This week we found out that Darden owned resteraunts, Red Lobster and Olive Garden, saw sharp declines in profits last quarter. But did you know that Darden has tried to put more financial libaility on their employees, namely the wait staff.
September 23, 2013

Earlier this week we found out that two of the nation's larger sit-down restaurant chains had dismal earnings reports for the last quarter:

Darden can't seem to convince more people to sit down for a meal at its Olive Garden and Red Lobster restaurants.

The company reported a sharply lower quarterly profit on Friday that missed Wall Street expectations, with sales down at its two biggest chains despite ongoing attempts to revamp their menus with lighter, cheaper options. Darden said it would slash costs to prepare for future challenges, in part by reducing its workforce.

These are high dollar restaurants, and with our economic downtimes, it should come as no shock that more people are opting to eat-in or frequent cheaper places. But what isn't talked about in the news this week is how a system that Darden put in place in 2011 has really hurt their employees:

Orlando-based Darden Restaurants is standardizing how waiters and waitresses at Olive Garden and Red Lobster share tips with bartenders and busboys under a new policy that's part of a larger plan to trim labor costs.

In Central Florida, where the new formal tip-share policy has already started, some employees say that hourly wages for bartenders and busboys have been reduced as a result, in some cases by several dollars an hour.

While many servers already share tips, Darden is now requiring it and setting percentages, saying its new policy will set standards and even the playing field. It plans to take the policy nationwide at the two chains.

It's part of a plan to eventually save $30 million to $40 million each year in labor costs. Darden — with about 175,000 employees and restaurant labor costs of $2.4 billion — might also hire a smaller percentage of full-time workers, is trying to make merit-pay increases more consistent and is trying to schedule more efficiently.

Tip sharing, also called tip pooling, is common practice in restaurants. I know Red Lobsters here in Cincinnati where they were already engaging in this back in the 90's. It has also become a system for these business owners to trim their own costs while putting an extra burden on their employees. Here's how it works.

Say I go to Red Lobster and sit at a table. At the end of the night my bill is $50, of which $20 was for bar drinks. Darden's policy is that wait staff tip bar staff 5% of their total bar bill, so for my bill the bartender will get $1. 

Now that $1 tip to the bartender may not seem like a lot, but what if I don't tip. Perhaps my Beam and Cokes were totally watered down, so I decided that I wasn't going to tip, despite amazing service from my waiter/waitress. Well that doesn't matter to the bartender. They still end up getting their $1, just now it's coming out of other tips the waiter/waitress received for the night. So now the waitstaff is responsible for tipping the bartender out of their own money.

And some restaurants even take this further, having bartenders and servers tip-share with kitchen staff and the host/hostess. So if I got to tip 5% out to the kitchen staff and I'm not getting tipped because of slow ticket times or cold food, then I'm helping pay for the kitchen staff out of my own pocket.

What this achieves is something very, very dirty. It puts a huge amount of the financial risk on the already low-paid staff. If my drinks are weak or my food isn't right, I still have to pay, unless I complain enough and they decide to comp my meal, which is not that common. So because of poor quality in the business, the business isn't suffering, but rather their employees. They aren't getting the tips, and in a lot of cases having to pay out of other tips for the staff. Meanwhile the business sits there and continues to collect on the check. 

Now add into it some of the very common reasons for not tipping that I gave - weak drinks and poor food quality. In most of these cases this is something that the staff doesn't have control over, and even if they do, then it becomes an issue of poor management. Most places use metered pours on the bottles, insuring that a shot poured is an actual shot and no more. If you have long ticket times, meaning your food is getting cold, there is a 99% chance that it is due to low staffing levels. If the food isn't prepared right, that is a lack of training. All of these liabilities are no longer carried by the company or even management, but rather by the low paid staff.

So how do we, as customers, fix this? Well there really is no way. You can try leaving a cash tip and telling your server that is all for them, that everything else wasn't worth it. But that won't work because the POS system (Point of Sale) automatically figures up tip-pooling since it's based on sales and not actual tips. So even if your waiter pockets the tip, which is generally a fireable offense, they still got to pay out that 5%. As consumers, our hands are tied and sadly there isn't much of an option for us, except to punish our wait staff, who is most likely innocent. 

The entire tip-sharing system is a scam. It's nothing more than a way for business owners to pay less, while putting some of the financial liability on those that don't deserve it - the $3.85/hr waiter. In a common-sense world, it would be illegal.

My suggestion is to ask next time you go to a restaurant. Ask the host if they do tip-sharing/tip-pooling. If the answer is yes, then leave. Sure it still hurts the staff, but now it also hurts the company and management. It's time for them to feel the pain they have been pushing off onto their employees.

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