Beyond Hospitality Included

7th Settlement Brewery no tipping

by David Boynton

Hospitality included: The word is out and 7th Settlement Brewery is preparing to go tip-free. But this change means so many things for the people and businesses in our community. Transitioning away from a long-held tradition (however backwards) is no easy task. So let this piece serve as a tool for you. A tool to measure your own beliefs, ideas, and ideals. Perhaps we will come to better understanding. Perhaps you will find the right words to express the concerns you have or the questions that make you doubt. You’ve read articles on NHPR, Fosters, and more – but this is the inside scoop. This is the full version.

Before we get started there are a few points to address. The opinions expressed in this piece are that of the writer (David Boynton, Owner) and may not necessarily reflect the opinions of the entire company.

In addition, I’d also like to recognize that the model for hospitality included we will be utilizing will inevitably change for us. Hospitality Included is not a science. So like all things we do, we will strive to adapt. Additionally, our hospitality included model could look very different for other businesses that are willing to try it. My thoughts and ideas are based in my experience at our brewpub. We are a small craft brewery and farm to table restaurant with full off-site catering and 40-50 employees.

Finally, I’m passionate about this topic because I care about my employees and community and, at times, I know it can seem as if I am pushing my agenda. I want to be clear that I’m not asking anyone to do this that doesn’t want to. I hope we can lead this cultural change through personal and organizational role modeling. Hopefully you can grab a beer and enjoy thinking about this. Or, more importantly, grab a beer with a friend and discuss hospitality included. Now, let’s get started!

Our lives inform our values.

At 7th Settlement Brewery, we are doing our best to lead the business with our values and the values that we think best reflect those of the community. Some of our decisions to align our actions with these values cause changes that are complex and sometimes difficult to understand. So, in light of our decision to move to hospitality included, I would like to explain how we came to this very difficult and seemingly controversial decision.

I grew up on a farm in a small community in northern New Hampshire and during the summer I would go to work with my grandfather or my father. They would put me and my brother to work and we would watch them manage their organizations. The lesson was that if you care for your employees and you work hard, they will care about your business and work hard in turn. I have carried this lesson with me through my past business ventures and now at 7th Settlement Brewery.

While earning my MBA in Organizational and Environmental Sustainability, I began to focus my skills and knowledge on how to best run a triple-bottom line organization where we recognize that a resilient business cannot just be financially profitable; a resilient business needs to take care of our community and our natural resources. As a business, we need to look at a bigger picture with consequences beyond a weekly cash flow and impacts greater than our own paycheck.

Seacoast Local, a non-profit building a local living economy, is a network of hard working small business owners. While Director, I learned a great deal about our community’s economy and how every dollar we can keep from being extracted out of the region turns into two to three times the local economic activity. This understanding built the foundation of the values that we wanted to lead 7th Settlement Brewery with when we opened in 2013.

My business partner Josh Henry and I had essentially zero restaurant experience before we opened 7th Settlement Brewery. Most people thought we were crazy, and we may have been, but we worked endlessly to shorten the learning curve. We hired the best people we could find. We made hundreds of mistakes. We focused on our strengths and led with our values.

Our strengths were building a culture that cared about its community. We created a culture of fun balanced with professionalism and a culture where everyone was not only willing to pitch in, but to learn and be open to doing things differently. If we can’t do it right, or at least move every day in the right direction, then it is not worth doing.

After many successes such as a Gold Medal at the Great American Beer Festival (the largest beer competition in the world) and the Small Business of the Year award from the Dover Chamber of Commerce in 2016 and many challenges such as starting out under-capitalized by $200k, we find ourselves at another crossroads. A decision we must make for our values. Hospitality included.

Almost two years ago, one of my servers sent me a link for a podcast on eschewing tips and it piqued my interest. By the end of the 45-minute podcast (Freakonomics featuring Restauranteur Danny Meyer) I knew we would eventually have to transition to this method. Danny Meyer’s book Setting the Table helped me define my management style while opening 7th Settlement Brewery by focusing on our employees first. This was already the style I had inherently used in other businesses, but I needed the help transferring that style to restaurants. Hearing the risk that Danny Meyer took at his restaurants to lead with his values instilled a hope that we could do the same at 7th Settlement Brewery.

Our lives inform our values. And our values cannot be compromised. Hospitality included is not a choice for 7th – it is the natural path of our values.

