Can Tipping Solve Fast Food Restaurants’ Labor Problems?

As restaurants across the country grapple with one of the toughest labor markets on record, more quick service restaurants are choosing to add tipping to a list of perks that incentivize workers. to resume their post.

And they’re doing it in the midst of a major staffing crisis. With more than 1.7 million job openings in the United States in the leisure and hospitality industry, finding employees is harder than ever. Seventy-eight percent of restaurant employers told the National Restaurant Association that recruiting and retaining employees was their top challenge over the past year.

Tipping can be the answer counter service concepts need. Category giants like Panera Bread and Starbucks have embraced the idea, offering tipping options in their mobile apps. Then there’s Sonic Drive-In, which introduced digital tipping to more than 2,000 locations in 2021. Within months, the company brought in nearly $12 million in tips, boosting morale and employee earnings (and generated positive publicity that could encourage more employees to apply).

From immediate recruiting results to long-lasting culture games, here’s why tipping is becoming an industry movement in 2022.

1. Attract more new recruits

If you’re like most restaurants today, you probably have a “Help Wanted” sign in your window. Quick services that jump on the tipping bandwagon now have a significant competitive advantage over other employers when it comes to hiring.

This is because the short-term perks touted by some other brands, such as temporarily increasing salaries or adding hiring bonuses, don’t always work to attract good new hires to your restaurant. Candidates know they are just short-term gimmicks and not just expensive to replicate; they’re probably not compelling enough to improve long-term retention.

Enabling tips, on the other hand, provides an instant benefit to employees and employers. Starting a tipping program has little impact on a company’s bottom line, so there’s no need to rethink or cancel it as market conditions change. This means your staff will see an immediate and lasting increase in their take-home pay that other non-tipping restaurants simply can’t offer.

2. Retain existing employees

According to research firm Black Box Intelligence, turnover costs restaurants more than $1,800 for general employees and up to $8,000 per manager. With so many restaurants offering brilliant hiring incentives, it’s no wonder that retaining employees is just as difficult as hiring them. After bonuses and other perks run out, there’s always another bonus employees can chase from the restaurant down the street.

But as many operators know, with razor-thin profit margins, raising wages isn’t always easy. That’s why adding a tip is a win-win solution for you and your employees. When quick-service restaurants allow tipping, they can significantly increase hourly workers’ incomes, far beyond what income constraints allow, and give them a reason to stay beyond a bonus window of 90 days.

Encourage better performance

The biggest difference between hourly pay and hourly pay plus tips is that your employees now have a financial incentive to perform better.

Once financial needs are met, employee performance boils down to three major elements:

Objective: Employees must be able to answer the question “Why am I here?” beyond a salary. Prompt service may not be as demanding as full-service hospitality, but there is always an element of quality service, and enabling tipping allows your team to make the connection between what she does and what she earns.

Autonomy: Employees who feel a sense of belonging and responsibility for their role are much more likely to stay. Unlike hourly wages, tipping revolves around how they report to work each day, giving them more autonomy and authority over their performance.

Assess: Every teammate wants to know that they are valued by their company and have a path to long-term career growth. Whether it’s moving from working on the chain to running a restaurant or one day helping them start their own business, they can take more pride in their work when they know their performance is tied to what they earn.

Considerations for Quick Service Tipping Programs

The increase in take home pay through the activation of tips represents a major opportunity for employers in the catering sector. And it doesn’t have to look like a tip jar: increasingly, it’s possible to use digital payment solutions and other technologies that integrate directly with your payroll or point-of-sale to make cashless tipping and tipping easier than ever.

While tip activation programs may look different from one quick service chain to another, what matters most is that they are secure, compliant with complex tipping regulations and, most importantly, , structured to benefit essential frontline hospitality workers.

Restaurants struggled to hire and retain employees for years before the pandemic, and it’s only gotten harder since 2020. There’s no silver bullet to solving the staffing crisis, but services Rapids must offer long-term and financially viable solutions. solutions. Digital tips, made possible by new technological solutions and the rise of mobile applications, must be considered as an integral piece of the puzzle.

Justin Robert is the co-founder and co-CEO of Kickfin, a leading rewards management platform. Hospitality employers across the country are using Kickfin to send real-time, cashless tip payments directly to their employees’ existing bank or card.

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