What is an automatic gratuity? It is when an establishment or workers at an establishment force a 15% gratuity (TIP$$$) on a customer’s bill. It is usually applied in most places that have this policy to parties/groups of 6 or more people. The customer’s forced tax is then divided between the workers that helped with that table depending on how tips are handled at that particular business.
The disadvantages and advantages have to be weighed with each business model, so in the end you have to decide what’s best for your business.
Who likes to get if over with and start with the bad news? What are the disadvantages of having an auto grat (for short) policy?
Well… for starters, it can alienate and upset your customers because as part of human nature, no one likes to be forced to do anything. Living in Toronto, Ontario, Canada we are already taxed to death here with a 13% combined federal and provincial sales tax, if your unfriendly neighbourhood buffet, big chain restaurant or bottle service lounge or nightclub slaps a 15% grat on your bill, then a 1/3 ON TOP of your bill is thrown to tax and tip on already inflated subjective pricing.
How do you quantify bad will from an upset customer? If one customer is upset and complains and doesn’t come back, then how many were upset who didn’t say anything? Are these people going to recommend anyone to your business?
Auto gratuity without proper management can create entitlement issues with servers that expect a 15% tip whenever 6 people get seated in their section, but are not over delivering in service in order to EARN it. Result? More resentment on the part of the paying customer. Being forced to tip and end up with crappy service? Sign me up!
The advantages of having an auto gratuity policy is that everyone else is doing it, so people are used to it, so it isn’t so bad. Sorry, my mistake if you think this way, but this is actually a disadvantage.
The main advantage is that it helps supplement your employees’ income at the cost of your customer’s goodwill and pocketbook/ available credit.
Knowing that 15% of nothing is still nothing, a good server will up sell each of the 6 or more diners to the maximum point that each diner can politely say ‘no’ to any suggestions thrown at them. Group peer pressure is a great environment for up selling. Almost as good as a guy on a first date. This means bigger sales volume.
If anyone has gone out with 3-4 free loading friends, then you’ve experience the ‘who had the chicken?’ game when the bill arrives. Usually in this fun, friendship destroying game, no one takes into account the tip or the tax whether they recognised good service or not. Simple math is thrown out the window by free loaders because they want to divide the total evenly even though they were the only ones who had an extra beer and dessert. This game always requires a mother hen-like someone to responsibility to round up everyone else’s money (and change), recount, recount again, and ask ‘who had the chicken’, then recount again, coax more money out of the free loaders, then count again, then be last to leave to make sure no one reaches back to grab an extra twoonie?
So having an auto grat on larger parties is good for staff morale. If your staff gives great service, then gets stiffed because you don’t get great human beings in your business, then guess who your staff will blame? You, Your Customers and Your Customers who just walked in the door. This is not good when you are trying to create an inviting atmosphere with repeat business. So if you have a lot of large groups in your business, this policy will help you keep morale high and therefore lower the quit rate (attrition) of your staff.
Having an auto grat allows your managers to expect and push for exceptional service from their staff. When we know what it is worth, then we can play a tighter, more focused game. The results, happy customers and hopefully part of the reason for creating raving fans.
This policy may help keep some people out, which may not be a bad thing. If someone don’t have money to tip and pay tax, then they might avoid places that do that when they going out with 5 people or more. Or they might take up the large table and skip the appetizers, desserts and drink water.
This policy may waived to be used as a bargaining chip when employee mistakes happen and customers are looking for a court room settlement to applease their dissatisfaction. You might have to bench the unhappy employee for the rest of the night that cost that loss, but at least you won’t be giving out free food.
In the end, as with everything in life- it’s up to you. The smart businesses have the policy listed on their menus, and give the managers the flexibility to wave it to make the customers feel special and therefore indirectly coaxing a 15% or greater tip through reciprocal guilt. And the smart managers may choose to give this option to the best staff to decide for the chance of earning a greater than 15% tip, and decide for the weaker staff.