Last month, Kickfin sponsored FSTEC, a premier industry event in Texas, where co-founder Justin Hassan had the chance to moderate a panel of executives from top-tier franchises. He sat down with:
- Jakub Petri: Senior Director, Global Visa Direct
- Dave LaRocque: Director of IT, Rock N’ Roll Sushi
- Jared Hinshaw: VP of Technology, Walk Ons
- Scott SirLouis: COO, FSC Franchise Co. (Beef ‘O’ Brady’s / The Brass Tap).
Panelists discussed the “hidden” costs of a traditional tip program — and how revamping their approach to tipping has improved recruiting and retention, cut labor costs, streamlined accounting, and reduced theft, human error, and compliance issues. If you missed it, scroll down for a quick breakdown of key takeaways.
Tipping Is Here To Stay
Compensation is more important than ever, especially in a tight labor market. Most hospitality workers have come to expect and enjoy the benefits of being tipped out in cash on a nearly daily basis. Tips not only help employees pay their bills, they keep your labor costs down as well. With the added tip revenue, tipped service employees’ earnings increase to $25 an hour, on average—a far cry from the $7.25 per hour national minimum wage. Can you afford to pay your employees the equivalent of what they make in tips? If not, tips may be the only way to find and retain skilled service workers.
Cash and the tip-out dilemma
Most customers are paying with credit cards or digitally—leaving restaurants without adequate cash to tip out employees at the end of each shift. Even with this roadblock, 90% of restaurants are still tipping out with cash.
But tipping out with cash comes with a host of hidden costs:
- Weekly or daily bank runs
- Expensive cash deliveries
- Risk of theft, skimming, and human error
- Tedious cash counting & distribution
- Labor costs (waiting on the clock)
- Rounding up to the nearest dollar
- Complicated reconciliation and reporting
Tipping Transformation
These days, higher earnings from tips aren’t enough to keep your best employees around. Naturally, workers want more control over their pay—and when they receive it.
According to a recent survey of service workers:
- 83% want instant access to their pay after every shift
- 80% prefer funds to go straight to their bank accounts
- 81% are more likely to choose an employer that offers on-demand pay
3 Steps To Reinventing Your Tipping Program
Restaurants should aim to stay ahead of the curve when it comes to digital tipping—or you risk losing your best employees. As you revamp your traditional tip processes, follow these steps to ensure a smooth transition.
Talk To Your Employees
Present your employees with better options than cash-only tips, including instant digital tips, tip-out cards, and payroll tips. By putting the choice in their hands, you’re empowering employees to control their financial future. Most importantly, be sure to explain why this change is good for both employees and the business as a whole.
Revisit Tipping Laws
Laws vary from state to state and country to country, so you’ll need to be up-to-date and flexible when it comes to your tip structure. It’s especially important to read up on tip-pooling laws, as new litigation has been popping up frequently. With compliance in mind, seek a solution that helps you stay above board by placing guard rails around your tip program.
Choose a Vendor
Before you can implement a new tip program, you’ll need to choose a vendor. Look for a partner that has a robust customer service department to help you smooth over any bumps in the road and help you train staff. Ultimately, this relationship should help you build your business and hire new employees, while helping your employees reach even greater financial success.
Interested in simplifying your tip-out process? Request a demo to see how Kickfin works.
