No-tipping experiment at Costa Mesa restaurants axed | Hacker News Reader

No-tipping experiment at Costa Mesa restaurants axed

ocregister.com

26 pointsprostoalex85 comments

In EU businesses have to advertise the whole price of everything they sell: including things like tax and service.

I am always surprised that in the US, with all its consumer protection laws, businesses get to advertise prices that are misleading. You have to pay the minimum service fee, or you'll get into a loud argument. You have to pay tax too of course, but it's added to the bill separately, which makes it inpractical too: buy a coffee for USD4, and you have to pay an impractical amount like 4.36. I always suspect this is a ploy by businesses to protest these taxes.

I feel forcing restaurant and vendors to quote the full price allows politicians off the hook for high tax rates. I think it serves a purpose that anyone that has parked in NYC knows there is 18%+ tax on their parking lot, and everyone in PR knows of 11% tax tacked on to nearly every item.

If you feel that way, why not also let everyone know the profit margin as well, and put that separately on the tab? So everyone can know how much profit goes to the business owner?

These things are politically motivated, and do not serve the consumer, who simply has to pay the full cost of doing business.

Profit margin is a private personal manner of the business owners, and sales tax is a matter of public records and government law.

Which is why the tax is printed clearly on the receipt. Personally I do not like the American way of not including the tax into the listed price because it makes it harder to shop with a limited amount of cash on hand.

Profit margin is very hard to compute on an individual item. How do you allocate capital cost, cost of labor, r&d, etc? For instance, a recipe may consist of ingredients that cost a few dollars but it may include the work of the chef in crafting the recipe, capital depreciation of the equipment used, space allocation of the restaurant and a million other factors that are though to explicitly account for.

Europeans are used to high taxes and in most countries you can figure out where your tax money goes of thebwebsites of the finance ministries. The fear of government is not really a thing in Europe.

Then display both the price, plus all the applicable taxes upfront.

The sales taxes, and the items they are applicable to, vary by municipality, and it's unrealistic for any business to conduct an advertising campaign when submitted to a requirement to quote the final price.

That includes the blanket national TV campaigns (McDonald's "pick 2 for $5", for example) as well as more locally targeted print ads and billboards. Large US municipalities are also really an amalgamate of a large entity, various smaller towns who incorporated on their own (like Campbell, surrounded by San Jose on all fronts) and various intentionally unincorporated areas, each with their own taxation regime and slightly different rate.

If that wasn't enough, some sales taxes have a temporal restriction, with various addenda to sales taxes going into effect and sunsetting on various dates. Then you have the sales tax holidays, which some state governments occasionally adopt to boost the retail component of their economies.

It's part of why I think that Americans complain so much about tax - their sales tax is both very visible and very annoying, due to the weird numbers that prices end up at.

Probably they can get away with it because sales tax is just a tiny percentage unlike the VAT in Europe which is 20%+.

Saying "20%+" makes it sound higher than it is. In Germany, it's 19% (7% for food), UK 20% (5%), France 20% (5.5% / 10%). Of course that's a lot higher than the usual US sales taxes (I remember 8.875% in NYC and 10.25% in Chicago, both of which are on the high end of the spectrum - DC was 5.75%)

The minimum non reduced rate is 15% and the average is above 20%. It goes all the way to 27% in Hungary for instance. VAT on food in restaurants is non reduced rate on mostbof Europe.

And I just listed the rates of the three largest countries in Europe, covering ~42% of the EU population.

In Germany, VAT on restaurants is 19% for sit-down places, and 7% on food to go.

US national average sales tax was 8.454% in Q2/2015: http://www.accountingweb.com/tax/sales-tax/us-average-combin... - I'm assuming normal sales tax applies to restaurant food?

In that case it's something like 40% of EU average. Just like gas prices ;)

Except that it is 7% on restaurant food in France. Getting back to the previous 17% (IIRC) is under discussion because the prices did not go down as promised by the restaurant owners.

In Sweden it's 25% but some goods have a special VAT of 12.5% instead.

Not really, it's usually around 10%/15%

Current rates:

AT 20%, BE 21%, BG 20%, CY 19%, CZ 21%, DE 19%, DK 25%, EE 20%, EL 23%, ES 21%, FI 24%, FR 20%, GB 20%, GR 23%, HR 25%, HU 27%, IE 23%, IT 22%, LT 21%, LU 17%, LV 21%, MT 18%, NL 21%, PL 23%, PT 23%, RO 20%, SE 25%, SI 22%, SK 20%, UK 20%

That's the standard rate. Average is 21.5%.

