Shake Shack founder Danny Meyer banned tipping at his restaurants - but employees say it has led to lower pay and high turnover
- In 2015, Shake Shack founder Danny Meyer decided to eliminate tipping at his restaurants.
- He hoped that the policy would give employees higher and more stable wages.
- The experiment has reportedly decreased wages and increased turnover, according to current and former employees.
Danny Meyer doesn't like tipping. He has said that the practice lets restaurants get away with paying servers insufficient wages, and in January, he called it "one of the biggest hoaxes pulled on [American] culture."
In 2015, Meyer, who also owns Shake Shack, decided to eliminate tipping at restaurants in his Union Square Hospitality Group - which includes Union Square Cafe, Gramercy Tavern, and The Modern - and raise prices in an attempt to give his employees more stable and equitable wages.
While the policy has not been implemented at all of his restaurants yet, those that have removed tips have experienced some turmoil, according to Grubstreet, which interviewed current and former employees of Meyer's restaurants. Some say that the policy has resulted in lower wages and higher turnover.
While many employees continue to appreciate the generous benefits and flexible scheduling that the restaurants provide, even some of Meyer's most loyal employees said they couldn't afford to live with lower pay. After working at Union Square Cafe for over three years, Danielle Carroll quit just two months after she stopped receiving tips.
"That place was my New York home and the way I made my living, and it's no longer a sustainable place to do that," she told Grubstreet.
Since Maialino eliminated tips in 2016, nearly all of its front-of-house employees have reportedly quit and been replaced twice. North End Grill, Gramercy Tavern, and Union Square Cafe have faced similar rates of turnover.
Many of these problems stem from Meyer's insistence that employees would take home pay that was equal or greater to what they received with tips. But this prediction relied on stable business across his restaurants, a forecast that has not held.
Current and former servers at Gramercy Tavern and Maialino said they took home around $100 less per week than they had with tips. One Union Square Cafe employee reported a $10,000 annual decrease in pay.
Some have benefitted from the no-tip experiment, including entry-level cooks, who have seen hourly wages increase from around $11 to $13, but most employees are waiting for it to pay off.
Still, many remain hopeful and recognize that, while the intentions behind Meyer's decision are noble, it may take time for them to produce their desired effect. Whatever the result, Meyer's decision to eliminate tips will likely have a profound effect on the restaurant industry.
Union Square Hospitality Group did not immediately respond to Business Insider's request for comment.