Tips for better tips

A significant industry story returned to the front pages on Friday. Not Punch-M&B (more on that later) but the issue of tips, with the union Unite accusing the nation’s restaurant groups of underhandedly using customers’ service tips to pay basic wages. Three things grabbed me about this story. First, this practice does not seem a particularly great way to motivate staff. It brought to mind a particularly bad experience my wife and a friend endured at FishWorks in the company’s previous life, under different management. Upon complaining about the poor service they had received, they were told rather candidly that “no one cared because we don’t get to keep our tips”. Second, the premise of companies using customers’ tips as a contribution to their staff’s basic wage, which does go on and in some cases is at minimum-wage level, is a little unsavoury; it does not play well in the media and it will not play well with customers. When customers make a discretionary payment for service, they want and expect that tip to go directly to the server. There is nothing wrong with companies covering the costs of putting tips through payroll systems. But customers don’t want to feel like they are lining the pockets of some corporate entity by believing they are paying employees’ wages. At best it feels disingenuous, at worst it seems dishonest. If the practice of using tips to part-pay basic wages is shown to be widespread, tips will quickly dry up, potentially damaging any effort to engender a tipping culture in the casual dining and pub market. This is a big issue – one that should not be underestimated. It will not go away and operators that do this would do well to heed this as a warning, swallowing the cost of change. The third point about the story was the vacuum created by the absence of any industry figures to comment or face down the journalists. What was the real situation? Does Carluccio’s use tips to make up its servers’ basic wages? We didn’t know because the company would not comment. Nor would Clapham House. Criticisms of Pizza Express also went unchallenged. Of course we don’t know the circumstances but this was a shame for those companies and for the sector because when Radio Four’s Today programme comes calling, a “no comment” position looks bad and it looks weak. There was no trade body in the mix either. The mass-market eating-out sector is now big, and it continues to grow, so it may be time for the companies that populate that market to get organised. The sector is now highly visible and therefore ‘fair game’ on big issues. Perhaps the Association of Licensed Multiple Retailers should further move away from suppliers and the big leased pub groups, becoming the voice of the eating and drinking-out market? If the creation of, or participation in, a trade association is too formal then perhaps the casual dining sectors’ leading companies should get together to elect a couple of spokesman from the CEO ranks to comment on such issues. Beware the void. Dealing with our sometimes-feral national media is not easy but the industry should not underestimate the commercial importance of good communication. The Punch and Judy show Talk in the Sunday Telegraph of Punch and M&B usurping Punch and Judy seemed a little unkind but no-one has emerged from the situation with too much credit. It feels that a coming together of large parts of Spirit Group and Mitchells & Butlers should be inevitable. It is certainly compelling and therefore a shame that the two groups were not able to thrash out a deal. The current backdrop of crunching credit and a consumer squeeze cannot have helped. But it is perhaps a bit much for M&B to issue loosely-veiled criticisms of Punch for not being overly interested in fully exploring opportunities for M&B to buy Spirit, when M&B was by all accounts less than over-enthused about talking to Punch when the roles were reversed. Two things are clear: Spirit is not performing brilliantly and M&B needs to do something. A growing perception that the two boards did not do everything in their powers to make a deal happen is potentially damaging to credibility and irritating for shareholders.