Ronald Hsu wants to see a more equitable restaurant industry. As part of that, Hsu strongly believes in eliminating the divide between the front and back of house and implementing a service charge to help raise wages. At Hsu’s Atlanta-based restaurants, Lazy Betty and Juniper Cafe, a 20% charge is added to the end of diners’ bills. Earnings are split between kitchen staff and those working in the front.
“Chefs work more hours and make overall less money per hour. I never understood that, and I also don’t like that customer-facing staff have to rely on the goodwill of customers,” says Hsu. “I did the service charge to make sure staff can make a livable wage and with the thought that it’d help promote more of a team culture.”
Hsu says his decision was grounded in “security for the workplace”, and so far, it’s paid off. He estimates about a quarter of diners still leave an extra tip and, when including the mandatory service charge, the overall tip pool averages around 30%. Hsu hopes to see more of the industry move in this direction. And it’s a big part of why he joined community group RAISE: High Road Restaurants, through which he now helps advise others on how to make the change.
“I just find it a little ironic that systemic racism is such a big topic right now, but if you look at how the tip credit works, you’ve got customer-facing employees who are better at speaking English and often caucasian making more money, and then you look at the back of the house, who’s working just as hard, and usually filled with minorities – why should they be penalized?” says Hsu. “Any time you want to make a change or do anything that’s out of the box, it’s going to be met with skepticism, but that’s the way the world progresses, and it’s our responsibility as leaders to make a difference.”
Peer-to-peer network
When Hsu joined RAISE two years ago, he became part of a national, peer-to-peer network that guides those seeking advice on how to increase wages through alternative wage models. RAISE’s mission also includes improving working conditions and racial and gender justice across the industry. The organization is an affiliate of One Fair Wage (OFW), the national advocacy organization dedicated to ending subminimum wages for all tipped workers.
“Our members get the ability to have these conversations with like-minded folks and the camaraderie that comes from a whole network,” says Andrea Borgen Abdallah, a former Los-Angeles-based operator and the organization’s community manager.
RAISE members meet virtually every two to three months for educational sessions and roundtable discussions. If you’re in the industry, and committed to advocating for legislative changes to eliminate the tipped minimum wage, you’re welcome to join.
“We have members that live and work in $2.13-an-hour states who are paying $15-plus an hour, providing benefits, and are living the mantra of what we’re after,” says Abdallah “And then we have members who haven’t figured out a way to bring wages up to that level yet but are committed to advocating for those legislative changes and are willing to support us in moving the conversation forward.”
Member meetings focus on topics ranging from creative approaches to health insurance to open book management. Lately, the concept of service charges has become a common point of conversation.
“I think it’s hands down the best model that’s currently out there, but the complication with service charges is that it’s essentially restaurant revenue,” says Abdallah. “There are some great actors who are using that money to invest in benefits and wages, and then there are some folks who aren’t doing that, and so a lot of our conversations revolve around what we, as an organization, recommend.”
RAISE and OFW endorse using the MIT Living Wage Calculator for operators to determine appropriate pay rates for their region, as well as committing to pay transparency and improving equity across departments.
Free wage model trainings
Anyone who’s exploring how to raise wages at their own restaurant can reach out for advice. The organization offers one-on-one wage model training.
“It’s a broad look at all the different types of models that are out there and what the financial implications tend to be,” says Abdallah, who currently conducts the one-hour, virtual sessions.
In each training, RAISE addresses three main alternative wage models. The first is the service charge, RAISE’s preferred method. The second is a model that uses traditional tipping but shares the tip pool between the front and back of house. In the third model, tips are eliminated and menu prices are increased to cover the costs.
“For each of these models, we go through messaging and language to use both internally and externally and take a deep dive into the finances,” says Abdallah. “I’ll include some spreadsheets and hypothetical P&Ls that folks can plug their numbers into, and we'll look at what the distributions can look like for employees and the impact on payroll.”
Following the training, RAISE often connects operators with industry professionals, like Hsu, who can share firsthand experiences and offer additional advice. Abdallah says the goal is to build interest and education around what else is possible.
“Why do we continue to think only in this very narrow way?” she asks. “These conversations have become really popular in California, but they’re a lot less popular in Georgia and Texas and some of these other states where we happen to have members – being able to reach out to that network is incredibly powerful and so important for working towards change.”
Advocacy and the future of wages
While RAISE works with operators individually, eliminating the tipped minimum wage nationwide remains the top priority. The organization sees this as the only path forward for truly achieving equity and higher wages industry wide.
“Coming up with these alternative wage models is an important first step, but it needs to be followed by legislative policy,” says Abdallah. “I don’t think our industry is united enough to set these standards on its own without the policy behind it.”
RAISE members are encouraged to get involved with advocacy work. Currently, most legislative changes are happening at the city and state level, like in Washington D.C., where voters recently approved to phase out the tip credit beginning next year. OFW was pivotal to getting the initiative onto the ballot.
As the policy battle continues on, RAISE does hope more operators will get creative on their own. Abdullah says the organization is here to help “operators use all of the levers at their disposal” to create more sustainable workplace environments.
“Restaurant owners are so, so busy, and even ones who want to have these conversations lack the capacity to know where to start,” says Abdallah. “Having organizations like RAISE, and OFW, that have very explicit goals, are able to find funding to achieve these goals, and can be an available resource is super valuable.”
Grace Dickinson is a reporter at Back of House. Send tips or inquiries to grace@backofhouse.io.