For things that qualify for a reduced rate, here are the current reduced rates:

AT 10%, BE 12%, BG 9%, CY 9%, CZ 15%, DE 7%, DK 0%, EE 9%, EL 13%, ES 10%, FI 14%, FR 10%, GB 5%, GR 13%, HR 13%, HU 18%, IE 13.5%, IT 10%, LT 9%, LU 14%, LV 12%, MT 7%, NL 6%, PL 8%, PT 13%, RO 9%, SE 12%, SI 9.5%, SK 10%, UK 5%

The average is 10.2%.

Thanks

I meant (US) sales tax in my original post, not VAT

Ahhh...OK. US sales tax (combined state and local) averages 6.4%. The largest is 9.46% (Tennessee).

Really? I sincerely had the impression of paying more (in NYC especially)

I just checked, I payed 6.5% on an Apple receipt in Florida a couple of years ago

I must have thought of the sales tax in Canada which is around those values

Non reduced VAT is not allowed to be below 15% and there are only a handful of countries with a non reduced rate of below 20%.

You do NOT have to pay a "minimum service fee". This is the third time I've read, recently, someone from Europe say that and it's totally false. Tips are a gift, if you will, to the waiter for giving good service and NO ONE will get into a "loud argument" with you for not leaving one, despite the online stories from anonymous posters who say they have at some pretentious dump they went to.

In addition, tips are given AFTER service and the customer is on his way out the door. Rarely does the waiter even know a tip was left till they collect the check and the guest is gone.

Note: I have been in the restaurant business on the side for 31 years. If anyone got into an argument with one of our guests, I would fire them on the spot.

Also, when I eat out, I tip what I wish; typically 15% except for exceptional service and then it's 20% but I have tipped less and nothing at all. I have NEVER been confronted about it and I NEVER expect to.

> You do NOT have to pay a "minimum service fee". This is the third time I've read, recently, someone from Europe say that and it's totally false.

I did not make that up: I visited New York a month ago, and experienced first-hand what happens if you pay less than 15%. I was at a restaurant where the noise was so loud I could not talk normally with my family. The place was very loud by itself, but at a neighboring table three guys were having an aggressive argument, they were screaming, standing upright at their table, acted completely obnoxious and extremely loud. The personnel let this go on for more than 20 minutes until one guy left, angrily. The whole experience was very unpleasant for us, so I gave only $5 tip, instead of the $15 that was the "minimum". I even explained the reason. I still was told that I had miscalculated, that they could not help the behavior of other customers, and I had to get into an argument and get help from another waiter before making my way out.

Probably this was just a poorly-run restaurant, but in my experience almost all restaurants there make it quite clear on the bill that the 15% service fee is really not optional. Only the part above that is.

Bad restaurant .

I've left plenty of bad tips when the service was poor. I've also left plenty of generous tips when the service was amazing.

I'm not denying you were confronted but that's not normal. Generally I'm out the door before the staff has even collected the tip. Even if paying by credit card they leave the reciept on the table with a pen. I write in the tip and leave. It's still on the table when I'm walking out the door

I've traveled all over this country for business and visited cities large and small as well as cheap and expensive restaurants. I'll say it again, I have never, ever seen this or heard of any such thing from anyone I've ever known. What you encountered could only have been a low-class dump from your description.

On the Sales tax issue, the business does not have advertise the price including the tax because the business is not being charged the tax which if my understanding it correct differs from how the EU operate. The individual buying the coffee is being charged the tax by the government, the Business is acting as a pseudo government collection agent, forced to do so by law. In most states te business is infact paid a nominal fee to collect this tax on behalf of the government in most location it is very very minor but it is there

As to the not including Tip in the price, well that is because you the consumer set how much you tip, there is not possible way to include it. Outside of "large parties" I will not partake in business that charge a mandatory tip. I am likely one of the few people that actually tip based on the service I get, and I have walked away with out leaving a tip.

UK VAT is also a charge on the buyer, and just collected by the seller on the government's behalf. It is not a tax on the seller. But B2C businesses must advertise prices that include this tax.

So you're hiding from the consumer the fact that the govt is taxing 20% on your consumption. In the USA system, tax is clear and present. The difference in style can be associated to a republic vs monarchy style => citizens vs subjects

Nope, the VAT amount is required to be clearly marked on all receipts, at least in the European countries I've been to. It's just that the shelf prices have it included.

Besides, since there's usually only a couple of VAT rates, instead of a complex mix of city and state sale taxes, everyone is very aware of what the current rates are, and it's always a big point in national politics.

People in the UK are very aware of VAT. However we do like to know the total cost in advance of paying.

As an aside, many restaurants here have included service charges (but these are usually optional, so although they are shown on the menu you can choose to not pay)

I think also in Europe many do not see tax as pure evil.

