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Tipping on Drinks

I am asked from time to time by friends who are not in the restaurant business what is the appropriate amount to tip a bartender.  I generally hate answering questions like this because I either justify tipping less than they do or make them feel bad that they have been tipping poorly.  I believe in tip karma as a server.  I tip generously and anticipate it coming back to me down the road.  For those who don’t make their living on tips, this may not be a concern.  There is room for debate on whether it is necessary to tip 20% on wine and drinks.  I am not going to give a definitive answer on that question, but I will give so thoughts on the issue that may not occur to the guest trying to justify not tipping on wine or leaving a dollar per drink.

This post was inspired by an actual event.  Two guests were seated at one of my tables last evening.  We exchanged pleasantries and they perused our bourbon list.  They were looking for a particular variety of bourbon they had seen on our online menu.  This bourbon is very rare and to the best of our knowledge we are the only restaurant in town that carries it.  It goes for $46 a pour.  Far too expensive for my tastes, but they ordered two.  When I returned with the drinks and to tell them the specials they informed me that they were not hungry and were just going to share a cup of soup.  This is very irritating to a server, but since their cocktails were approximately the price of an entrée, I was not incredibly upset about it.  After an hour they had finished their drinks, paid the tab, and departed.  Their tab was $106.44.  They wrote $110.00 on the total line.

I use this specific incident to allow me to use actual numbers in the explanations I provide in this post.  I understand that their logic was to leave a dollar per drink just as they would at the bar.  Obviously a $46 drink is not any more difficult to serve than a $4 drink.  By that justification, it was a fine tip.  What that logic fails to compensate for it the economics of tipping in a restaurant.

The tip you leave a server does not go directly into the server’s pocket.  There are numerous people who support the server in providing you the dining experience you are looking for.  These staff members are often paid either the minimum wage or the server minimum wage (more on this in a moment) and given a percentage of the server’s tips.  In order to keep it fair, this amount is based on a percentage of the server’s sales.  In my restaurant, we are required to “tip out” 2% of our sales to the bartender and 1% to the busser.  On a tab of $106.44 that equals $3.19.  This leaves me $0.37.  That is about 10% of the original tip or less than I will pay in taxes on the tip.  This means that I have lost money by serving this table.  I can still consider myself lucky though.  Other restaurants require you tip the bartender a higher percentage of only your alcohol sales.  At my last restaurant it would have been 7%.  It would have cost me several dollars to wait on those guests.

So at this point I am out a few cents for taxes.  The greater loss of income was the loss of a table during the dinner rush.  Servers have a set number of tables and hours to make money.  Late in the evening, a table having cocktails and soup would be welcome since the table would have been empty otherwise.  During the dinner rush, tables looking for cocktails with appetizers or desserts are diverted to the lounge or bar.  This allows priority to the guests looking for a full meal to have a full table.  It makes economic sense for the restaurant and the server.  I would estimate that slightly less than half of all revenue taken in at a moderately busy restaurant in a day comes from the guests who are at a table between 7:00 and 8:00pm.  This is the one hour of the day when restaurants are usually at capacity.  Before or after this hour a table is likely to sit empty or be filled with guests looking for dessert and cocktails.  Guests who occupy a table during these hours, but do not tip, cost the server a table that most likely would tip.  This has to be factored in as lost revenue.

The final factor to be considered into the equation is that your server is actually paying for part of your meal.  In 44 states, servers are paid less than the federal minimum wage.  The federal minimum wage for servers is $2.13 per hour.  Most states have set it slightly higher, but almost all of them are less than $5.00 per hour.  This is based on the assumption that you will tip your server.  The employer is allowed to count those tips against what they would have to pay as the minimum wage.  When they pay their employees less, they pass the savings onto the guests.  This means that the server is subsidizing part of your meal by agreeing to work for tips.  If restaurants were forced to pay an hourly wage that would attract high quality servers, the prices on menus would skyrocket.  Not only would you be paying more directly for the wage increase, they would also factor in that wage for the hours a server is in the building preparing for the arrival of guests.  Servers make this wage for hours before the first table arrives based on the faith that they will make up for it in tips primarily during that prime hour.

It is not my policy to tell anyone how to tip.  I am simply wanting to educate people on how tipping actually works.  It is not as simple as saying, “I don’t feel the server deserves to be tipped 20% for opening a bottle of wine or bringing down some cocktails.”  There are several instances where a percentage tip is detrimental to the server.  Ordering very little or occupying the table for an extended time makes tipping by percentage a bad policy for servers.  Tipping by percent has been accepted as the norm though.  For this reason, restaurants have set their policies regarding “tip outs” accordingly.  Sometimes a percentage tip is better for the guest and sometimes it is better for the server.  Choosing to opt out of it when it is better for you as a guest can create significant impacts on the income of the server though.

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About David Hayden

David Hayden is the creator of The Hospitality Formula Network, a series of websites dedicated to all aspects of the restaurant industry. He is also the author of the book Tips2: Tips For Improving Your Tips and Building Your Brand With Facebook.

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