To truly understand what, for me, became the unbearable truths about the tipping industry, we must be willing to look at a much bigger picture.

The bigger picture.

Beyond the storm of conversation online discussing pay, service, and menu pricing is the bigger picture of hospitality included. The why of the thing is what drives us. We are not exploring the possibilities of hospitality included for kicks, giggles, or profit. We do it because it is the right thing to do for our employees and community.

There is enormous inequity in pay between the servers and the kitchen staff.
Kitchen staff who have culinary school debt can barely make a livable wage because of the industry standard. On a busy night, the servers and bartenders get rewarded for their extra work while the cooks and managers get the same pay as if it was slow and easy.

Tipping promotes discrimination and harassment.
Even if it is subconscious, a server may give more attention to a predictable good tipper such as four people in business attire versus a family of four. It is not fair. When the customer is asked to pay the wages of our employees, it puts that customer in a position of power. This can unfold all too often as sexual harassment or other forms of unfair treatment.

Tipping has an ugly history rooted in classism and racism.
William Scott in 1916 said, “In the American democracy to be servile is incompatible with citizenship. Every tip given in the United States is a blow at our experiment in democracy. The custom announces to the world…that we do not believe practically that ‘all men are created equal.’ Unless a waiter can be a gentleman, democracy is a failure. If any form of service is menial, democracy is a failure. Those Americans who dislike self-respect in servants are undesirable citizens; they belong in an aristocracy.”

Tipping as a general practice only became the norm shortly after the abolishing of slavery because employers didn’t like having to pay wages to newly freed African-Americans. Tipping is just an antiquated cultural norm in the United States. It is unfortunate that it is so ingrained in our culture that it is very difficult to move away from. Fortunately, we have learned a lot from the social movements of the past. In fact, the first women’s labor strike in the United States happened right here in the historic mill where our brewpub is.

We need to disrupt the norm and start the conversation. We need to work hard to show that it can work and we need to have patience and recognize how our people, our business, and our community can change faster than our industry or our country.

Tipping has very little if any influence on the quality of service.
Quality of service only improves with effective feedback, training, and motivation. There are dichotomies created that make the practice of tipping ineffective for improving service. The first is that people have some opposing opinions on tipping. Some tip no matter what because they feel responsible for the server’s paycheck regardless of the service, or they may drop their percentage by a menial amount. The opposite customer lowers their tip because of poor service, slow service, poor food quality, or maybe just because they can only afford to tip 15% and tipping is a choice anyway, right? At the end of the evening, there is no actionable feedback for our managers to use for training or improvement. No server or bartender is ever trying to provide poor service; in fact, a lot of their service is dependent on many things outside of their control.

Earning tips is the source of motivation is only half the truth.
Let’s be honest, it is not tips that staff want to earn, it is money. Everyone wants to be paid well for their hard work. When I teach at the UNH Paul College of Business, the first management lesson covered is participative management. That is because case study after case study and thousands of management books on running a successful company teach us that it is not all about the money. At some point when you are earning what you feel is fair or even great, what motivates performance? Participative management suggests we take extrinsic motivations (wages, paid time off, health benefits, bonuses, commissions, etc.) off the table. We do that by paying people fairly and by providing benefits that support a good life-work balance such as health benefits and paid time off. Once extrinsic motivations are met, we can build our companies from good to great with intrinsic motivations (autonomy, mastery, and purpose). Good employees that are compensated commensurately with their jobs excel in a work culture that allows them to problem solve on their own, improve and learn new skills, and be part of a mission and team that is bigger than themselves. Autonomy, Mastery, Purpose.

No one likes losing control.
Even if that control is just perceived control and we may think when we go out to a restaurant that the tip we are withholding until the end of our experience is somehow guaranteeing or incentive good service. The implication here is that our servers and bartenders are inherently lazy and need this motivation to do their job well. Almost every other career in the world people perform well or not regardless of their wages being paid directly by the end user. Of course, employees need to be paid well for their work but the business as professionals in their industry are typically the ones deciding to pay their employees fairly, not the customer of that business. Imagine if we decided as a customer how much our dentist made after each visit? If this example seems ridiculous, you are right. But it is just as ridiculous in the hospitality industry. If you don’t work in hospitality, imagine your paycheck changing not just every week but every night.

