QSR June 2022

DEPARTMENT OUTSIDE INSIGHTS

Can Tipping Solve Labor Woes? There’s a lot more to this movement in quick service today than flipping the iPad around. BY JUSTIN ROBERTS

A s restaurants across the country grapple with one of the toughest labor markets on record, more and more quick-service restaurants are choosing to add tipping to a list of perks that entice workers back to their posts. And they’re doing so amid a major staffing crisis. With more than 1.7 million job openings across the U.S. in the leisure and hospital ity sector, it’s more difficult than ever to find employees. Seventy-eight percent of restaurant employers told The National Restaurant Asso ciation recruiting and retaining employees was their top challenge in the past year. Tipping may be the answer counter-service concepts need. Category giants like Panera Bread and Starbucks have embraced the idea, offering tip options within their mobile apps. Then there’s Sonic Drive-In, which introduced digital tipping to more than 2,000 locations in 2021. In a matter of months, the company brought in nearly $12 million in tips—boosting employee morale and income (and garnering positive publicity that could encourage more employees to apply). From immediate recruiting results to long term culture plays, here’s why tipping is becom ing a movement across the sector in 2022.

One way to boost wages without eroding margins? Let customers reward front-line workers.

2. Retain existing employees According to research firm Black Box Intelligence, turnover costs restaurants more than $1,800 for general employees—and up to $8,000 per manager. With so many restaurants offering shiny hiring incentives, it’s no wonder retaining employees is just as chal lenging as hiring them. Once bonuses and other benefits run out, there’s always another bonus employees can chase from the res taurant down the street. But as many operators know, with razor-thin profit margins, raising wages isn’t always easy. That’s why adding tipping is a win-win for you and for your employees. When quick-service res taurants enable tipping, they can significantly increase the earnings of hourly workers, far beyond what revenue constraints allow— and give them a reason to stay beyond a 90-day bonus window. 3. Incentivize better performance The biggest difference between an hourly wage and hourly-pay plus-tips—your employees now have a financial incentive to deliver a better performance.

1. Attract more new hires If you’re like the majority of restaurants today, you probably have a “Help Wanted” sign in your window. Quick serves that jump on the tipping bandwagon now have a significant competitive advan tage over other employers when it comes to hiring. That’s because short-term benefits touted by some other brands, such as temporarily boosting wages or adding hiring bonuses, don’t always work to attract the right new hires to your restaurant. Can didates know they’re just that—short-term gimmicks—and not only are they expensive to replicate; they probably aren’t compel ling enough to improve retention long-term. Tip enablement, on the other hand, provides an instant benefit to both employees and employers. Launching a tip program has little impact on a business’s bottom line, so there’s no need to rethink it or roll it back as market conditions change. That means your staff will see an immediate, sustainable boost in their take-home pay that other restaurants without tip enablement simply can’t offer.

ADOBE STOCK / GABRIEL TRUJILLO

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