Automatic Gratuity Goes on the Menu at New LA Restaurant

Posted in America, California, North America, On the Ground

The Los Angeles entire restaurant world is currently in a tizzy about the opening of Petit Trois, the small French restaurant/bar opening today next to its big brother Trois Mec. The collaboration of LA uber-chefs Ludo Lefebvre and Jon Shook & Vinny Dotolo (Animal/Son of a Gun) took the culinary world by storm with Trois Mec, earning “Restaurant of the Year” from Eater as well as a top spot on pretty much every critic’s best-of lists for 2013. Now that Petit Trois is open, the accolade machine is gearing up again. First is this early look from Food & Wine’s Kate Krader which basically says “eat here immediately and wait in line as long as it takes.” The rest of the food media will be posting report after report after report for the next few months — mark my words.

So why do you care? Well, Trois Mec instituted some customer-unfriendly policies (you have to buy tickets ahead of time; you have to eat during set seating times; if you show up late and miss a course, it disappears from your life forever) but Petit Trois is going a step further. Some notes from Krader’s early look:

*No reservations. First come, first served.
*No cash. (Credit cards only.)
*No tips. (“We are a non-tipped house. An 18% service charge will be added to all items,†says the fact sheet.)
*No phone. The best (and only) contact is
*Full bar—a small, well-curated list of cocktails, wines and beers.
*Late night menu: After 10 p.m., Petit Trois will serve just one thing: croque-monsieurs.

So, don’t even think about using cash. Don’t try to call and talk to anyone. Don’t expect food after 10pm that’s not a ham and cheese sandwich. The most glaring on that list? “No tips,” which doesn’t really mean “no tips.” It means “we’re going to decide how much you tip and you’re going to tip the amount we tell you every time.” This is a problem. Yes, I know it’s common in Europe — specifically France where Ludo is from. No, that doesn’t make it okay.

Tipping is a hot topic on Fly&Dine. Just check out these posts:

Tipping at Hotels

Leading Butler in SF Weighs in on Hotel Tipping

It really gets people going and for good reason: American tipping culture is out of control. So wouldn’t a set service charge be a welcome development? Not in my opinion. A tip is a report card. It says “I appreciated the work you did this much.” It’s also voluntary (although seems mandatory in a lot of situations). By charging a specific percentage for everyone, the restaurant is now saying “we think our servers deserve to be paid more, but we think you should foot the bill.” Instead of a reward for good service, it’s a literal charge for that service. Why?

Look. I’m all for paying servers a strong wage. They do hard work and should be paid well for that work — by the restaurant. If I think they did an exceptional job, I’ll leave money on top of what the restaurant has already charged me. By charging a service charge instead of accepting tips, you’re taking the choice out of my hands and that’s why I take issue with this policy. It’s also bad for the servers. According to California state law:

Q. Is a mandatory service charge considered to be the same as a tip or gratuity?

A. No, a tip is a voluntary amount left by a patron for an employee. A mandatory service charge is an amount that a patron is required to pay based on a contractual agreement or a specified required service amount listed on the menu of an establishment. An example of a mandatory service charge that is a contractual agreement would be a 10 or 15 percent charge added to the cost of a banquet. Such charges are considered as amounts owed by the patron to the establishment and are not gratuities voluntarily left for the employees. Therefore, when an employer distributes all or part of a service charge to its employees, the distribution may be at the discretion of the employer and the service charge, which would be in the nature of a bonus, would be included in the regular rate of pay when calculating overtime payments.

That means that employees at Trois Mec not only miss out on the benefit of people who tip over 18%, they also have to wait for those service charges to be added into their paycheck, as opposed to walking with cash at the end of the night or the next day as is required by law.

It’s bad for the customers and bad for the servers. Will it stand? Only time will tell.

Photo (not of Petit Trois):

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  1. There is nothing stopping a restaurant from cashing out automatic gratuities at the end of a shift.

    I think professional servers have an expectation for some daily cash flow and they won’t work at places that don’t provide it.

    I’m involved with a restaurant, and our servers receive both their tips and automatic gratuities in cash at the end of their shift.

    However, as mentioned, in an all automatic gratuity restaurant, the employer would have the option to put all employees on a fixed rate of pay – no tips, no sharing of tips, etc. I don’t see this as being problematic.

  2. Wow… maybe they never read the recent @irsnews that when a restaurant charges an automatic gratuity it turns instantly into income and therefore subject to taxes.

    • I’m very curious to know if they’ll change the policy once they realize all of the negative ramifications.

    • There’s been a lot of discussion of this within the industry lately. I suspect most business owners are aware that auto-gratuities are taxable gross receipts.

      I don’t see the problem with this. By way of example, let’s play a game – you give me a dollar, and I pay 50 cents of the dollar as taxes…do you ever think I’ll ask you to stop playing??

      Obviously, the employer has the choice to either keep all of the auto grat, and just compensate the servers on a fixed rate determined by what servers of the desired caliber expect, or they can pay some or all of it out to their employees.

      Ifthey pay some or all of the auto grat out to the employee, the amount they becomes deductible salary expense. So, whether a customer voluntarily tips, or the employee collects an auto grat and passes it along to the server, at least from an income tax standpoint, it makes no difference to the business.

      An astute business, however, wouldn’t turn over 100% of auto grats to servers, because they have to pay employment taxes on that amount. Personally, if it were me, I wouldn’t pay any out and just pay my servers an amount, and at a frequency sufficient to retain the type of staff I need.

  3. I see nothing wrong with servers paying tax on tips, something I am sure they have always scrupulously done.
    I just returned from Miami Beach. many really low end eateries add an 18% fee. They are less open about it and basically really expect people to tip in adition to the 18% that is hidden. I have been told these policies are to protect the staff from foreigners that are not accustomed to tipping as in many countries service charges is included (compris).

    • Servers always have to pay taxes on tip. @irsnews say that if there is an automatic tip, the restaurant has to include it as income regardless if it is passed on to the servers.

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