One of the first Hawaii restaurants to implement a kitchen service charge has discontinued the practice in response to customer complaints.
Some restaurants started adding the fee to food bills as a way to compensate nontipped staff, following a recent ruling by the 9th Circuit Court of Appeals that bans servers from sharing tips with kitchen staff — a practice known as tip pooling. The ruling, which took effect in March, means servers keep all their tips, effectively reducing the pay of kitchen staffers who used to share tips.
Gyotaku Japanese Restaurants added a 4 percent kitchen service charge on checks starting June 1 to make up for the kitchen staff’s lost tips but stopped the practice Oct. 8, said co-owner Thomas Jones.
“It’s actually less expensive to the guests to pay the 4 percent service change on the food than it is for us to raise prices. A price increase would have to be
10 percent or more to be able to provide the same amount of income to cooks,” he said. “Then the bill goes up, and the customer ends up paying more in tips as well. Unfortunately, many of our guests disagreed with the mandatory nature of the kitchen service charge, and they let us know about it. They stopped coming. They told us, ‘We love your food, we love your service but we don’t agree with your service charge. We’re not going to come back unless you change it.’ We lost some of our regular customers — enough for us to want to change it back.”
Jones said he is trying to figure out a way to compensate kitchen staff with the least financial impact on customers.
“We care about our customers … and we’re taking action on their concerns,” he said. “We are going to do the best we can to provide good value to our customers while being able to provide good, competitive wages to our kitchen staff. We are revising our wage scale for the kitchen, and we’re looking at how we can pay our cooks more. Many customers said they prefer menu price increases to a mandatory service charge. The reason we started this whole thing in the first place was to help improve the income of our kitchen staff. When compared to the front-of-house tipped staff, it’s hard for us to pay them those kind of wages.”
Other eateries have not had problems with adding service charges onto the bill.
Russell Ryan, chief financial officer of Hawaiian food restaurant Highway Inn, said, “We couldn’t be more pleased with the way it’s worked out.”
Highway Inn added a
5 percent “kitchen service charge” in recent months but lowered
suggested tips on receipts by that amount
to 10 percent, 13 percent and 15 percent.
“Essentially what we did was say you don’t have to leave the full tip because we already put a third on there because by law we’ve been mandated to do that. For whatever reason our staff and customers seem to understand what’s going on,” he said. “Our servers were already giving a third of their tips to the back of the house. It wasn’t an economic change to our servers. Our servers are explaining it more (to customers), perhaps.”
Chef Peter Merriman added a 2 percent service charge on bills at Merriman’s in Waimea on the Big Island to offset the court ruling and says that has gone over well with customers.
“There’s been very little pushback from the customers,” he said. “Once we explain to them that it’s illegal for the culinary people to share in the tip pool, then they totally understand. Some people even want to give more than
2 percent once they learn about the legalities of the situation.”
Restaurants say they are struggling to bring kitchen staff compensation more in line with servers, who can make up to $35 an hour when tips are added to the minimum wage of $8.50, which is increasing to $9.25 in January.
Restaurant managers are allowed to reduce the minimum wage by 75 cents for workers earning tips, but they argue the so-called “tip credit” is too low. The federal maximum tip credit is $5.12.
“Hawaii has the lowest tip credit (in the nation),” Ryan said. “If Hawaii’s tip credit was at the federal level of $5.12, then we could use that tip credit to increase the salary of our back-of-house staff, and we could avoid having to administer these service charges and tip-sharing systems. It’s a shame that we have to, because there is an easier way if our state would change the tip credit to be in line with the rest of the country.”
