomo to eliminate the tip credit that restaurants can apply against the regular minimum wage when they pay tipped workers. As Cuomo holds public hearings on this across the state, he ought to value our voices as well. The credit allows us to manage costs when our servers and bartenders earn more than the full minimum wage in wages and tips combined—as they often do by large margins. If that compensation falls short, we have to make up the difference so no one is earning a sub–minimum wage.

Running a restaurant in New York City is beyond expensive. We deplete our savings and mortgage our homes in hopes of establishing model businesses in our community. In Harlem, the cost keeps going up. The tip credit has helped us open and sustain our restaurants.

We didn’t start our businesses just to make a profit but also to offer great hospitality and food that nourishes our neighbors’ souls. We want to set a positive example for other women as well as Harlem’s youth so they may see their future selves in every meal served. Part of our mission is to create job opportunities for our residents. They are young and old, college-educated and GED recipients, immigrants and the formerly incarcerated—all of whom deserve opportunity in their backyard of Harlem.

Many of us capitalized on the lower commercial rents in Harlem to find a storefront and bootstrap the rest until we were able to get the cooking gas turned on. Unsurprisingly, because of our success and other forces, rents have risen, making it more challenging for others from the neighborhood to do the same. Once you do get your doors open, you can embrace the competition and the day-to-day grind of running a small business. However, the red tape, laws and regulations make it much more expensive and complicated to survive, let alone thrive.

Putting aside those challenges, we’re proud that our tipped workers earned a living wage before the governor increased their base wage 100% over the past three years. During that same period, he reduced our tip credit three times. If Cuomo eliminates our tip credit completely, we would need to reevaluate the existence of our businesses. We are already reducing employee hours and positions to keep our doors open.

Some people claim the practice of tipping results in harassment of workers by customers and employers. We don’t agree that eliminating the tip credit will effectively address such unacceptable behavior. We do, however, believe that losing the credit will put our restaurants and the jobs of our fellow women and minorities in jeopardy.

Many restaurant and bar owners would consider banning tipping and raising menu prices in an attempt to stay afloat, but that would result in some servers earning less than they do now.

Rather than take our employees’ gratuities, the governor should accept a tip from this group of successful minority and female business owners and save the tip credit.”

August 3/18 News10NBC-NYS Exposed: State DOL reviews wage increase proposal for tipped workers:

“I think about it every day, I really do,” says John Urlaub, owner of Rohrbach Brewing Company

At Rohrbach Brewing Company in Gates, waitresses and bartenders rely on tips. Now, there are wide-spread concerns about a potential change that could impact those earnings.

“I think financially it will hurt them, not only in the percentage tips that they get, but if you aren’t filling the seats, you’re not serving food, you’re not getting a tip on that,” says Urlaub. 

The plan would raise the minimum wage for tipped workers from $7.50 to $10.40.

However, many believe that increase will decrease the amount that workers make in tips. It would also raise the burden on business owners by forcing them to pay the higher wages.        

“It’s not like we don’t have any information about whether this is the right move or not,” adds Urlaub. “In the state of Maine, they tried it and they reversed it and not because the owners were screaming, but the staff was saying, ‘this did not work out the way we wanted.'”

July 24, 2018 ROC update via e-news: “Currently, tipped workers have to count their hard-earned tips toward simply getting paid a minimum wage. This amounts to an unfair profit subsidy for employers, and less money in workers’ pockets.” 

#5- ROC United. 

Let’s start where bartender, Mark Hurley (above) left off.

According to the New York Post on June 27, 2018, NYC restaurateur, Danny Meyer “was among 21 eatery owners who signed an advocacy group’s letter to Gov. Andrew Cuomo calling for the end of the tip credit wage paid to wait staffs across the state… Meyer was not happy to learn that his name was included on the letter. He quickly asked to have his name and restaurants removed from the missive.” 

Additional excerpts from the New York Post piece:

“The group, the Restaurant Opportunities Center, or ROC, is seeking to eliminate the lower-than-minimum wage now paid to waiters and waitresses in New York.”

“Meyer’s name on the letter raised eyebrows — and tempers — of other eatery owners in the city because it would have marked the first time the 60-year-old businessman, whose stable of restaurants includes the Union Square Cafe, Gramercy Tavern and Shake Shack, publicly advocated for forcing the change.”

“The hospitality guru does not think that his peers in the restaurant industry should be forced to match the wages he pays his staffs.”

