Currently Managing Partner, GM & Beverage Director of Huertas in NYC, Nate Adler spends most nights running the floor of his Spanish tapas hot spot. The Union Square Hospitality Group alum (he worked at Blue Smoke for almost three years) followed in famed restaurateur Danny Meyer’s steps late last year, implementing a no-tipping policy in December. We caught up with him on why he made the switch, how it’s been going and what he hopes it means for the future of hospitality.
Why did you decide to eliminate tipping?
It was a long process to get to this point, but it all started with the news of the minimum wage increase in the spring of 2015. How are we going to solve this problem, how are we going to look out for the business and take care of everybody in this new structure? As I started to talk to more and more restaurateurs around the city, it became clear that there was a good number, many with influence, that were going to be moving towards solving the issues once and for all. We saw the legal change not as a downfall, but an opportunity.
In restaurants, there have always been two issues: the dichotomy between front of house and back of house has increased over time, as pay goes up for the front of house but not for the back of house staff. As it stands already, there’s a big discrepancy between what those two parties make. The second part is paying people based on merit. In the typical structure, two servers are identical in terms of how they get tipped out. In a revenue share or when a business decides to pay out of pocket, we can afford to pay based on merit. So those are two major problems that we had a big opportunity to solve.
As the momentum built with restaurateurs, we took that idea to our employees. They were skeptical at the start but then became quite enthusiastic about the idea of making this change and being at the forefront of the new movement for restaurants.
Can you explain the concept of revenue share?
We pay out — almost like a bonus — a percentage of top line sales to our employees. So they share in the revenues of the restaurant.
To what extent did Danny Meyer’s decision to eliminate tipping influence you?
Both Jonah [Miller, Executive Chef and Owner of Huertas] and myself worked for Danny Meyer. His company’s mentorship through the process — we couldn’t have done it without them. They were very open about how they were going to be proceeding down this path — and how we could go down that same path — and they helped us work through all of the details of that path.
What change do you hope to affect in the hospitality industry?
The hope is that everybody moves in this direction, because the biggest challenge is having the guests and employees react to this change. There needs to be momentum around the issue, or guests are going to be confused as to how to look at prices on a menu. The more restaurants that adapt to this, the better we’re going to be in the future.
How have your employees and diners responded?
Things have been going very well. Over the course of a five week period we haven’t lost any employees, and our guests have been overly enthusiastic or really agnostic to the issue. As a result it’s been a really big success so far.
Has the new “hospitality included” policy affected your revenue?
One of the biggest challenges is being able to get all the guests to purchase the same quantity of food, so that’s where we stand to fail in this. Our prices are very competitive — ultimately the difference is only about $1-2 per person, but when you see the prices there’s always going be a little bit of sticker shock. If prices are a little bit higher you may wonder, “Oh do I want one more plate? Maybe I’ll skip out on it tonight.” If people don’t order as much volume as before — and we only increased prices at a bare minimum — the numbers don’t really work out. On top of that, we’re just continuing to tinker here and there with the program and our prices to hit our goal. If we lose a few dollars on what our goal was, then we’re making sure they want to come back a second time.
Our biggest initiative right now is cultivating repeat guests and getting the best feedback we can and be really in tuned to who they are and trying to convert first timers into regulars. That’s been our January goal — especially as the restaurant is now in a different stage of its life cycle than it used to be. So we’ve got to look out for the people that are going to come back and be loyal to us.