The O-B House Fort Lauderdale Eliminates Tipping

The next time you sit down for breakfast at the O-B House in Fort Lauderdale, the first thing you'll notice about the menu won't be the restaurant's name, logo, or even the story behind its mission but instead the message clipped to the front of laminated book that reads: "No tipping establishment."

The O-B House does not accept gratuities. Instead, it "takes care of its employees so you don't have to." At least, that's the idea behind the new no-tipping policy the restaurant recently implemented. Located in Fort Lauderdale's historic Himmarshee Village, the 4-year-old breakfast and lunch establishment that employs a total of eight servers officially switched to a no-tip format two months ago, and according to co-owners Aaron Johnson and Rodney Ely, the new system has been working well for both the establishment and staff.

"So far, the customers love the no tipping-policy," says Ely. "They feel like I've taken responsibility for taking care of my employees, and they feel good that it's not their job anymore. Now, all they have to do is enjoy their meal and sign their name."

No-tip restaurants could be a new trend for the new year in South Florida. Miami's Choices Organic Café, a vegan restaurant that boasts three locations in Miami-Dade County, took the no-tip plunge earlier this month.

The move to pay servers and other restaurant staff a higher fixed wage and do away with tipping made its debut earlier this year with Danny Meyer, the restaurateur who founded Shake Shack and whose company owns New York City establishments Gramercy Tavern and Blue Smoke. Meyer announced in October that his Union Square Hospitality Group's 13 full-service Manhattan-based restaurants would implement a no-tipping policy by adding a 10 percent service charge and raising menu prices. 

In November, Joe's Crab Shack — an Ignite Restaurant Group chain with locations in Lauderhill and Fort Lauderdale — made a similar move when it launched a no-tip pilot program at 18 of its more than 130 restaurants (not including South Florida). The establishments participating in the test group did not add a service charge to checks but instead raised menu costs 12 to 15 percent.

While the approach to implementing no-tip formats varies, restaurant owners seem to have the same goals in mind: improved team atmosphere (less fighting over tips and tables); reduced turnover (more steady pay in and out of season means workers won't look for better-paying positions); and a better way to calibrate wages and reward employees based on the length of their service and the complexity of their jobs.

Ely said he also sees being one of the city's first no-tip restaurants as a proactive move that will help set an example for other small businesses.

"For the last two years, I've been asking the question: 'What will a small business like mine do given the inevitability that minimum wages will increase at some point?' Whether it happens next year or three years from now, it's a question I believe a lot of small businesses like myself are asking," says Ely. "For me, the idea to become a no-tip establishment began as a business solution. Someone had to step up and be the first to take on the change and determine how that change will affect the client experience, the business, and the staff experience all at the same time."

The question regarding whether minimum wage is enough to live on has been an ongoing debate in recent years, and the idea of restaurants moving toward a European-style restaurant model that replaces tipping with a service charge, higher prices, or both has become a growing trend in the United States. At the end of 2015, more than two dozen restaurants nationwide had done away with tipping, meaning employees would earn more than the national minimum wage, which — since 2009 — has been $7.25 per hour for nontipped workers and $2.13 per hour for tipped workers.

At O-B House, Ely and Johnson decided to raise menu prices to reflect the increase in employee wages but did not add a service charge. The move, they say, has received a positive response so far.

"The first week, customers didn't even really realize that our menu prices had gone up, including our regulars — many of them people that come in to eat here almost every day," says Ely. "Really, the hardest part about all this was actually getting the customers to stop wanting to add gratuity."

Some South Florida restauranteurs aren't so quick to share Ely's enthusiasm. Boca Raton-based Sybarite Pig owner Daniel Naumko and Fort Lauderdale-based Bull Market co-owner John Todora say they see drawbacks to the no-tip system.

"I've only seen this work at co-op restaurants where everyone on staff owns a chunk of the pie. I don't believe it's a model that would ever roll here," says Naumko.

"I can't see us going to an auto-grat system in Broward," adds Todora. "The level of service would diminish and the tax ramifications for the employer would be too steep. There are no benefits that I can see as an employer."

And what about the staff? Once Ely decided to make the move to a no-tip policy, he says it was important to imbue his confidence to his servers.

"We had to convince the staff that while it was a huge change for them, that they would realize the positive power of the change they were making," says Ely. "Initially, they were nervous because they're used to getting cash on a daily basis. But once they secured their first check and saw that they are making the same, not less, it was an easy transition. But here's the best part: Now they get one large check, which helps them to save more and budget their money more responsibly."

Jeffrey Batton, an O-B House server, agrees. Although he was skeptical when he first heard about the change, Batton has since become a fan of his employer's no-tip policy.

"I'm bringing more money home now than I did when we were getting tips, and I'm also forced to budget my money better," says Batton, adding that quality of service should not be a concern. "And we still have a vested interest in the success of the business, and providing good service is still very important. If service is bad, our jobs are still on the line. But now there's no pressure to get the shifts or tables that will bring us better tips. The hardest part has been convincing customers not to feel guilty. My message to them is don't feel bad. I'm providing a service and product for you, and I'm being compensated for it very well."