“Meyer believes restaurateurs should implement their own solutions to the problem, sources familiar with his thinking said.” [I would still like to hear this reinforced from Danny Meyer himself, and have reached out to him for comment. Possibly link to my tweet.]

ROC President Saru Jayaraman, who has tapped Sarah Jessica Parker in the group’s fight to eliminate the tip credit, owned up to the Meyer mistake.

“We accidentally included [Meyer] in the letter, but look forward to continuing our shared fight for a better industry,” she said.

In Part 1 of this series, I included questions and answers from an email exchange I had with ROC United leadership. ROC co-founder, Fekkak Mamdouh responded on behalf of his team. Here are some open-ended items that he still has not responded to:

Question #1 What is the current ROC United position on the social contract, the custom of tipping in America?

Fekkak (partial) response: ROC supports One Fair Wage, which means better wages and better tips.[1] The seven states that have One Fair Wage – which means that restaurant owners pay their workers the full minimum wage and that tips are on top of the wage – have higher restaurant sales per capita, higher job growth among servers and other restaurant workers, and the same or higher rates of tipping.[2],[3],[4] All seven states have the same or higher tipping averages as the 43 states with lower wages for tipped workers.[5] According to PayScale, servers in San Francisco, California, with the highest wage in the country at $14 per hour, earn median hourly tips of $11.90, compared to $9.50 in NYC, and $8.50 in Washington, D.C.[6] That’s because customers do not tip based on how much the server earns in wages – most customers have no idea how much the server earns in wages.

Fekkak full response in Part 1.

Patrick Maguire response:

Fekkak, thank you for responding to my questions in a timely manner. I asked question #1 because it appears that the ROC position on tipping has evolved over the years, from denouncing the notion of the practice entirely, to now embracing tipping in addition to servers receiving full minimum wage. Is that because of the evidence that several ‘no tipping’ or ‘hospitality included’ (Danny Meyer-USHG) experiments are failing in America? In addition, you didn’t answer my original question:

Given the above, what is the current ROC United position on the social contract, the custom of tipping in America?

Fekkak, Saru, and ROC: No additional response as of  8/6/18.

Question #4- If eliminating the tip credit and implementing ONE FAIR WAGE is in the best interest of all servers, workers, and restaurant owners, why did LD 673 pass reinstating the tip credit after careful scrutiny by the Labor, Commerce, Research and Economic Development Committee (11-2 favorable vote) and a bi-partisan legislative vote for reinstatement in Maine? Shouldn’t the reversal in Maine send a loud and clear message to Massachusetts, New York, and all other states considering elimination of the tip credit and tipped minimum wage to slow down and thoroughly consider the implications before passing legislation or a ballot initiative?

Fekkak Mamdouh:  The people of Maine passed the One Fair Wage ballot measure in November 2016. More people voted in favor of raising the wages of both tipped and non tipped workers than either Presidential Candidate.[10] After it passed – and before it was implemented – the National Restaurant Association (NRA) spent significant funds lobbying to overturn the ballot measure.[11] The NRA is a highly funded trade lobby representing the Fortune 500 corporate restaurant chains. It has lobbied heavily in every state, including Maine, to keep wages for tipped workers as low as $2.13 at the federal level and $3 in Maine. Corporate interests should not overrule the basic needs of working people to survive.

Wendyll Caisse (RWA) response to Fekkak: 

As an active member in the Restaurant Workers of Maine, which was simply a Facebook Page started by a server by the name of Jason Buckwalter from Bangor; I can attest that we did NOT receive even a phone call from the NRA during our grassroots effort of 5,000 servers – and absolutely NO funding – we didn’t even have a bank account! The tipped wage information cited here for Maine is incorrect. After the referendum passed by a slim margin in November, many voters were not even aware of what they had voted for, as the elimination of the tip credit was 1 part of a 3-part question. The start of the wage escalation was implemented on January 1, 2017, the tipped minimum went from $3.75 per hour to $5.00 and the minimum wage went from $7.75 per hour to $9.00. The people most intimately affected by the loss of the tip credit were the ones asking for the reinstatement.

Fekkak, Saru, and ROC: No additional response as of 8/6/18.

Question #5- If a restaurant previously had a tipped minimum wage of $3.75 (current in MA), and the tipped minimum wage went up to $15/hour, even gradually over 5-6 years, what would ROC United’s advice be to owners of FULL SERVICE restaurants (with servers, no automation) to keep Prime Cost under 60%? How much would an owner need to raise their prices to achieve 60% prime? Do you acknowledge the risk of your experiment and why so many restaurant owners are fearful of it?

