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https://archive.is/TZTOO
https://www.sfchronicle.com/food/restaurants/article/backhaus-tipless-prices-19435576.php
This hit Bay Area bakery has gone tipless. But will customers get sticker shock?
At one of the Bay Area’s top bakeries, customers paying for fresh bread and croissants no longer see a touch screen prompting them to tip.
Backhaus in San Mateo and Burlingame got rid of gratuities last month and raised prices by an average of just under 11% to cover the cost of higher wages and benefits for employees. An entry-level employee now starts at $23.50 an hour, compared to California’s $16-per-hour minimum wage. The bakery offers complete health insurance coverage for all full-time staff, in addition to previous benefits that aren’t standard in the food industry such as paid parental leave and a 401(k).
Tipless models aren’t rare in the food industry, but most restaurants charge an automatic service fee rather than increase prices. (Backhaus follows the approach at restaurants including San Francisco’s Zazie and Petaluma’s Pearl.) Backhaus’ change also comes at a time of heightened sensitivity to the cost of dining out. And under a new law that takes effect July 1, California restaurants will no longer be able to use surcharges to offset the cost of wages, benefits and local mandates, and must instead fold them into menu prices. While many consumers are celebrating this change, restaurateurs are worried that the sticker shock could alienate diners and result in lower sales at an already challenging time in the industry.
Yet so far at Backhaus, the reaction has been mostly positive, said co-owner Anne Moser. Some customers don’t even notice that their croissant got more expensive until they ask about tipping and an employee explains the change. (A sign posted next to the payment tablets announces that Backhaus is now tipless.)
“We believe it’s only fair to provide stability to our team and those kinds of benefits and a fair level of wages so they can afford to live in the community that they serve,” Moser said. “That’s part of the cost of doing business around here, so we need to price our products accordingly.”
Moser and business partner Robert Moser never wanted to accept tips at Backhaus. But when they opened the bakery in San Mateo in 2019, it felt too risky. They watched Bay Area restaurants that had implemented service charges revert to tips after backlash or staffing issues. They decided to compromise by pooling gratuities among all workers to cut down on the historic pay disparity between servers, who often make more through tips, and cooks and dishwashers.
But recently, customers started to tip less — dropping from about 8% of Backhaus’ overall revenue to 6% to 7% — as the business’ costs, from ingredients to utility bills, rose sharply. Gratuities are unpredictable and vague, Moser said: “When tips are not good or very good, we don’t necessarily know why.”
Rather than hike menu prices across the board, Backhaus’ management team analyzed each item. They considered labor and ingredient costs, and looked at competitors’ menus. They used a Massachusetts Institute of Technology “living wage calculator” to assess what a full-time worker would need to be paid to afford their basic needs in San Mateo County. They also thought about customers’ emotional reactions to pricing: How would someone feel about paying $23 for a plate of rye bread and smoked salmon?
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