The tax is not clear in both cases, but it is present in both cases. The difference is in one case (Nova Scotia, in this example) you walk up to the counter with $37.64 and pay 15% tax on the $27.65 portion because the $9.99 feminine hygiene products are exempt; you don't work out the tax in your head because you can never remember which items are exempt, you figure it out by looking at your receipt and see you paid $4.15 in tax. Meanwhile, in the Netherlands you walk to the counter with 43.38€ worth of goods and you pay precisely 43.38€. You again look at your receipt and see that you paid 2.46€ in tax (6% rate for food and medicine).

Certainly, people try to argue that Europeans don't realize they are paying tax, but this is simply false. In both cases, people know they are paying taxes; even foreigners realize it. The only real difference is that it is trivial in Europe to work out how much money will be paid for the goods picked up before getting to the checkout and there is no need to have memorized the tax code. The only thing you need to be able to do is add and you will know how much money you will need to pay.

Everybody knows VAT exists, how much it is and that's included in the price. And everybody complains every time it's raised because we see prices going up (sometimes more than they should) and we know there will be a domino effect on everything.

Normally receipts list prices without tax and then total with the tax. It's just what you see on the price tag is different.

That's not usually the case in the UK. I have never seen a UK supermarket receipt list individual prices without tax.

> At Marin, a large bacon and egg breakfast sandwich was $22, and refillable coffee was $7. On Friday it will go down to $18 and $5, respectively.

It was not exactly an inexpensive restaurant to begin with.

It's interesting too because the price with the tip included is 40% higher for coffee and 22% higher for the eggs. I wonder if 22-40% is the normal tipping range for the area. Would the experiment have turned out differently if for example they raised the prices by 15-20% across the board rather than 22-40%?

> Marin

> $22 egg sandwich

I can hear the world's smallest violin playing for the wealthy snobs of Marin County.

Perhaps, but this article is about a restaurant called Marin in Orange County.

At the "lower prices" of $18 for bacon and eggs and $5 for coffee, you'd think they could pay the servers more than minimum wage, even with tipping.

High end restaurants don't get their ingredients from the same place you do or McDonald's does. The quality there is above and beyond.

I've read that restaurants as a whole usually spend 30% of the price on ingredients, and the rest is staff and rent and other miscellaneous items. Buffets work because even if people eat more, the restaurant as a whole operates more efficiently(no individual servers).

I don't know what the percentage is for high-end restaurants. Do you think it's higher or lower?

The cost of ingredients for coffee are a small fraction of the cost, whether you charge $2 or $5 for it. There is a student-run café at my university, all staff are unpaid volunteers, they serve really good coffee for 50 euro-cents (~55¢ US). The beans are from a high-end local roasting house, and it's in a real cup. Milk (whole/soy) is included. Coffee is cheap.

Coffee is cheap

Rent isn't. I bet those students pay a lot less in rent every month (and quite possibly they don't pay anything at all) than what it costs a nice restaurant to rent a centrally located place.

Yeah, but the post I replied to was about the cost of ingredients. And McDonald's has some really expensive locations as well.

Let's not cherry pick. I'm talking about menu items overall.

The cost of the ingredients will still be pretty low compared to the overall price you pay. A bacon and egg sandwich is about as cheap as it gets to make. It's the time to prepare and serve the food (i.e., staff time) and the time you spend there (i.e., customers per hour → rent) that are the bigger factors.

Quit guessing. Your estimate of food costs is wrong. The bacon and bread at high end restaurants is not the bacon and bread you get at the grocery store. For one thing, the bread at the restaurant just may have been made from scratch and baked in the kitchen a couple of hours earlier. The eggs may have been shipped in from a special farm picked out by the chef. The bacon might have the chef's name on it, too, cause he hand selected it himself when he visited the farm.

And there's nothing frozen and you won't find any microwave ovens either.

Food cost varies but can easily be 28 to 33% of your bill. Now add up how much a couple of slices of your Wonder bread, an egg from your $2/dozen eggs and $5 package of bacon is and then try and figure out why the restaurant food costs so much more.

Let's not forget, too, that, in higher end restaurants, the people in the back room aren't high school kids playing on their phones and dancing to hip-hop while making your food. They are most likely professionally trained with an experienced background. None of them are making $10/hour until they find their "real job". This IS their real job.

How can you tell? You can taste the difference. That's all the proof you need. You may think $15 for a bacon and egg sandwich is high until you taste that sandwich. Then you really know what a $15 sandwich tastes like.

Hey, you're making an awful lot of assumptions here. For the record, you won't find a microwave oven or Wonder bread in my kitchen either. I've had a rye sourdough for the past ~2.5 years. Not exactly sandwich bread, but the point stands.

Making the bread themselves is exactly my point - the ingredients are not the most expensive bit. Staff time is.