Question #6- With the elimination of the tipped minimum wage and ROC United’s Fight for $15, what is the ‘new’ labor cost percentage goal if servers are making $15/hour?

Fekkak Mamdouh (Responses to #5 + #6): Restaurant owners in seven states – Alaska, Minnesota, Montana, Oregon, Washington, Nevada, and California – keep their prime costs well under 60%, and are thriving. (Partial response. The complete response can be found in Part 1.)

Patrick Maguire response: Fekkak, I would love to see the data from the full service restaurants in the 7 ‘One Fair Wage’ states operating at prime costs “well under 60%” that are “thriving.” Has this data been presented to the legislature, the Labor Committee and all parties currently negotiating in Massachusetts?

Fekkak, Saru, and ROC: No additional response as of 8/6/18.

Question #7- Saru, Fekkak, Sekou, and ROC United leadership- I believe that commingling the issues of sexual harassment and server compensation (via tipping and tipped minimum wage) is a strategy being employed by ROC United (with cherry picked data) to mislead and exploit the very people that you are claiming to be advocating for. And many of the Hollywood folks jumping on the morality bandwagon are enjoying the optics of the crusade, but are misinformed and unaware of the crucial details (and math) of how a cause they claim to be champions of could actually harm many individuals and small businesses. There should be more time, effort, and energy focusing on facts, education, and compromise to benefit servers and all workers rather than all of the divisive rhetoric against ‘rival’ lobbying groups. I welcome your response to my statements and anything cited above following question #6.

Fekkak initial response: “There are now multiple sources of research and investigative journalism that corroborate that a mostly female workforce of tipped workers (two-thirds of tipped workers nationally are women) having to rely entirely on tips for their income subjects them to sexual harassment from customers, co-workers and managers. We surveyed 688 workers nationally on the issue; nearly 90% said they experienced sexual harassment as a result of having to tolerate inappropriate customer behavior to feed their families in tips.[16]” (This is a partial response. Full response can be found in Part 1.)

Patrick Maguire response: Fekkak, you painstakingly provided 18 footnotes for several items, but did not provide any to support your opening comments, “There are now multiple sources of research and investigative journalism…” And please provide a copy of the survey and the method of choosing the 688 workers that you mentioned above.

Wendyll Caisse (RWA) response to Fekkak: 

The perpetrator of harassment bares the sole responsibility of their deviant behavior because to point blame on the compensation system removes the blame from the accused. Sexual harassment is a cultural problem that we are finally beginning to address, and if solving this social issue was as easy as a wage discussion, on street harassment wouldn’t be the most prominent situation that harassment is experienced in. RWA in no way acknowledges any ‘reports’ executed by ROC because of their flawed methodology, such as using IP addresses for the One Wage states vs. doing focus groups and interviews. Additionally, we at RWA hold their interviewer training and interviewer ‘drawing’ techniques as highly suspect. (This is a partial response. Full response in Part 1.)

On June 1, 2018, MinimumWage.comEEOC Data Debunks Claimed Link Between Tip Credits And Sexual Harassment:

“Perhaps the most-popular argument for eliminating the tip credit is the claim that states without one have half the rate of restaurant sexual harassment as those states that do. Earlier this year, the Employment Policies Institute released a report-length examination of the problems with this claim, which was based on a deeply-flawed survey conducted by the Restaurant Opportunities Center (ROC).

Based on a review of ROC’s methodology and Equal Employment Opportunity Commission data collected during the time period studied by ROC, EPI concluded that “claims about a tip credit and its link to sexual harassment are…baseless.” New data obtained from the Commission via a public records request, which cover all federal- and state-level sexual harassment charges from the restaurant industry filed between 2007 and 2017–from customers, coworkers, and management–cast further doubt on ROC’s claim.

Contrary to ROC’s claim, the data show that the seven states without a tip credit (plus Hawaii, which has a very small tip credit) all have a higher percentage of restaurant sexual harassment charges than does New York–a state where ROC is trying to eliminate the tip credit.

There are few if any strong arguments for eliminating the tip credit. But the data make clear the worst argument for doing so is the claim that it’s in any way linked to sexual harassment.”

Fekkak, Saru, and ROC leadership, I welcome your response.

