In 2020, triggered by the pandemic, Washington D.C. restaurant group Destination Unknown Restaurants completely overhauled its wage model. The goal was to create an environment for staff that fostered growth and a sense of stability.
Today, all three of its locations no longer run on a tipping model, and instead employ full-time bartenders and servers on salary. Part-time staff make an increased hourly wage, ranging from $25 to $30 an hour, depending on the position. And there’s also an added bonus structure, entirely based on customer reviews.
“The pandemic made it a necessity to change, but it’s not just a pandemic thing now. It’s something we think we’ll keep for forever,” says founder Kelly Phillips. “We doubled our sales since this time last year, and I tell my partners that this [wage model] is why.”
We chatted with Phillips to learn more about the wage model transition and the payoff her restaurant group is experiencing.
How did you determine which positions are salaried, and how do you set the salaries for each person?
A lot of people aren’t quite full-time, so it’s mainly front of house – full-time servers and bartenders that are working five days a week, about 38 to 40 hours consistently with us.
We looked at what servers were making, and then we added about five-percent – this was in 2020. From there, we’ve raised it even more because of inflation and prices going up. The salary depends on which restaurant, but right now it’s between $54,000 and $66,000 a year.
You also created a bonus structure using review ratings from platforms like Google and Yelp. Can you share how that works?
In a traditional setting, you incentivize great service because the server wants that tip. They want to make sure the table’s having a great time because they think they can make more money. With us, we’re incentivizing great service for the entire restaurant.
We’re looking at our Google and Yelp scores, and if staff are hitting their targets, they email me submitting the score for their bonus. It incentivizes them to be looking at every guest and not just one table.
I have them self-report because I want them to be paying attention. The first week of every month they send an email, and then that first paycheck of the month has a little extra.
How high do the scores have to be, and how much are the bonuses?
It varies, but at our fanciest restaurant, you need to hit 4.5 [on Google and Yelp]. I did offer to double their bonus if they get a 4.9 on Google this month, and they’re about 30 five-star reviews away from that.
For Google and Yelp, [bonuses are] $100 for each per month. If they get a Washington Post review, that’s a one-time bonus of $300. If they get a Michelin Star, it’s a one-time bonus of $500. If they get a Michelin Bib Gourmand, it’s a one-time bonus of $200.
They have the ability to add on thousands [of dollars] a year in bonuses, and that’s good for the restaurant and good for them, whereas tips are only good for them.
Not every server is happy when tipping is eliminated. What was the general response from waitstaff, and with the bonuses, are servers making more money on average?
I think [they’re making more money]. At other restaurants, servers will have a really great summer, but then during winter, they’re not getting as much money and they’re having to work a lot harder and by themselves because they don’t want anyone else in the tip pool. With our team, it’s always going to be well-staffed.
We started off small with a few people. And now, when someone new joins the team, you’ll hear them say, “Oh, it’s great, I never have to worry about paying my bills on time.” Servers talk, bartenders talk – especially around the city, everyone’s curious what people are making, and our team knows they have that stability, rather than a situation where they’re making $500 one night but $50 another night.
You’ve increased pay, and I’m sure your payroll taxes have gone up, too. And you’re giving out regular bonuses. How are you accounting for what I imagine is a significant increase in labor costs?
We have a 20-percent service charge. And our strategy is to have people come in often, and because they love the service, we’ve been busier than ever, and that’s helped us.
Obviously we need to keep our labor at a certain percentage, so we do raise prices if we need to, but we’re trying to work that in slowly.
I would say one out of 100 customers asks about the service charge, and if they don’t want to pay, we’ll take it off. We try to have a conversation and explain the “why” when they have questions. But people are increasingly accepting that the cost of dining out is a bit higher, with prices and labor going up.
Can you share any advice for operators who are considering a change to their wage model but are concerned about customers balking at increased prices?
Communication is very important. When the server drops that check, they have to explain that the service charge is in lieu of tipping, and there’s no need to sign. They really have to mention it because people might get confused when they realize there’s no pen or tip line. Most people are like, “OK, great, wonderful.”
We have a lot of regulars who know to bring cash if they want to tip extra, and that goes directly to the staff.
Can you share how the transition is benefiting the company as a whole?
When we post job ads, in the headline for the ad, we just say “full-time salaried servers” with the amount, and we’re typically filling roles pretty quickly. People want to be taken seriously as a professional, and with us they know exactly what they’re going to make.
We’re having to spend less money on hiring, recruiting, and training. We also don’t need as much staff because people are showing up, and we have a steady team here. Some people that have been with us since the beginning did get raises, and we’re just seeing growth – these are potential managers for me. A lot of times when you’re trying to find a manager, you hire a recruiter, and that can be a $7,000 or a $10,000 fee, and I’m not going to have to pay that because I already have people I trust in-house.
Has this structure increased teamwork among front of house staff?
It encourages us to take people under our wing. It’s all hands on deck with training because everyone wants everyone to give good service, otherwise the restaurant might get a bad review. And that’s good for me because it frees me up to do things beyond spending all my time training.
How much do you expect to pay out this year in bonuses?
Probably $2,500 per person, so it’s significant. But for us, we’re busier than ever, so it’s working.
Do you see the no-tipping model becoming the mainstream model of this industry?
I’d like that. What we’re doing is antiquated. I just got back from Europe last week, and it’s a professional job there to be a server, and they have higher pay. It’s less pressure on the guests when they’re dining out, and you know everyone’s taken care of.
Here, being a server is not a stable job, and people are leaving [Washington] D.C. to go where they can have a lower cost of living. There are a lot of changes that we need to make, but this is the biggest one I think – just making sure people have stability and can grow.
As you’re experiencing your first couple years with this new wage model, do you expect to make any changes moving forward?
We have a server and bartender contract, which goes over the expectations of the job and the bonus structure. We’ve made little tweaks to that, like with paid time off and needing to have it scheduled two weeks in advance.
I will say, it would be nice to find a way to put everyone on salary. For back of house, we pay well above minimum wage, but it’s a really difficult job that requires a lot of talent, so we’re working on how we can make the back of house more equitable as well.
Any final advice for operators who might be considering doing something similar?
It’s possible to start small. Maybe you have your head server or bartender, and experiment with putting them on salary and see how they like it. You can start with one or two people. They might love it. They might not. And if they don’t, it’s OK to go back to tipping.
It's OK to experiment. I think people are understanding that a lot is going on right now, so if a restaurant has to change to work, then we should make the change.
Grace Dickinson is a reporter at Back of House. Send tips or inquiries to grace@backofhouse.io.
[Photo courtesy Leah Judson]