Joe’s Crab Shack Scales Back on No-Tipping Experiment After Receiving Widespread Disapproval

 

Under this trial, servers at Joe’s received a starting hourly wage of $14 sans tips instead of their usual $2.14 an hour plus tips. On the surface, it was a move that seemed in line with the direction the restaurant industry was moving (their decision came right after Danny Meyer made a similar announcement)—employees get a pay increase while the rest of us can put away our tip calculator apps. It's a win-win, right? But as it turns out, things didn’t go exactly as planned. After ten months of trial and error, the chain announced that they’ll be rolling back their no-tipping policy after receiving both staff and customer disapproval.

 

In an interview with Nation’s Restaurant News, Ignite Restaurant Group’s CEO Bob Merritt spoke up about the experiment that was implemented at 18 Midwestern Joe’s Crab Shack locations—nearly 60 percent of customers disliked the no-tipping program.

 

“The system has to change at some point, but our customers and staff spoke very loudly. And a lot of them voted with their feet,” Merritt said. “We got negative customer counts between 8 percent to 10 percent on average among the 18 restaurants.”

 

According to Merritt, there are two reasons behind the negative feedback: First, customers didn’t want to lose control of incentivizing service, and secondly, they didn’t trust management to pay the increase price to employees. To recoup the pay increase, Joe’s also had to up its food prices.

 

“Unfortunately, as those of us who have been around this business for a long time know, when you roll back prices, you rarely get credit for it very quickly,” Merritt said. “It’s going to take us time to rebuild that.”

 

During this no-tip trial, labor expenses and operating margins also increased for Joe’s, and the brand saw a 3.5 percent revenue drop.