Question #8- Has the pledge to furnish proof of the accusation that RWA is being backed by the National Restaurant Association been followed up on by Saru or anyone at ROC United?

Fekkak Mamdouh:  Restaurant owners who are part of the National Restaurant Association funded the launch of Restaurant Workers of Maine, which then launched Restaurant Workers of America. The RWA has admitted it receives no money from restaurant workers, only restaurant owners.[17] The NRA funds the RWA to travel around the country to oppose higher wages for restaurant workers.[18]  (Fekkak Mamdough footnotes are included at the end of Part 1.)

Wendyll Caisse (RWA) response to Fekkak:

While some of the above answers are disingenuous, this response is a patent lie. The Restaurant Workers of Maine was simply a Facebook group of 5,000+ servers, started by a server that received ZERO funds and never had a bank account. The RWA is not funded by, nor connected to, the NRA. As the Treasurer of this new 501c4, I was happy to see numerous $1 and $5 membership fees coming in from tipped servers across the country; there have been no deposits from the NRA. Again, ROC has made another false statement; we HAVE received funds from restaurant workers. Through the generosity of our restaurant community, our board members have been able to enjoy low travel expenses due to people offering rides, couches, and meeting accommodations at no cost to us.

Fekkak, Saru, and ROC: No additional response as of  8/6/18.

In addition to the evasive, incomplete responses from Part 1, there are some additional,  important items to note about Fekkak Mamdouh, Saru Jayaraman, and ROC United.

To be clear, ROC United, the organization preaching that restaurateurs need take the “High Road” and pay their tipped employees $15/hr, ‘operates’ 1 restaurant in Detroit (COLORS) from 11am to 3pm for lunch only. And the restaurant is partially funded by grants. Real restaurants with real balance sheets, struggling to survive, don’t have the luxury of grants and artificial assets. That’s right, they’re open for 4 lunch shifts a week, period!

From the COLORS Detroit website:

Mission: COLORS is the Social Enterprise of the (ROC-MI) a division of Restaurant Opportunities Centers United (ROC United) based out of New York. Our goal is to set the example through professional training, strategic execution, and the operational action of running a successful restaurant and showing how it can co-exist alongside of caring for our #1 Customer… beside the patrons that we service… OUR EMPLOYEES!

Despite having announced that they will be opening restaurants in NYC, Oakland, CA, Washington, D.C., and New Orleans, the only ‘restaurant’ that ROC currently ‘operates’ is open 4 days/week for lunch, and funded by grants.

To date, despite several requests from multiple sources, I have never seen a comprehensive financial model from ROC demonstrating how real, full service restaurants are supposed to ‘thrive’ while paying their tipped workers $15/hr. 

Wendyll Caisse (RWA):

“The restaurant industry normally has a 30% labor cost (with a tip credit model) – retail has 11%. To put forth ROC’s version of this measure that not only raises the minimum wage but eliminates the tip credit is an experiment that has never been done before. Full service restaurants will have a 400% cost increase in their server pay line item. To most operators, this is simply not feasible without making drastic labor cuts or automating. ROC has not done the math. We can make changes as owners, but it will be at the detriment of our staff. Changing from a full service model to counter service for example, would allow an operator to cut their FOH staff by 75%. Additionally, some urban, high end operators may succeed with a 40% menu price increase – but there is no financial evidence that this model is sustainable for independent, mid-priced restaurants. RWA has put forth an escalation model, that doesn’t even speak to PEOD (Price Elasticity of Demand) in menu price increases, it is beyond irresponsible that a national, well-funded organization like ROC, with $9.8 million in total revenue in 2016, can’t give a financial model of a 400% increase in the tipped wage in Massachusetts from $3.75 to $15 that they are promoting.”

Fekkak, Saru, and ROC leadership: No additional response to Wendyll’s statement as of  8/7/18.

From the ROC website: One of the tenets of the ROC United model: (2) Engaging employers through our “high road” employer association RAISE, which provides: training, technical assistance, and a peer network of like-minded employers following the high road to profitability, which includes higher wages and working conditions for those employed at their restaurants; leadership development and civic engagement opportunities; research and communications work that documents the benefits for all three stakeholders of taking the high road and more.

