Restaurant adopts ‘no-tipping’ business model by paying staff a living wage and sharing profits with workers

Restaurant workers have one of the most tiring jobs, yet many industry professionals remain notoriously underpaid.

Employees often rely on customer tips to make a livable wage, adding another layer of stress to the already tense working environment.

Sadly, most restaurants in the U.S. transfer the cost of labor onto customers in the form of tips, leaving their hard-working employees with no safety net.

But the owners of a San Francisco eatery have been defying the status quo for years with their “tip-free” model that offers all their staff a living wage with full benefits and even a share of the restaurant’s profits.

The popular brunch spot Zazie went tip-free in 2015 under the management of its second owner, Jennifer Piallat. And to sustain such a business model, Piallat had to increase menu prices by 20% across the board.

She expected a pushback, but customers were surprisingly satisfied with the changes.

“In fact, one customer said she expected sticker shock, but that the menu still looks reasonable,” the restaurant owner said after carrying out the new system.

If patrons were happy with the change, more so were the staff. When the no-tip arrangement was first established, all of them earned anywhere from $15 to $20 per hour.

Servers received a 3% to 7% pay raise, while the back-of-the-house staff got a whopping 35% increase. Today, the team makes anywhere from $30 to $65 per hour. Aside from that, 25% of every item on the menu is paid out directly to the employees as a revenue share.

“Our staff are treated like adults, with ‘real jobs,’” Piallat explained. “Our labor costs are much higher than most restaurants, but our food cost/loss is much lower, so our profits end up higher.”

“More mature, long-term staff waste less food, make less mistakes, are less likely to steal, and can handle bigger sections.”

Adopting this model also allows Piallat to offer all full and part-time employees paid sick and vacation leave, fully funded health and dental insurance, paid maternity or paternity leave, and a 401(k) with a four percent employer match.

“The only person losing money is me,” she joked. “My accountant doesn’t like it, but I didn’t want to risk anyone being dissatisfied.”

Piallat also believes that complete transparency makes a healthy workplace, so she posts a spreadsheet with all the critical numbers.

“Everyone sees what everyone else makes. There’s no shadiness about it,” she said.

Over the years, these changes have allowed three of Zazie’s long-time workers to become part-owners of the French eatery.

In January 2020, Piallat sold Zazie to one of its servers, its executive chef, and its general manager—three employees with 50 years of cumulative experience at the restaurant. Piallat is now 25% owner of the business.

“I always knew I wanted to sell to my staff. I couldn’t imagine putting 17 years into building this community to have some stranger come along and treat them like disposable idiots. The hard part was choosing who to sell it to…I doubt they thought they’d ever own the place,” she said.

Zazie’s owners plan to carry its “no-tipping” legacy for the next decade.

Fortunately, the restaurant seems to be doing better than ever, even after the pandemic’s devastating effects on businesses everywhere.

Many suffered labor shortages, shut their dining rooms, shortened operating hours, or closed for good, but Zazie weathered every challenge.

The staff benefits also contributed to Zazie’s very low turnover rate. During the pandemic, only one server left to change careers.

Only a handful of employees had left the eatery over the past five years to change cities or switch careers, with no one quitting to work at another restaurant.

Hopefully, other restaurants follow in the footsteps of Zazie. Everyone knows that service workers deserve more!

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