Chefs remember their first formal critique. For Ruth Gresser, the year was 1992 and Pizzeria Paradiso had only been open for a couple of months in Dupont Circle. Then-Washington Post critic Phyllis C. Richman had plenty of positive things to say, and a line formed outside the restaurant before the doors even opened for lunch on the day the review dropped. The pizza and beer joint was packed until 10 p.m.
Gresser was on a high until she wasn’t. “There was a server who had worked a double that day,” she recounts. “She was very pleased with her tip out and was kind of excitedly displaying her tips over her head in the dining room. I had to go up to her and say, ‘Can you put your money away because everybody on the other side of the counter would be paid the same way they had been paid the day before?’ That stuck with me. At the time, I was a very new owner of a business and this was how the industry was.”
Thirty years later, Gresser feels empowered to make a change. Although she’s now a restaurateur, she comes from a kitchen background and has experienced first hand the disparity between back-of-house and front-of-house pay. “One of the tenets of being a Paradisian is you’re going to work together as a team, and yet there has been this separation,” she says.
Last week Gresser, who now also owns Pizzeria Paradiso restaurants in Spring Valley, Georgetown, and Hyattsville, blew up the labor model she’s relied on for decades. She no longer takes a “tip credit,” which allows businesses to pay their tipped employees a lower minimum wage ($5.35 in D.C.) so long as gratuities from customers carry each employee over the full minimum wage ($15.50 in D.C.).
Now she pays all hourly employees base wages that are higher than the standard minimum wage and commensurate with experience. She also takes into account the amount servers, bartenders, and support staff typically average in tips throughout the course of a year.
To afford paying higher wages, Pizzeria Paradiso adds a 20 percent service charge onto dine-in checks and a 12 percent service charge to takeout orders. Because they’re mandatory—unlike tips—service charges are considered a part of sales and belong to the employer, who can divvy up the charge however they see fit.
Customers have the option to leave an additional tip, but the restaurant spells out that they’re not expected to do so. Any extra tips are divided up among all hourly staff based on total hours worked that day, including kitchen employees. People who do not directly interact with customers, like cooks, typically can’t receive tips. But when a restaurant doesn’t use a tip credit to pay tipped workers a lower minimum wage, kitchen workers are allowed to take a cut. “We’re going for a much more cohesive team approach to compensation,” Gresser says.
She leaned on the general manager of the Spring Valley location, Tony Strowd Hamilton, to help with the roll out of the new labor model. He’s a salaried employee and won’t be impacted by the change, but he’s been with the company since 2009 and most of his time on the clock was as a server. “I was the most hesitant and unsure about it,” he says. That’s changed.
“This industry forever has been modeled, at least in America, on a concept that you pay your staff the lower federally mandated hourly rate, and they earn their income mainly through the generosity of the customers they serve,” Hamilton says. “If you’re in the right restaurant, have the right approach to service, and have a little luck there’s potential to earn a lot of money with that model. But there’s still so much risk and insecurity in that model. It was always doomed to fail to some degree.”
The rise and fall of COVID-19 case rates and accompanying diner anxiety has injected huge doses of unpredictability into the hospitality industry. That’s why a number of restaurants distanced themselves from tipping and switched to service charges when the city allowed restaurants and bars to fully reopen last spring. Some weeks were slow, others were slammed.
“We’ve spoiled our customers to think they have all the power, and the pandemic has proven that the worker has a lot of power and has rights and deserves respect and security to some degree as well,” Hamilton says. Restaurants are experiencing a staffing crisis as workers flee in search of fields with better pay, benefits, and hours. “The silver lining is the pandemic revealed inequities and has finally forced us to look at what has been done and what can be done. I’m proud Ruth pushed through a lot of our mental blocks on this idea.”
Gresser deputized Hamilton to have individual talks about the transition with employees such as Spring Valley servers Brian Angel and Kate Campbell. Both initially had some questions, but came around and were willing to give it a shot once they learned their base pay would be above minimum wage, and they’d also share in the money gained through the service charge and optional extra tips.
