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The Economics of Tipping

A reminder for all of us.

I still occasionally get the guest who will say, “I can buy this wine for half this price at the store.”  Which is true, but it doesn’t come with a staff to serve it and a crew of chefs ready to cook you an incredible meal from a fully stocked kitchen.  I wonder if the same people have ever priced grapes at the grocery store.  If they want to get really serious about cutting out the mark up, that would be an even cheaper place to start.  Better yet, if they buy seeded grapes they could plant the seeds and never have to pay for a bottle of wine again.

Most of you understand the absurdity of this logic.  Those who do not understand have already stopped reading to go buy grapes.  At each step along the process of making the bottle of wine the cost of goods and service, along with a healthy profit margin, are passed along to the next stage.  From grape to cellar, farmers, vintners, bottlers, distributors, and restaurants all add to the price of the bottle in advance.  There is one exception to this rule.  The person who opens the bottle and pours it actually makes that wine less expensive.  At the most basic level, the person who serves the wine pays for part of the bottle for you.

Read the full post at Tips For Improving Your Tips

About David Hayden

Restaurant industry professional helping small restaurants with their training, operations, and marketing needs. Author of Tips2: Tips For Increasing Your Tips and Building Your Brand With Facebook. You can also visit my other websites and blogs at: http://www.tips2book.com http://www.restaurant-marketing-plan.com http://www.themanagersoffice.com http://www.tipssquared.com http://www.foodieknowledge.com http://www.restaurantlaughs.com http://www.tipsfortips.wordpress.com

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6 Responses to The Economics of Tipping

  1. Becky November 11, 2010 at 12:14 pm #

    I’m glad you wrote about this today. I worked, at one point, for a fine dining French restaurant in Jo Co which is no longer in existence (for good reason) which had an extensive wine list. One day, the food critic for the Star decided to review us and one of her comments in the final, published review was about a bottle of wine that, while good, cost $32 in the restaurant and she could have bought it in Berbiglia for $17. I was flabbergasted that, of all people, a restaurant critic would have an issue with 100% markup on a bottle of wine, as if ours was the only establishment doing this.

    I wanted to say to her that if she wanted wholesale prices to stop going to restaurants.

    Really. A seasoned restaurant reviewer. Gah.

    • tipsfortips November 11, 2010 at 12:22 pm #

      I think you are well aware of my opinion of most food critics including our local one.

  2. Maggie Wilson November 11, 2010 at 1:14 pm #

    It’s writing like this that will bridge the gap between servers and guests. Knowledge and understanding is powerful! It is often difficult to remember all of these factors when you’ve had to pick the kids up from school, scramble to get homework done, prepare things ready for a babysitter, arrange to have your spouse leave early from work and fight traffic to get to the restaurant. After all that, we sometimes fell exhausted and entitled…but reading this gentle and creative reminder will make all of us better consumers. Well done!

  3. Jessi November 11, 2010 at 3:15 pm #

    At my restaurant I tip out 7.9 percent of my sales. It really takes a huge cut out of my pay when people who in their country do not tip, so they think that applies here as well, and I end up paying for the privledge of waiting on them. And that oh so generous 10 percent tip really does not go that far when I do the math at the end of the night either.

  4. yellowcat November 11, 2010 at 11:33 pm #

    Excellent post!!

    I can’t tell you how many times I’ve heard how someone could buy something for half the price at Walmart. My response is always the same: “So do it.” When faced with outright apathy at their idiotic statement, they always order and shut up.


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