US restaurants ban tips and raise menu prices for higher wages
Restaurants like La Cigale and Nightshade Noodle Bar drop tipping for equality and higher staff wages, facing challenges with sales tax and menu math.
Stock photo for illustration only, not from the actual event
- Several US restaurants are banning tips entirely and paying staff higher fixed wages instead.
- Higher menu prices count as business revenue, increasing the restaurant's sales tax obligations.
- Industry feedback highlights a mix of employee retention benefits and operational hurdles.
Wine waiter Caroline Kraetzer earns $40 (£30) an hour, double what most service staff in San Francisco are paid, though it comes with a high price tag for diners eating at her establishment.
Operating at a set price of $140 (£100) per person, La Cigale is among a select group of restaurants charging elevated prices to fund higher salaries while strictly banning tips.
Stock photo for illustration only, not from the actual event
The restaurant informs patrons that the visible price is the final amount owed, declining gratuities and noting that kind words and return visits are sufficient. Kraetzer expresses relief in no longer depending on the generosity of strangers to cover her monthly bills.
"The people breaking their backs and minds in the kitchen - often the least visible and the least celebrated - were taking home a fraction of what the front staff made on tips for the same hours."
Rachel Miller
Across the country in Lynn, Massachusetts, Rachel Miller, chef and owner of Nightshade Noodle Bar, transitioned to a tip-free model five years ago during the post-pandemic reopening to create fairer compensation for kitchen staff.
Transitioning to a gratuity-free model introduces complex economic hurdles for hospitality businesses. Unlike traditional customer tips, higher menu prices directly inflate gross business revenues, triggering increased sales tax liabilities. This financial reality makes sustaining tip-free operations difficult, forcing some establishments to revert to standard tipping practices.
Miller noted it was deeply unsettling to witness higher tip distributions favoring white male staff over others. To fund higher wages at the French-Vietnamese eatery, she adjusted menu prices, with tasting menus starting from £102 for seven courses prior to 6 pm and $126 for nine courses.
Source: BBC Business
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