If a meal is priced $50 + a 15% tip is expected, you expect customers to pay $57.50 for the meal.
If you instead eliminate tipping and increase the prices by 15%, your customers will still pay the same $57.50 for the meal. You still have the extra money to pay your servers. How does that lead to fewer customers? They still see the same final price at the end of the day.
The rest of the world operates perfectly fine without tipping and in fact has better service.
Tips are optional. People tip anywhere from 0-100%, with most tips in the 15-35% range. A person who regularly tips 0-10% will see their prices go up if they’re forced to pay 15% more on every meal.
But my broader point doesn’t address the “what if society wakes up tomorrow and bans tipping for the entire country?” scenario. That’s a fantasy scenario.
The issue I’m raising is the question “what if one restaurant owner decides to eliminate tipping at their restaurant and just charge 15% more, passing all that money over to the employees?” The answer is that this has been tried before and the restaurants did not survive. People saw the higher prices and switched to a restaurant with lower menu prices, even if they tip 15% or more anyway.
You might say this is irrational, and it is, from an economic standpoint. But people in a tipping culture do prefer it that way. The fact that a tip is optional but customary makes them feel like they are in control, and of course they are, given that people decide how much they want to tip.
I still don’t understand your point at all.
If a meal is priced $50 + a 15% tip is expected, you expect customers to pay $57.50 for the meal.
If you instead eliminate tipping and increase the prices by 15%, your customers will still pay the same $57.50 for the meal. You still have the extra money to pay your servers. How does that lead to fewer customers? They still see the same final price at the end of the day.
The rest of the world operates perfectly fine without tipping and in fact has better service.
Tips are optional. People tip anywhere from 0-100%, with most tips in the 15-35% range. A person who regularly tips 0-10% will see their prices go up if they’re forced to pay 15% more on every meal.
But my broader point doesn’t address the “what if society wakes up tomorrow and bans tipping for the entire country?” scenario. That’s a fantasy scenario.
The issue I’m raising is the question “what if one restaurant owner decides to eliminate tipping at their restaurant and just charge 15% more, passing all that money over to the employees?” The answer is that this has been tried before and the restaurants did not survive. People saw the higher prices and switched to a restaurant with lower menu prices, even if they tip 15% or more anyway.
You might say this is irrational, and it is, from an economic standpoint. But people in a tipping culture do prefer it that way. The fact that a tip is optional but customary makes them feel like they are in control, and of course they are, given that people decide how much they want to tip.