Packhouse Meats Restaurant Eliminates Tips — Will Other Restaurants Follow Suit?

In America, tipping at restaurants is just understood — or at least it ought to be; don't get me started on evil people who take some sort of moral objection to tipping. But now Packhouse Meats restaurant in Kentucky is eliminating tips in favor of a revolutionary alternate strategy — just paying their wait staff a reasonable wage. Say what?

Packhouse Meats, which opened in Newport, KY in January, serves only meatballs and refuses to let customers tip. Instead, they pay their waiters and waitresses either $10 an hour, or 20 percent of the service person's food sales for the shift, whichever is higher. Usually, the 20 percent of food sales wins out, and the wait staff typically averages about $15 an hour.

"We wanted our servers to participate in our productivity by giving them reasonable compensation based on sales. It takes the whim of the customers out of it," said Packhouse's owner Bob Conway. "I've heard the horror stories — $3 left on a $100 tab....Servers have quit because they couldn't make ends meet."

But no more. Now instead of making the minimum wage for tipped employees — $2.13 an hour —and hoping for tips to make up the difference, the employees at Packhouse Meats can rest a little easier.

Tipping as a whole is a highly flawed practice — and not just when Waffle House makes a waitress return a generous tip. Studies have shown that, even though in theory tipping encourages good service, actual tips are influenced by lots of non-service-related factors. For instance, drawing a smiley face on the bill increases your chance of a good tip, as does wearing makeup, or being white. Good service, as it turns out, has less to do with it than you'd think.

And then sometimes a couple tries to tip using meth. Because why not?

So yes, every so often Justin Timberlake leaves a huge tip, or some good Samaritan tips $1000 at Waffle House and makes everyone's day (assuming people get to keep it). But tipping as an institution is highly flawed.

Packhouse isn't the first restaurant to eliminate tipping–in fact there are plenty of restaurant owners who have tried eliminating the practice. But unlike many places that simply add an automatic tip onto a bill, Packhouse just straight up pays people a guaranteed wage without identifying it as a "tip." Instead, they've slightly raised the cost of food in order to pay the higher salaries. Which is how just about every other industry operates–you charge prices that let you pay your staff instead of asking other people to do it.

Other places that have eliminated tipping also tend to be more high end eateries, and to be located in much larger cities. So is Packhouse signaling a more widespread trend among restaurants? Only time will tell.

So far though, their new business model seems to be working well so far. Conway says the restaurant hasn't had anyone quit since they started the new policy. He thinks it's good for restaurants. “Ultimately, it can stabilize your business model,” he said.