Posted in Small Business Hacks | by: Kinjal Dagli Shah

The Tipping Hack That Transformed This Cafe’s Staff Retention Rate

Tip pooling has always been a fiery subject. And now it may become legal, if the new regulations proposed by the Department of Labor come into effect.

Whatever side you’re on, how do you navigate the issue while keeping your servers and kitchen staff happy? We spoke with Sacramento-based restaurant owner Ed Roehr of Magpie Cafe to get the lowdown. He shared his creative spin on tip pooling—and how it’s been the key to keeping his employees around for years.

Tip pooling, defined.

Generally, tip pooling is when tipped employees combine their tips, and then the employer splits it up among the team. Fans say it provides a living wage to more workers, while opponents say it cheats tipped employees out of their fair share. Right now, its legality depends on your state.

The little yellow note.

In Sacramento, California, where Ed Roehr and Janel Inouye run their popular farm-to-table restaurant, Magpie Cafe, they are legally not allowed to split tips with the kitchen staff, according to California law. So they introduced a whole new idea—an extra tip line to the customer’s receipt, which allows diners to tip the waiter and the kitchen staff separately.

When a customer is presented with the bill, they also receive a little yellow note which explains the extra tip line on their receipt. Inside is a recommendation on how to split the tips they may be thinking of adding. The idea is that while the service staff should get paid a higher percentage, the kitchen staff should get something too.

Here’s the note they use:

Tipping is always voluntary… and greatly appreciated.

If you’re perfectly happy with tipping as usual, there’s no need for you to do anything differently. If you’d like to send a little thanks to the crew hustling in the back, we’d be honored to provide you the means to do so:

Example:

– Service = 15-18%

– Kitchen = 3-5%

In California, we are not allowed to require a split of tips to the kitchen staff. All such tips will go to line cooks and kitchen staff; no one in management will participate.

Thank You!

“Most customers don’t even know where their tip money goes so this really helps them understand and make sure they tip the people exactly the way they want to,” says Ed.

Ed also recommends including actual numbers that show how much the tip would equal, so customers don’t have to stress about computing the right amount.

“It does happen that after two bottles of wine, people don’t really want to do the math,” says Ed, “and least of all get into the politics of tip pooling rules.”

Thoughtful tipping practices = Higher retention.

The secret of Magpie Cafe’s success lies as much in their unique method of sharing tips as in their food. They have practiced it successfully for three years and hope to continue the practice.

Of the 20 employees they have, many have been with them a long time, thanks in great part to the culture made possible by the extra tip line.

“If the tip rules change federally, making tip pooling the traditional way compulsory, we have enough data and math collected over the last three years to come up with a solution that is fair to all employees,” says Ed.

And Ed’s not alone. Alimento, a popular Los Angeles-based restaurant, incorporated a similar practice a few years ago. Owner Zach Pollack added a separate tip line for prep cooks, line cooks, and dishwashers, hoping that it would spark a change in how restaurant staff are compensated.

How other restaurant owners think about the tipping debate.

Here’s the thing about tip pooling—many restaurant owners have various views on whether it’s a good idea.

“I will be pooling tips in the restaurant because it is the fair thing to do,” says Jennifer Brulé, owner of Davidson Ice House, in North Carolina. Currently, North Carolina allows tip pooling, but only for workers who normally receive tips. However if the new regulations come into play, Jennifer says she’s already on board.

“We pay our front-of-house servers and back-of-house employees a very similar wage so it wouldn’t be fair if some get tipped and the others don’t,” she says.

__________________________

Wherever you stand on the tip pooling debate, the proposed federal regulations are sure to shake up your practices. Thankfully, there are many ways to legally give your employees the tips they deserve—while taking care of both sides of the counter along the way.

 

This article provides general information and shouldn’t be construed as legal or tax advice. Since tip pooling rules may change over time and can vary by location and industry, please consult a CPA or tax advisor for advice specific to your business.

About Kinjal Dagli Shah

Kinjal Dagli Shah is a writer and journalist living in Toronto. She has worked in newsrooms in India, the US, and Canada over a span of 15 years and counting.