Closing the Wage Gap: Opting for the Service Charge Over Tipping

Running a restaurant business is hard, especially in 2025. With the cost of goods and labor on the rise, sales down, and a recession looming, many operators across the country are pressed to find ways to not only keep the doors open, but to profit. And tipping structure is a big part of the equation.

Tipping structures vary from establishment to establishment. While some places pool tips for the front-of-house, others employ a more common model in which all staff members keep the individual tips they receive (except for tipping out a busser). While others have attempted to eliminate tipping altogether in favor of higher wages (but have arguably been unsuccessful). 

We’ll explore different approaches to tipping with a series of interviews with operators on why their particular model works for their business. For this installment, Full Book spoke with Paul C. Reilly, culinary director and proprietor of Coperta in Denver, on why he’s opted for a service charge model with a full-house tip pool.

The following interview has been edited for clarity and length.

What led you to adopt the service charge structure? 

At Coperta, we have a 23 percent service charge that is automatically added to any bill for dine-in, and a 15 percent service charge for any to-go order. The 23 percent breaks down to: 9 ½ percent to the front-of-house; 4 ½ percent for the back-of-house; 1 percent to managers; and 8 percent to the house, which allows us to pay higher hourly wages, as well as future wage increases within Denver county, plus 10 days paid time off for every single employee. This service charge is on top of employees’ hourly wages, and it's divided by the amount of hours they’ve worked in a shift. 

In early 2020, even before the pandemic started, we added a 3 percent back-of-house charge on every single bill in an attempt to close the wage gap. When we came out of lockdown and reopened in June 2020, we thought the time was right for some change. We kicked around the service charge model and thought it might work for us. We came up with 23 percent because we looked back on the average guest-given gratuities, which were between 20–21 percent, and we decided to keep the existing 3 percent, thus coming up with 23. 

How does operating in Colorado factor into that decision?

Right now, Denver and Denver County have the third highest minimum wage charges in the entire country, behind the Bay Area and Seattle. It’s not growing leaps and bounds like it was in 2021, 2022, and 2023, but it's continuing to go up; right now it's at $18.81 for non-tipped employees. But with margins being so razor thin in the restaurant industry to begin with, it's very difficult to continue to have these forced wage increases. We absolutely support paying our employees as much as we can while staying in business. And we absolutely support closing the wage gap between front-of-house and back-of-house. But these are difficult increases to navigate in a post-Covid restaurant world when sales are generally down and expenses overall are way up.

How did you implement the service charge operationally and culturally?

The night before we enacted this in April 2021, I was so nervous wondering if I had destroyed our little restaurant. It was a decision that we didn't take lightly. We knew it would be pretty monumental; we knew there could be fallout. We held meetings with the staff to discuss exactly how it was going to go, and we talked through the way we wanted to communicate this to our guests. We knew we had to be forthright and upfront about it. We posted it on our social media accounts, it’s on our website, it’s printed on the menu, and it’s posted, to this day, all around the restaurant. When we drop every single check, the server mentions it. And when we run their card and bring it back to the table, the server repeats it again. Every once in a while we get a guest who says they had no idea, but most people walk in, read it, and say that sounds pretty cool. 

It’s very clear that this service charge is in lieu of gratuity, but we do have an extra tip line and some guests do tip extra if they feel like they've had exceptional service. Guests often ask if they need to tip on top of the charge, which they don’t, but we don't get very many complaints about it. When we do, I believe it’s because we have fallen short in providing an excellent experience — because we’re short-staffed, or it’s an off night — or because people just want to be in control of how much they’re tipping. 

Menu prices have not gone up because of the service charge, they’ve gone up because of the cost of goods. We have tried to keep portion sizes the same, but a few of them I believe have gone down slightly. We are still working with local farms and ranchers for the best possible products — that has not changed nor will it waiver. We are not decreasing quality because of this, because that's truly what sets Coperta apart from other great dining destinations in Denver. But the adoption of the service charge was so we didn't have to raise menu prices because of labor, but they’ve risen because of the cost of goods overall. Guests obviously don’t want prices to go up; operators don’t want it either, but we have to keep our doors open.  

What benefits have you seen from the service charge?

Number one is we're still kicking. I’ve had plenty of colleagues and close friends that have closed restaurants recently in Denver and Coperta is still going. 

Another is that I haven’t had a conversation with a BOH employee in years about their desire for more money, whereas I can look back at the late teens and that was a monthly occurrence. Back then, I’d get asked, “hey chef, how can I talk to you about making more money?” My response was usually, I don't know how to make this happen for you. And I lost some great cooks and chefs because of it. 

With this model, there’s longevity for back-of-house employees. And we have better retention for front-of-house employees as well. When we first implemented it, FOH employees took a slight pay cut to, again, help close the wage gap, and we had a few longtime servers who said this isn’t for me, and that’s a bummer. But at the same time, I now have a professional, driven, dedicated staff, and it’s work for them. And that's a chance we took for the long-term health of the restaurant. 

On top of the service charge model, we also have a tip pool, so it’s a team effort in terms of everybody pitching in to provide an experience. And that’s for every single amount of money that comes in, if a guest does tip extra on top of the service charge — even if somebody hands the coat check two dollars, that goes into the tip pool. (I've only been called a socialist like maybe four or five times and it hasn't happened in a while, so I'm feeling pretty good.)

The system isn't perfect, and it’s not for every operator, but we have found that it works for us.

What are some of the challenges you’ve encountered with this model?

One of the biggest challenges are the select few guests who just want to be in charge of what they are giving and be in control of their dining experience, so that has challenges. 

There’s also the general confusion that you could eat out five times in Denver and have five different service charges or none at all. Guests don't love that. I've talked to them about it and they wish it was just a universal charge.  

Certainly more people comment negatively online than they do in person, but that's this industry. Behind closed doors, you always have about 10 to 12 people who, in response to a service charge, say, “why don't you just pay your employees more?” What’s so defeating about that is, in any other industry, when you have a transaction and you pay for something, that payment goes directly to support a laborer’s salary. When you buy a car, you are paying for that person’s salary. When you get your windows cleaned, your payment is paying for that window washer’s salary. For some reason, this same premise isn’t accepted in the restaurant industry, and I just think it's time for that to change. 

Why does this model work for your team? And would you ever consider changing it?

The service charge model works for us, and I support whatever restaurants can do to support themselves, whether that's a service charge or not. As long as they're doing things legally, and providing for their staff, and they are providing an experience, then I support whatever that is. This is just what works for us and my team, and I wouldn’t change it. It’s what we’ve now implemented, and it’s become indoctrinated and institutionalized at Coperta at this point.