Campbell, Angel, and Hamilton liked that their colleagues on the line would be paid better too. “You’ve witnessed those people in the kitchen on a Friday night busting their asses off, and they never got to see the product of that effort,” Hamilton says. “Now they have that opportunity and there’s more incentive for them to put in that effort.”
“They work their asses off, and there are many times where they work even harder because of mistakes made by the front of the house,” Campbell adds. “To think they would still be making the same rate they’re making and they’re covering up for our mistakes or backtracking because we did something wrong, meanwhile we’re the only ones reaping the benefits of how generous people are, has felt really unfair to me.”
Both servers like knowing that weekend shifts are going to be lucrative and hope that aspect remains intact. “If you did work a Friday or Saturday, hopefully people are tipping on top,” Angel says. “You’re doing more work on a busier night. But by the same token, I hope it will help even out the wages throughout the week or month.”
Moving away from tipping, Hamilton says, “finally guarantees security in a very insecure and unstable industry in a very insecure and unstable world.” That couldn’t be more true as D.C. is still seeing more than 1,000 confirmed cases of COVID-19 per day because of the highly transmissible omicron variant.
But building in stability to keep workers in the industry isn’t the only reason some restaurants are making a change. A ballot initiative potentially coming down the pike seeks to gradually eliminate the tip credit and tipped minimum wage. Organizers are currently gathering signatures for Initiative 82. A similar measure, Initiative 77, passed in 2018, but the D.C. Council overturned it. The second go around, Initiative 82, may stand a better chance of getting enacted if it makes it onto the ballot and voters approve it given the new, more progressive make-up of the Council. Restaurants might solve for the extra labor costs by instituting service charges, like Gresser has done to get ahead of the curve.
Gresser was one of many restaurateurs who opposed Initiative 77. “I’m making the change because I think my staff is more ready for it,” she says. “When 77 happened, I had some very vocal staff members who didn’t want that change to happen, so I supported their position. In looking at it as a broader opportunity to bring more equity across different positions in the industry, I returned to my fundamental belief in this change.”
While more restaurants are adding service charges for various reasons, not all diners dig them. Some would prefer a restaurant increase its prices enough to cover labor costs if they’re eliminating tipping. “I’d be happy to do it that way, but it doesn’t serve the industry, and I don’t think it serves the customer,” Gresser says. “I think it’s necessary to explain when you’re going to change the system. … To increase our prices isn’t an accurate reflection of what’s going on.”
There are notices about the service charges posted on Pizzeria Paradiso’s website and online ordering platform as well as on menus, signs, and tables. “We’re trying to be very upfront,” Gresser says, hoping customers appreciate transparency.
When people are surprised by charges they can act out, like the person who wrote “Fuck You,” on a receipt at Apéro in Georgetown last month. He didn’t like the 2 percent charge the wine bar added to the bill to cover employee healthcare costs. Two percent of his $300 bill amounts to $6. Apéro removed it after he muttered something about socialism, according to the Post.
It’s only been about a week since Pizzeria Paradiso introduced the service charges. Angel says so far so good. “I’ve had to explain it to a couple of people,” he says. “If someone is like, ‘Why the heck is there an extra charge on my bill?’ I’ll say we switched to a service charge in lieu of a tip. For the most part, people seem to accept it. The practice is used widely enough that it doesn’t shock too many people. I hope it won’t turn people away from coming to dine.”
“There might be some concerns where something didn’t go as a customer hoped, and so they’ll see the 20 percent service charge and be upset about it, but Tony says ‘that gives us the opportunity to make it right,’” Angel says.
Hamilton explains that the new system encourages customers to speak up while they’re still on premises. “They have to confront us if something isn’t right,” he says. “There are those secret Yelpers who do not say a word and don’t let us know something isn’t right until they leave a $1 tip and go online and make it a public offense. With this charge they have to have that conversation up front and allow us to address it.”
While Pizzeria Paradiso might remove a salad or an appetizer from a bill if food or service isn’t up to snuff, the service charge is non-negotiable. “That’s how we are paying our staff a living wage now and customers cannot pitch a fit and get it taken off every time. That’s how seriously we’re taking this,” Hamilton says.