Better Service, Better Tips: The Traditional Tip-Out Model Still Works

While service charges and automatic gratuities have become more common in recent years, especially since Covid, most restaurants across the country still have a standard tipping model, in which guests leave gratuity based on the service experience they had. With the more traditional tip model, some operators have tip pools, for front-of-house staff, or front-of-house and back-of-house. And others employ a tip-out system, where servers share a portion of their tips with other front-of-house team members. 

In the second installment of our tipping series, Full Book spoke with Emma Elmes, regional director for The Henry and Blanco, two of the concepts under the Fox Restaurant Concepts (FRC) umbrella, who oversees restaurants in Arizona, California, Tennessee, and Texas. For FRC and Elmes, the tip-out model ensures the highest level of service and hospitality that they expect from their teams. 

The following interview has been edited for clarity and length.

How does Fox Restaurant Concepts structure its gratuity policy?

At FRC, we want tipping to be discretionary for the guest, so we use a regular tip-out model. When we do menu roll-outs, we do year over year price increases, to cover the cost of doing business and food and drink, but that’s all rolled in. We still want to provide an excellent service, and allowing our guests to be able to tip based off of service and not just a blanket add-on is how we want to do business. 

The tip-out model is different in each store depending on the food versus beverage sales. For example, the bar tip-out at some restaurants might be 2 percent of total sales but at other restaurants it might be 6 percent just of beverage sales. So we tailor it depending on sales volume of that restaurant, and then figure out the percentage to tip out for each worker based on that volume. 

There's only one restaurant in our group where we add on gratuity and that’s in Miami. We always do research regarding what happens in a particular region and Miami was one market where we decided to add on that auto grat. We don't get any pushback there because it's just normal for that market. 

During the pandemic, all FRC restaurants went to tip pool because obviously circumstances were very different then. I really liked what it brought to The Henry location in Coronado, Calif. The teamwork was great and everybody was pulling their weight, and it just created this amazing environment. We tailored the tip tool over about a year to get it dialed in and fair for the team, and then we just kept it. 

I did try to roll out a tip pool when we opened up Blanco in Coronado, but the sales volume is different there and it just didn't work for that team, so we just went back to regular tip-out. We tried to tailor it and look at different percentages for different work groups, but the overall consensus was that they would rather have their regular check out with their own money, so we moved away from it. 

We want our teams to be happy, and at the end of the day this is their money. Sometimes restaurants add on a service charge with gratuity and service rolled into one, but then it’s out of the server’s control how much they're actually getting. We like the visibility, whether it's a pool or regular tip out, of where the money is coming from and how it gets distributed.

Why does the tip-out approach work for your team?

Our philosophy at FRC is ‘great hospitality every time.’ That goes hand-in-hand with how we do business — how we hire staff, how we train staff. It’s all about hospitality and we don't want our guests to have any hidden costs. We want to be very open and honest and visible with our guests.

So we leave tipping to the guest’s discretion and push our team to give really, really great hospitality. At many restaurants that auto grat, they don't really care about the service because they know they're already getting their money. But at FRC, we want to continue giving great service, and this model is a good incentive for that.

We do mystery shoppers in our company — five every month — because we want to make sure our teams are following the steps of service. And if you were to follow the steps of service and get 100 percent, we know that our guests would tip 20 percent. But if you’re a guest and you're having to ask for your drinks to be refilled, and your appetizer takes 20 minutes instead of 12 minutes, or your credit card isn’t picked up within two minutes, that’s not perfect service. So we try to push for 100 percent with our mystery shoppers so that we know our guests are getting that perfect experience from the minute they walk in right until they leave. 

We also do server sales and tip percentage reports, to see which servers within the restaurants are high sellers, which have high tip percentages, which servers have high liquor sales, etc., because we want to constantly drive them to want to sell and want to get a high tip percentage.

What challenges have come up with the tip-out approach?

Sometimes we have new servers who join our team and they'll question why things are done a certain way. But as long as the GM is able to explain that particular structure for that restaurant, it isn’t much of a problem. 

Another challenge we’ll sometimes encounter is with larger parties where we will need two servers and sometimes there will be questions as to how tipping will work in that case, but you just have to look at the dynamics. 

Finally, we’ll sometimes get guests from other countries where it’s normal to only tip something like 10 percent (I’m from the U.K. myself). Because our servers all get paid minimum wage, 20 percent is really where we want to see tips at. And because we don’t auto grat tables, even for bigger parties, that is sometimes challenging for a team to get a lower than average tip but still provide excellent service because a guest tips less than what is standard in America.