photo illustration by maclean’s, photo via istock

A Restaurant Ended Tipping—Then Brought It Back

We wanted to pay our staff a living wage and waive tipping. Rising costs forced us to revert to the old ways.
Nathan Middleton

April 24, 2024

I’ve worked in restaurants for my whole career. After culinary school, I started as an entry-level cook and came up through kitchens in Toronto. Eventually, I worked my way up to head chef at a restaurant on King Street West and, in 2020, I joined Beast Pizza, a 20-seat restaurant in West Queen West, as a partner and owner. I love what I do. I get to cook six-course meals for guests almost every day. We also serve whole-animal dinners: last week, I cooked an entire goat for a large group of people. The next day, I prepared venison six ways. From a culinary perspective, I’m living my dream. 

Running a restaurant is financially tough, though: we have to cover wages, rent, increasing food prices, alcohol taxes, fees to third-party delivery services and more. We survived COVID by running a takeout storefront and beer and wine store when people couldn’t dine indoors. There were weeks where no one came at all because of COVID case spikes, but we still had to order ingredients and have food ready for guests, and we still had to pay bills even if nobody came out to eat. In April of 2020, we got a Canada Emergency Business Account—an interest-free federal loan of $40,000 for small businesses and not-for-profits. It was a no-brainer to take it back then. The future of our industry was so uncertain. 

Eventually, however, we had to repay those loans. Then we entered a period of explosive inflation. Food prices rose by 21.6 per cent between February of 2021 and February of 2024, according to Statistics Canada. The cost of 16 litres of vegetable oil went from $17 to $70—an increase of 400 per cent. We decided not to get a deep fryer because oil was so expensive, and tracking the prices of dry goods felt like watching the stock market. According to the Agri-Food Analytics Lab at Dalhousie University, since 2020, the retail price of flour went up nine per cent, butter went up 32 per cent, and eggs went up 25 per cent. Even though restaurants often pay wholesale prices, the cost of everything has soared, and food prices in Ontario are expected to increase another 5.5 per cent this year. Restaurants have always had narrow profit margins, but since COVID, it’s been really hard to turn a profit. Right now, 51 per cent of restaurants in Canada are losing money, according to Restaurants Canada. Before the pandemic, it was just 12 per cent. 

Despite all this, in 2022, we made a moral decision to become a livable wage employer, which meant paying our staff salaries that covered their basic needs amid high costs of living. We started paying all of our seven staff $25.05 an hour—nine dollars more than minimum wage. (Managers got slightly more than that.) This is the before-tax income amount that’s considered a “living wage” to cover expenses in the Greater Toronto Area, according to the Ontario Living Wage Network. Before this, most of our staff were earning around minimum wage, $17 per hour, plus tips. 

As former kitchen workers ourselves, my partners and I felt paying above minimum wage was the right thing to do. The grind is part of the industry: I worked for free while studying French Culinary Arts at George Brown College, lived in a motel (where I’d wash my clothes in a bathtub) in Sainte-Adèle, Quebec, and staged 60 hours a week at a fine-dining restaurant in a Relais & Châteaux hotel. I was happy to do all this; it was what everyone did if they wanted to be a cook. But the economy is so crazy right now that it’s hard for young chefs to do that today without support. We also wanted to retain our staff: during COVID, talented cooks, servers and managers left the industry to find more stable work, like office jobs. We thought that, by offering a better wage, we could attract some good people back to restaurants and build trust in the industry for those who lost it. Our business partner, Adnan Pirbai, was already operating as a livable wage employer at Dispatch in downtown St. Catharines, Ontario, so we thought this wage model could work.

We made another change. The owners of Edulis, a nearby restaurant, had stopped accepting tips in August of 2021. We wanted to do the same. We didn’t think it should fall on the customer to provide a livable wage for our staff. Plus, as a guest, it’s nice to sit down and not have to do any math equations or feel guilty for not leaving a big tip. We felt good about it. I’d tell guests, “We don’t accept tips. We’re living wage employers.” The response was always positive. Our regulars still wanted to leave tips, but they supported our new policy. 

Overall, staff were pleased with the changes. They no longer had to guess whether they’d have enough money to pay rent or buy groceries during the slow seasons. New grads with debt knew how much they’d be making each paycheque, and single parents could reliably support their kids without worrying if the restaurant was slow that day. 

However, after two years of no tips and paying livable wages, we realized that our profit margins were tight. Margins are already narrow in restaurants—usually around 30 per cent with controlled labour costs—but ours became really tight, especially during the winter. We hadn’t factored in additional costs: we paid thousands of dollars in labour taxes last year. We also matched CPP contributions for our employees, plus 1.5 times their EI contributions, and that was on top of the additional $6 to $7 per hour to get to that livable wage amount. Add in the usual high costs of running a restaurant, and the prospect of making a profit—or even paying back government loans or outstanding debts—seemed unrealistic. In fact, the labour costs ate up all our profits last year.

I had a few meetings with Scott Vivian, my co-owner, and we decided that it was no longer feasible to forgo tips and be a livable wage employer. We didn’t have the support for it, nor is the restaurant industry designed for it—it’s been operating on tips for too long. If the government introduces a policy that would make reducing labour taxes possible, then livable wages would work. That would require employers to prove they were not taking advantage of the system and that they were truly paying a livable wage. Right now, there is little incentive for small businesses to pay livable wages.

We did the math on our in-house sales and realized we could pay staff $17 per hour; if customers tipped 15 per cent, staff would earn around the same as they would with a living wage. We’d go back to what we were doing before: pooling all the tips and splitting them evenly among employees. We called a staff meeting and let everyone know about the plan; we said that we’d tried our best, but we didn’t see the light at the end of the tunnel. We are grateful to have an unbelievably passionate and loyal staff. Our pizzaiolo, Stew, said, “Whatever you guys got to do, I’m here.”

We reinstated tipping in April and, so far, customers are leaving more than that estimated 15 per cent tip. Our first two-week pay period shows our staff are getting paid $9 more per hour, which is more than when we were paying livable wages. We know that can fluctuate drastically, but right now, things are looking good.

In the end, our moral fight to do the right thing wasn’t financially feasible. We just want to cook, and making good financial decisions ensures that we can keep doing it for longer. I don’t know if things will change. Restaurants in other countries don’t accept tips at all—it’s just not part of the culture. In Japan, it’s considered rude to leave a tip. Tipping isn’t the norm in Europe, either. But in North America, tipping is ingrained. We have a long way to go if we want to eliminate it. It would have to be a massive movement—not just mom-and-pop shops like us. Until then, it’ll be the customer who will sustain our business.  

—As told to Emily Latimer