Hey, it’s me, Andrea. That 26-year-old, first-time, downtown Los Angeles-based restaurateur who decided to eliminate tipping. Not trying to toot my own horn here, it’s just that I’m 29 now, and the audacity of my decision is starting to weigh increasingly heavy on me. I’m considering how many before me tried the same and failed, and how hastily I had ascribed those missteps to generalizations like “company culture” or “staff morale.” I made broad assumptions about complex problems and swept anything that didn’t fit my idealistic worldview under the rug. We can be really naïve when our pride is at stake.
I opened barcito in September 2015, in an up-and-coming downtown LA neighborhood. The concept aimed to provide an approachable, affordable Latin American bar to local residents. My mother is from Argentina, and I spent most childhood summers exploring the streets of Buenos Aires with my grandparents. I was always enchanted by the classic corner cafés, the kind that you pop into for a quick coffee, or stay all afternoon, lingering over food and drink, catching up with friends. Although not an authentic reproduction of the cuisine — for the millionth time, no we don’t carry Malbec — barcito was, in its purest form, intended to be a catch-all for the community, serving coffee, cocktails, and small bites. We’d be open all day, to fulfill our duty as a neighborhood go-to, and staffed by a team of hospitality pros that keep regulars coming back. It took us nearly two years to finally muster the courage to open for daytime service, which is still only limited to weekdays.
In October 2015, Danny Meyer announced he would eliminate tipping across his restaurants. That’s when my ears perked up. As an alum of Union Square Hospitality Group (USHG) — of which Meyer serves as CEO — I drank the “enlightened hospitality” Kool-Aid, and firmly believe in the importance of putting your employees first. Yes, this means before guests, and before investors. The trickle-down effect works, and the idea of taking this model a step further — eliminating tipping, providing better pay to kitchen staff (who weren’t allowed to partake in tips), revenue sharing with waitstaff to improve wage stability, and providing health benefits to all full-time employees — was an opportunity I couldn’t miss. I spent months analyzing the hospitality included model, discussed it with my friends and old colleagues in New York, and spoke with current USHG employees to take their proverbial temperature. I listened to panels, read articles, and contacted local restaurants that had attempted similar practices. I took my findings back to my staff, and when it came time to take the plunge, we jumped — together. Our prices increased by about 22 percent (based on value perception and product mix), the tip line was eliminated, and we politely declined cash tips.
ATTN: picked up the story, publishing a 30-second video that received nearly 60,000 views. A few months later, I received an Eater Young Gun award, shortly followed by being honored as one of Los Angeles’ Zagat 30 under 30. Amid the press coverage, sales steadily increased, and the model was working. But it’s been almost two years since those accolades, and now I can’t speak with quite the same confidence.
Although a variety of challenges have impacted barcito, the most glaring is quite simple: I’d too quickly dismissed the notion that people would scoff at our price increase, which, at its highest, was $3. We’ve experienced some serious sticker shock, even after the final, tip-line-less check is signed. Our braised short rib, once met with rave reviews (at $13 for 5 oz.) began to be described as “small” and “underwhelming” at $16. Our Google listing now shows a price rating of three dollar signs ($$$) instead of one ($). That $16 short rib is our most expensive item. Value perception is a fickle friend.
Sales have slumped, and recently hit an all-time low. After operating on a no-tipping, “hospitality included” model for two years, we are just beginning to understand the full scope of its subsequent, unintended consequences.
A recent conversation with a close friend — a union-side labor attorney and a force to be reckoned with when it comes to workers’ rights — shed some light on the current state of consumer psychology. We were discussing the price of a cup of pour-over coffee at a local, independently-owned shop, which ran her $4.50, or $6 after tax and tip. She felt it was unwarranted; I disagreed. Not because every coffee shop should start charging $6 for their coffee, but because it was a delicious cup, with organically, sustainably farmed beans, roasted locally, prepared by a skilled barista in a beautiful 2,000-square-foot space that lets you sit around and milk that cup for hours on end, using their free electricity, free WiFi, free restroom, and…you get the point. There’s much more to that $6 price tag than just the coffee.
Whether Los Angeles consumers are ready or not, minimum wage is steadily increasing, and will reach $15 per hour by 2022. The only businesses that will able to afford those labor costs without hiking their prices (or adopting a no-tipping model) will be major corporations, with economies of scale — and, let’s be real, some pretty disreputable labor practices — on their side. If we can’t recognize and pay for the additional value in that $6 cup of coffee, it’s going to go away, and go away for good.
