Indiana Daily Student

The tipping point: How Switchyard’s new model might affect Bloomington bars, restaurants

Switchyard Brewing company released a video Aug. 21 explaining changes to their wage system. According to the new policy on their website, Switchyard wages will start at $15 per hour with the possibility of increasing to $18 per hour.

“We just believe as business owners that it is 100% our responsibility to take care of our co-workers wages, benefits, health care, and it should not be to the whim of the customer to cover those costs,” founder and president Kurtis Cummings said in the video.

Cummings said this increase in wages is funded by a 20% increase in prices. He said he hasn’t had a single customer complain about this increase since it was implemented.

Seth Freedman, an IU professor who studies labor economics, said customer perception is an important factor in determining the success of this policy. He said that negative customer perception could drive customers away.

“People see that menu price and that’s the salient price to them,” Freedman said. “It could impact their customer base potentially.”

Freedman cited a study conducted by Michael Lynn, a professor in food and beverage management at Cornell University, that analyzed the no-tipping policy in the restaurant chain Joe’s Crab Shack.

In the study, Lynn reported that customers were happier with the tipping policy compared to the  no-tipping system with higher prices. Lynn said that is because current tipping policies are the status quo.

“If tipping were universally abandoned or were outlawed as some are advocating, the resulting customer dissatisfaction may be reduced,” Lynn said. “Future research should test these possibilities by comparing customer satisfaction under tipping and no-tipping systems in industries or countries where tipping is less normative.”

Freedman said studies like these aren’t currently common. However, because more restaurants and bars are experimenting with this model, other businesses might try to emulate this policy if it proves to be successful.

“There’s certainly a broad, growing concern that tips might not be the most fair and efficient way,” Freedman said.

Cummings said restaurants and bars tend to be busier on weekends, and this incentivizes servers to work during these times in order to ensure better pay.

Cummings said Switchyard’s no tipping system eliminates this incentive. By eliminating tipping altogether, servers are no longer concerned with how their wages are tied to the day they work.

“The benefit that I really love about this change is the freedom it gives our employees with scheduling,” Switchyard hospitality director Kiley Memmott said. “The traditional system is ‘I have to work Fridays and Saturdays so that I can make enough money to make rent or support my family.’”

Bars like La Una Cantina try to mitigate this by use of included gratuity on larger parties. Manager Juan Carlos said this helps servers who make $2.13 an hour plus tips.

“We already put 20% gratuity on big parties because everybody is coming to work for tips,” Carlos said.

Cummings said his employees prefer this system and hopes other restaurants and bars adopt this policy as well. Both Kilroy’s on Kirkwood and The Upstairs Pub declined to comment about the likelihood of implementing similar no-tipping policies.

Correction: A previous version of this article misspelled Switchyard Brewing Company's name.

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