Restaurateur Danny Meyer is known for his empire of more than 20 restaurants in New York City, many of which have been around for decades. Union Square Cafe opened in 1985, Gramercy Tavern debuted in 1994, and The Modern came about in 2005. The Union Square Hospitality CEO also founded the mammoth burger chain Shake Shack, which started out as a single hot dog cart in 2001. Hundreds of locations across the U.S. now sling their signature crinkle-cut fries.
But since 2015, Meyer has made headlines for another reason. That year, he began rolling out what he calls a “hospitality-included” model of service. He first tested it at The Modern and now almost all Union Square Hospitality restaurants have eliminated tipping in favor of higher menu prices that Meyer says allows him to more equitably pay his kitchen and dining room staff. Historically, servers and bartenders have out-earned their brethren in the kitchen. Cooks’ wages don’t fluctuate based on how many diners pass through the doors.
When Washingtonians sit down to their first meal at Maialino Mare, Meyer’s first full-service restaurant in D.C., they won’t see a line for gratuity on their checks. The seafood and pasta-focused restaurant opens tonight at 221 Tingey Street NW in Navy Yard. Antipasti cost $12 to $18, primi pastas cost $18 to $29, and individual entrees cost $24 to $26. The menu also includes a couple large-format dishes meant for two diners, like a salt-baked sea bass that goes for $56.
City Paper sat down with Meyer to understand why his restaurants use the “hospitality-included” model and how it works for a large restaurant group as opposed to a single, standalone restaurant. The conversation takes place in a D.C. that’s still smoldering over Initiative 77—a ballot measure that sought to gradually eliminate the tipped minimum wage. It passed, but was ultimately repealed by the D.C. Council.
Opponents said the measure would necessitate adding a mandatory service charge to bills or raising prices significantly to shoulder increased payroll costs. Initiative 77 didn’t outlaw tipping, but tipped workers who opposed it worried diners wouldn’t tip at the same rate if they saw a service charge on the bill or if prices were higher, thus reducing their take-home pay. Supporters argued eliminating the tipped minimum wage would make wage theft easier to enforce and decrease sexual harassment and racial disparities in the workplace.
This interview was edited for length and clarity.
City Paper: What is your definition of hospitality included?
Danny Meyer: As is the case with almost every other business in the world, the price we charge covers everything. We don’t expect you to pay for part of our team while we pay for the other part.
CP: Why was making this change important to you? What problems were you trying to solve?
DM: It’s just not accurate for me to say I’m for our employees if I’m not truly for our employees. I kept finding I was blaming the tipping system and I woke up one day and said, “Who wrote the rule that you have to abide by that system? It’s not the law. You don’t have to accept tips in restaurants. It’s not a law that you can’t pay people what you think they’re worth.
The other big problem I was trying to solve is the labor shortage. It’s been a pretty full employment economy for several years now. It was becoming more and more challenging to hire great cooks. I’d seen that trend happening over time in New York. Unlike the old days, if you wanted to have a successful career as a cook, you had to have a Manhattan restaurant on your resume. Every city in the country has great restaurants now. You don’t have to stop in Manhattan. I was impressed, one day, when one of our general managers told me that seven of our servers graduated from the Culinary Institute of America. I thought, “That’s really cool.” Then he said, “You can look at it that way, but they want to be cooks. They just can’t afford to be.” We’ve got to do something about this.
CP: Chef José Andrés encouraged Washingtonians to vote against Initiative 77, arguing that increasing the tipped minimum wage until it’s eliminated “will only make the current wage disparity more extreme.” The thought is if restaurateurs are on the hook for increased labor costs for servers and bartenders, there won’t be money to give cooks raises. Is he wrong?
DM: He and I are good friends. We’ve agreed to disagree on this topic. The first thing we did is to lift the kitchen hourly compensation by 20 percent. So many people have focused on “hospitality-included” equaling eliminating tips. What they don’t focus on enough is what we’re trying to promote. Ours is a revenue-share model. In addition to paying everyone well over the minimum wage, everyone stands to gain by a share of the revenue. Waiters told us, “We don’t need an incentive to be nice to people, but we do love the incentive of sales.” And guess what? We share that with cooks as well. On a cranking Saturday night 20 years ago in one of our restaurants, I saw the scene many times where waiters would come back to a private room where no one would see them counting their money and cooks just perspired more. Right now there’s more teamwork because cooks make more too.