Despite all of this — the lagging sales, the skewed value perception, and the multitude of (both administrative and financial) challenges a no-tipping model poses — if I had to do it all over again, I would.
You see, staffing is really hard, mostly because restaurants have a long, storied history of wage theft, long hours, and nonexistent benefits. Money earned in tips is unstable, and varies each night, and as soon as a restaurant starts to lose its edge, waitstaff tends to abandon ship. And don’t get me started on the state of the kitchen staff that can’t collect tips — it’s a long story, with a not-so-happy ending.
Since we eliminated tipping, barcito has never had a stronger team of dedicated, passionate employees who love working with one another and push the hospitality envelope on a daily basis. We have little turnover, and the ability to provide these very-deserving people a stable wage with health insurance benefits is a responsibility I take quite seriously. Not just because I believe it’s a meaningful departure for this industry — and for the physical and mental health of all those who work in it — but because I’ve made it such an integral part of my business model.
It’s damn near impossible to operate a successful neighborhood restaurant when you have a revolving door of employees. To ensure that we can consistently build relationships with locals, barcito needs to have consistency in the people who operate on its front lines. We need bartenders who recognize Edgar — He’s a real person! Hi Edgar! — and pour his regular shot and a beer before he even sits down. Those connections run deep. They are tangible, meaningful, and, ultimately, the reason we do what we do.
I’m at an impasse, because there are components of this model that work so well, yet others that are so fundamentally broken. Sure, I could wait until Los Angeles’ minimum wage hits $15/hour, at which point everyone’s prices will go up and ours will stay practically the same. But who has three years to sit around and wait for the world to change?
Grappling with these questions has consumed me. I overanalyze every shred of evidence, any feedback that may help boost sales. Yelp’s push alerts notify me when a new review has been posted, and my heart skips a beat. Anything less than four stars will plummet my mood, unbeknownst to my boyfriend. Sometimes, the last thing you want to talk about is work, even when all you can think about is work.
He and I recently moved in with each other to an apartment building two blocks from the restaurant. I pretend it helps with my work/life balance, but that’s probably a coping mechanism. He’s endlessly supportive, and I can’t help but wonder if I’ve embroiled him in an elaborate Ponzi scheme, the fallout of which may haunt us the rest of our lives.
Not a day has gone by in the past three months that I haven’t considered closing, cutting my losses, buying a one-way ticket to Buenos Aires and starting a new life.
But I can’t; I won’t. Not because it would feel like giving up — and sometimes, in this industry, you really do need to admit defeat — but because I believe that if you don’t like the culture, you have to try to change it. And because part of my disillusionment is directly related to the fact that not enough people are doing this. Not enough people are standing up for their employees’ rights, for the deeply important change a no-tipping model can, and does, invoke.
And I get it. People love the idea of an increased minimum wage, so long as their morning coffee isn’t impacted. And operators’ hands are tied, not because they don’t believe in a tip-less model (most do!), but because consumers are hesitant to shoulder any of the financial burden.
So, now what?
We pivot. We address something it’s taken almost two years to fully come to terms with: barcito was never meant to be a full-service restaurant. At some point, we started saying yes much more than we said no. We added over 18 menu items since our original offerings at opening, attempting to accommodate guests with a spectrum of allergies and dietary preferences when we don’t have the storage space, refrigeration, or hood system to support that sort of enterprise. Heck, we don’t even have gas in our kitchen. As a result, costs went up, and efficiency went down. At some point, the small, minimalist gastropub I envisioned (and opened as) turned into an Argentine restaurant, one severely lacking the infrastructure to compete in the dynamic Los Angeles restaurant scene.
And, to be honest, I don’t want to compete. I don’t want to be a destination, or book my entire space with reservations, or try and subsidize my bottom line with to-go sales. I don’t want to earn awards, or critical acclaim.
I want to earn regulars. I want to drive value, without compromising our integrity. I want to provide a go-to space for locals that’s approachable, affordable, and staffed by employees who actually care how your day is going. I want to be an all-day café and late-night bar, with a little something extra in between. I want to strip down our menu, decrease our prices, extend our hours, and hone our focus down to coffee, cocktails, and community. And, above all else, I want to prove that a no-tipping model can work. Not because it’s easy, but because it’s important.