National restaurant chain tests no-tipping policy

The notion of getting rid of tips in restaurants could be going mainstream.

Joe's Crab Shack is doing away with gratuities at 18 of its more than 130 restaurants in more than 30 states, said Ignite Restaurants (IRG), which also owns and operates Brick House Tavern & Tap.

The company is testing the results of the pilot program, which will involve increased menu costs for the added labor expense. That said, the price hikes are typically less than the average 20 percent service tip, Ignite said.

Servers, hosts and bartenders will be be paid higher, fixed hourly wages, which the company said it expects will result in an improved team atmosphere and reduced turnover.

"I personally believe tipping is an antiquated model and you have seen most businesses in America migrate away from it over the last 50 to 100 years," Ignite CEO Ray Blanchette said Wednesday in a release detailing the move, which follows a like step in October by New York restaurateur Danny Meyer.

Meyer, chief executive at Union Square Hospitality Group, said two of his 13 restaurants, including Manhattan's highly touted Gramercy Tavern, would dispose of gratuities by the end of 2016.

During a third-quarter earnings call with analysts last Thursday, Blanchette said menu prices rose between 12 percent and 15 percent at the restaurants where the new policy is being tested.

He also countered the argument that eliminating tipping would lead to an exodus of staff, saying "when you start paying actual wages, you create a reason to stay purely through your compensation model."

"We believe the no-service tipping model also gets us above the fray with regards to the increased minimum wage conversations that seem to be happening all over the country," Blanchette said.

One reason Blanchette cited for optimism: The restaurant where Ignite has tested no tipping the longest, since August, "is gaining the most traction."