We’re finally figuring out the math so we’re able to close some of the gap. We’ll never close all the gap between kitchen and dining room. Just like any business—manufacturing and sales or in media, the people who create the editorial and the people who sell ads—it’s a different deal. That doesn’t mean the disparity has to grow every year and it doesn’t mean you can’t narrow it.
CP: What do you say to the folks who are afraid that if tipping goes away, so will the incentive to provide good service?
DM: One of our patrons said, back in 2015, rather angrily: “How dare you take away my right to punish bad service!” It took me aback. He said, “In a tipping situation, I can just give a zero tip if somebody doesn’t treat me nicely.” I said, “Have you ever had bad service in a restaurant?” He said, “Damn right.” I was like, “Then I guess the tipping system didn’t prevent it.”
What are you going to do if you get horrible service? You’re going to let us know about it. The same thing if we overcook your steak. You ain’t going to pay for it. We want to learn from it and we want you to come back.
The other side of that coin that I heard early on: “You’re taking away my opportunity to get a better table because I put a $20 in the hand of the maître d’.” The best way to get the table you want is to be a regular here and you shouldn’t have to pay a penny for that. I don’t want to preside over a restaurant where a server is looking at her station and deciding who should I be nicest to based on who will give me the biggest tip and whose food should come out first. That’s not how the restaurant business works and it’s not the kind of people we want to hire anyway.
I understand why our industry clings to [the tipping model]. That’s fine, I don’t really care what anyone else does. I like being in a smaller category because it gives us a competitive advantage when it comes to hiring people. But it’s my job to pay people. It’s my job to promote people. I don’t believe that thousands of patrons are a better boss than we can be.
CP: I imagine that at a restaurant like Maialino Mare, the check averages around $150 or more for a party of two. It stands to reason that a server could be making $40, $50, or $60 an hour if they received tips. Are you able to compensate them to this degree?
DM: Yeah, or they wouldn’t work here. And they’re getting health insurance, family leave, and a 401(k). And here’s the thing: I am so proud of our industry on a lot of levels. But what we’ve done a less great job at is giving people a pathway to further their financial and professional growth. There’s a starting point for everybody here. When you accomplish things either from learning or the guest satisfaction you earn, you have opportunities to make even more money per hour.
In a tipping house, especially a pooled-tip house, everybody is making the same amount of money. The only way to make more money is to stay at the restaurant longer than everybody else and get the peachy Friday and Saturday night shifts. That’s now gone away. You can make the same amount per hour working on a Monday night instead of a Saturday night.
CP:You admitted in 2018 that as much as 40 percent of your longtime front-of-house staffers left your company after the initial implementation of “hospitality included.” Why?
DM: That became the story. I think that percentage was exaggerated. Go to Gramercy Tavern sometime. That was the hardest of all. It’s now a 25-year-old restaurant. There are people there who are very happy who were on our opening team. There are [also] people who said, “The rules of the game changed.” We lost those people in the dining room. But those jobs have been replaced by people who wanted this system. We made it work. Now every time we open a new restaurant it opens this way, which is a lot easier. You’re not changing the understanding that anybody had when they signed up for the job. 100 percent of the people who work at Maialino Mare signed up either saying “I know that,” or, “That’s exactly what I want and that’s why I signed up.”
CP: Can a “hospitality-included” model can work everywhere?
DM: Something else mischaracterized early on was that we were somehow out to try and convince our entire industry to do this. I don’t really care what anybody else does. There are many reasons why I’m pretty sure I don’t know if this will change globally in this country.
When something is a law, and I don’t believe this should be a law, you have to figure out how to do it. If everyone did it, guests would get used to it. You’d be looking at menu prices that are apples to apples. What’s hard for restaurants to get their heads around is how to make the math work. If you’re charging enough money on your menu to do all the things you’re trying to do for your staff, you don’t want to freak out your guests with sticker shock. They can go to the internet and say, “Why is only one of those roast chickens $6 more than the rest of them?” Restaurants don’t want their menu prices to appear out of whack with everybody else. But when you get your bill and there’s no line for a tip, you go—that’s a great value. And they were nice to me!
This story has been updated to reflect the correct price range for pastas. They’re $18 to $29.