Question and comment for Fekkak, Saru, and ROC Leadership: Does the statement above imply that struggling, REAL restaurant owners who are not voluntarily paying their tipped staff $15/hr are inferior or taking the “low road?” Instead of morality plays, money grabs, and divisive rhetoric, I’d like to see real numbers, and thoughtful, fair, creative solutions that simultaneously take into consideration workers, owners, and customers alike. And stop skewing the data by combining earning statistics of minority, female servers at national chains in rural America with workers at independent, full service restaurants in urban locations for the convenience of your unfounded, guilt-ridden narrative. And show us the in-depth financial modeling from multiple ‘thriving,’ full service restaurants in every “ONE FAIR WAGE” state.

Fekkak, Saru, and ROC Leadership: No2DC77 in the graphic above** claims that in 2014 and 2015 you received 2 grants from the Novo Foundation totaling $1.1 million for “Project support district of Columbia campaign to end tipped minimum wage.”  Will you please confirm receipt of those funds?

Fekkak, Saru, and ROC Leadership: In your monthly e-news you state that “Nothing supports our fight for better wages and better tips more than your monthly contributions. It’s that consistent support that we need to focus on what matters: lifting the workers, and especially women of color who turn their power into an electoral muscle.” That quote is just above your requests for donations. Is it your intent to unionize restaurant workers, increase their wages and extract union dues from their pay to sustain your organization longer term?

Kekkak, Saru, and ROC Leadership: According to Ballotpedia, the Michigan One Fair Wage campaign has raised and spent more than $1 million, with most of the donations coming from the ROC and its affiliated organizations. Please confirm.

Also, will you please provide a breakdown of how much money ROC has spent lobbying for ONE FAIR WAGE ($15/hr.) and against the tipped credit in every state?

As I have previously stated, despite their initial noble, humble mission, ROC’s evolution has been very disappointing. I’ll take a deeper dive into their troubled history in a future post.  Their current strategy of dodging facts, misleading information, questionable studies, and commingling sexual harassment and server compensation to exploit the very people that they claim to be advocating for, is disingenuous. There should be more time, effort, and energy focusing on facts, education, and compromise with lawmakers to benefit servers and all workers and restaurant owners, rather than divisive rhetoric against ‘rival’ lobbying groups and eliciting platitudes from uninformed Hollywood actors. And let’s be clear, the ROC United cottage industry is a lucrative endeavor.

The financials below were obtained from public IRS Form 990 for Nonprofit Tax Code 501(c)(3):

As reported in a Capital Research Center piece by Julia Tavlas in August of 2013:

ROC steadfastly denies that it is a union even though, as the Village Voice once noted, “it often employs the tactics of bargaining, protesting, and picketing.”  ROC-United claims 501(c)(3) public charity tax status under the classification of “category R20 (Civil Rights, Advocacy for Specific Groups).” And there’s a reason why it is classified as such and not as a union. As the website (currently inactive) explains:

While labor union activities are highly regulated under the National Labor Relations Act (NLRA) and other labor laws, the activities of so-called “worker centers” remain largely unregulated. By operating as a worker center, ROC can claim 501(c)(3) charitable organization status, which allows ROC to pay no taxes and to raise tax deductible contributions from foundations. But more importantly, this also allows ROC to flagrantly skirt federal labor laws and union disclosure requirements.

ROC United Financials 2016 (2017 unavailable)

Total Revenue: $9,871,538

Salaries, other compensation, employee benefits: $2,788,285

Total assets beginning of year: $2,589,350

Total assets end of year: $9,129,736

Total liabilities beginning of year: $196,982

Total liabilities end of year: $1,802,747

Net assets or fund balances beginning of year: $2,392,368

Net assets or fund balances end of year: $7,326,989

Fekkak Mamdouh compensation: 2016 = $84, 442  2015 = $103,295

Sary Jayaraman compensation: 2016 = $89,625  2015 = $102,691

2016 Travel: $276,312

2016 Schedule C Part II-A:

#1c-Total lobbying expenditures to influence public opinion: $319,977

Additional income for Saru and Fekkak derived from ROC affiliates, Diners United, ROC Action, or the UC Berkeley Food Lab Research Center could not be located.

Servers, restaurant industry workers, and owners interested in supporting industry brothers and sisters in the fight to preserve the tip credit should follow and support the work being done by Restaurant Workers of America-RWA, and share their website, Facebook page, Twitter, and Instagram platforms with your restaurant colleagues and everyone in your network willing to support you.

Thanks to everyone who provided information for this post. Stay tuned for Part 3. Feel free to join the conversation in the comments below, or email me at with tips, information, and/or recommendations for future posts.

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