BUSINESS

The No-Tipping Policy At Joe's Crab Shack Just Sank

Turns out that people don't mind tipping as an incentive for better service.
Four Joe's Crab Shack locations will keep the no-tipping policy in place as a continued experiment.
Four Joe's Crab Shack locations will keep the no-tipping policy in place as a continued experiment.

We like tipping our waiters!

In an unprecedented move for a restaurant chain its size, Joe's Crab Shack announced in November that it had dropped tipped wages at 18 of its restaurant locations.

It was an experiment to determine whether customers would be happier not having to deal with that dastardly 15-20 percent calculation after a meal. The restaurant chain announced that food prices would rise in those locations to cover higher labor costs, and in turn, the average employee's $2-an-hour plus tip wage would rise to $12 an hour.

The problem is, nobody believed them.

Bob Merritt, the shack's new chief executive, told investors last week that both customers and employees weren't happy with the policy, according to The New York Times. Company research found that diners hated the price hikes, and 60 percent disliked the new tipping policy -- they were happy to throw a little extra cash toward their wait staff as an incentive for a better experience.

"The system has to change at some point, but our customers and staff spoke very loudly," Merritt told the Times. "And a lot of them voted with their feet."

Those 18 locations lost 8 to 10 percent of their customers, and former CEO Raymond Blanchette told CNNMoney that some employees quit over the policy.

Now Joe's Crab Shack is rolling back its plan, decreasing prices at 14 locations but keeping the no-tip measure at four locations as a continued experiment.

“We are going to try to figure out why it worked in some places and why not in others,” Merritt told Nation's Restaurant News. “The way we look at it is: We are really continuing the tests in place with where it works.”

Other, smaller ventures have also tried to implement similar policies and failed. According to Grub Street, Fedora in New York City announced Monday it will bring back gratuities due to customer complaints.

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