Now I don't know the restaurant from the article and how high-end it really is, but for $18 I would expect them to make the bread themselves and not use cheap supermarket ingredients. Staff is still the most expensive part.

Again, you may not be correct. I would have to ask my bookkeeper what our labor cost is, I'm not that involved in mine anymore, but it's not that much higher than food cost.

> McKenzie surveyed 40 servers working for moderately priced sit-down restaurants. He asked what hourly wage they would need to voluntarily forgo their current minimum wage and all tips. The rate they wanted ranged from $18 to $50 an hour, according to the study

Ouch. Living somewhere where tipping is already not the norm, that seems...wildly unrealistic? I wonder what the average was.

One would need to know what moderately-priced meant.

Three of us went to a Thai restaurant in the Washington suburbs last night. Dinner was $75, and we tipped 20%. Suppose each server had six tables (which I think was about right) and that the turnover is 1.5 hours per table, that's four tips per hour. Our bill might have been on the high side (a beer each, and one more entree than we needed); but it would probably be safe to set $20/person as the low side of the bill, and a table average of 2.25 persons--I saw no solo diners, and a number of tables of four persons. So the hourly turnover during busy hours might be upwards of $180. The slow spells later would be less, though maybe compensated some by more alcohol with the meals. Anyway, with an average tip of 15%, that's $27/hour for the busy hours at least.

So $18/hour seems fairly realistic. $50/hour suggests a turnover of something more like $350/hour, so maybe a $90/table charge. I guess that Washington counts this a moderately priced.

(It could also be that not all of cash tips come to the attention of the IRS; but I don't know how much cash gets put down in that range of restaurant.)

You're on the right track but it must also be remembered the time of year affects this along with seniority of the waiter (how many hours they get) and their own availability. Waiters can have great days and weeks followed by poor ones but waiters at good restaurants can make decent money on tips. Too many bad stories are from IHOP.

This is a shame. Tipping is a pernicious practice in the US. But he seemed to have good data.

Sometimes it's painful to realize how not economically rational people are.

I know, right? Sometimes when I am sitting through an econ talk it is very hard not to say, "But your assumption one is wrong."

Coincidentally, I submitted this interview an hour ago.

"An interview with Professor Richard Thaler, godfather of behavioural economics"

http://www.spectator.co.uk/2016/06/id-have-said-lets-not-do-...

https://news.ycombinator.com/item?id=11927635

Why is this evidence of economic irrationality? I'm not a fan of tipping as an institution, but as a buyer, lower prices with tipping gives one more flexibility to choose how much to tip.

tipping is not rational?

I think the argument is that the price to the consumer doesn't change yet consumers changed their habits anyway.

Maybe on average the price didn't change, but in the "no-tipping" case, customers can no longer self-select into their various price points.

What businesses actually want out of their pricing model is to have a bunch of people pay the maximum amount they'd be willing to pay for a uniform set of products, even though that maximum varies across the customer population. Having a single price for each of your products necessarily constricts your customer base, and it's actually pretty rare -- even your corner drug store publishes coupons in the shoppers' weekly to help bring the cheapskates in the door.

Eliminating tipping puts this restaurant into the "single price point" game, forcing them to pick a number that balances not only revenue per customer against customer volume, but also some intangibles -- having a big waiting list catches people's attention and makes your place seem more desirable, for instance, and lets some people pay with time instead of money, broadening your customer base. Plus the marginal efficiency of the kitchen is pretty high if its going full-bore all the time, and it likely makes better use of perishable supplies that are already paid for.

My guess is that what they have learned is that there's no single number you can pick that's "the same" as in the tipping scheme. The article talks about "high-energy millenials" who were put off by the high prices. This suggests a price-sensitive group, so probably not especially high tippers, but with some other feature that makes them valuable -- maybe they buy low cost but high-markup items, or maybe they help create an atmosphere that brings in some high rollers, or maybe they marginally increase the volume in the off-peak, allowing the kitchen to make better use of those already-mentioned already-paid-for, perishable ingredients.

Tl;dr a cost distribution is not fully characterized by its average, the shape also matters.

But he price is changed. You're forced to tip a specific amount regardless of quality of service. Most people do not fancy to be forced.

Unfortunately it's another case of "Culture eats strategy for breakfast"

Maybe it could have been handled differently.

They removed a 15% tip, increased pay from 10 to 15 and prices by 20%, replacing a payment you should do with one that you must do. What could go wrong?

"And most were actually working even harder because they were working as a team for Arc, not themselves"

Give me a break!

You don't understand. When you wait tables, you are in a little fiefdom of your own that you are responsible for and no one else's. Helping others takes time away from your space and, potentially, your own income. When your income isn't based on helping yourself alone, then you can form a team to help each other when they run into problems.

Note that I am not saying waiters never help each other out.

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