We must change more than our tipping policy to make this work.
Of course, we need to raise our menu prices. That being said, the guest can only tolerate so much and should only have to tolerate menu prices being raised so that their bill at the end of a meal is similar to a bill with prior menu prices and an average tip. However, this does not cover the difference required to increase kitchen and management wages.

I would like to share some insights into how we have already started this process. It has required a lot of hard work from everyone here and deliberately changing our business model to do it differently than most. The only reason we think it is a better way is because it reflects our values and it may not be for every restaurant. We have already moved all but a couple of our kitchen employees to full time hourly positions with earned paid time off and health benefit options. Yes, this includes our dishwashers and prep cooks. One outcome of this move is less turnover because people have a better balance in work and life. The other outcome is that staff have predictable pay and, usually, predictable schedules. In addition, they have clear expectations of the skills they need to acquire to get to the next level of pay.

Another way we have changed our business is by focusing on local scratch cooking. When I say scratch, I mean our team makes everything from scratch except for a few items on our menu (tortillas, local veggie burgers, and some of the pasta to be exact). Everything else, from our own baked buns, breads, and pastries to our ketchup and other condiments, are done right on site. We butcher most of our own meat, cut whole fish, and even make our own infusions, bitters, and syrups at the bar.

Two major outcomes of this have moved us toward our goal. The first is that 7th Settlement has a fun kitchen to work and learn in for those who are passionate about food, which once again minimizes turnover. The second is that we move money from outside our regions (the vendors and producers that would otherwise prepare this food) into our own organization and community. We can employ more people doing more work and have a superior product and product control.

We source most of our menu from local farmers and fishermen. For everything else we use local distributors like Favorite Foods. Most people would think that locally sourcing costs more. At first glance, this is superficially true. But again, we must take the long view. For instance, the spent grain from our brewing process goes out to Jack Clarke’s farm. In turn, he gives us a reasonable price on the cow we get in. Because we are getting the cow into the kitchen in four large parts all at the same pound price, we immediately get a price advantage. Even though we are paying our employees to butcher the cow, the prime cuts cost the same as the ground from an ingredients perspective, but just about the same if you include labor compared to buying those prime cuts pre-cut and packaged. The bonus is that we get to pay our employees that money instead of a company in the midwest sending us frozen cuts of meat. Better product, better job, better pay.

We pay more for local produce, but, we correlate our menu planning with our farmer’s crop planning and can guarantee buying that creates efficiencies for the farmer in which they can pass on to us in the form of better pricing while they are still paid fairly for their superior product.

A major cost for any restaurant is turnover.
A new employee has lots of costs associated including advertising for the job, manager time in interviews, bookkeeping and human resource costs for on-boarding, training costs, and efficiency costs as that new employee learns the skills and methods necessary to be efficient in their job. The more we make respectable careers for the front of house and back of house the more efficient our payroll becomes.

Working in hospitality is a respectable career.
Respectable careers pay people fairly and commensurately. They allow for paid time off with family and friends. Front of house employees are typically transient because the industry and our social culture does not respect them. It is seen as a younger person’s part time job. I’m not saying it cannot be a rewarding part time job, but there is ample opportunity for a fulfilling career without moving into management. The back of house is more career oriented, but the burnout is incredible. These cooks work unbelievably hard and are not paid fairly for that work. Frankly, it must change. But we have to start somewhere and make a model that works for that change.

I do not think anyone is arguing that all employees should be paid well but the question is how? We cannot take it out of the pockets of the servers; we have to change the model. Hospitality included is just a piece of the puzzle that creates predictability and resiliency in the business. With more consistency, there are more efficiencies which lead to better financial management and that benefit can be passed along in real ways to our employees, like in our profit share program. Our profit share program incentivizes the overall success of the organization and helps employees think beyond themselves and more about the entire community of guests, co-workers, farmers, other vendors, and partner organizations. It’s about changing our mindset.

Stay tuned for another article with more details on the economics, actual pay scale models, and updates!

If you have any questions, concerns, comments, or just want to chat about hospitality included, please contact outreach@7thsettlement.com

11 Comments on “Beyond Hospitality Included

  1. Dave –

    Brilliant. And about time. And I don’t care if my bill ends up a little higher at the end if it means taking care of the people that work there.

    Well done. I need to get back there for lunch soon!!

    Sue
    Mug 107

  2. Rather than increasing prices wouldn’t adding a service charge to the quest check be better? Increasing prices will have customers paying more for rooms & meals tax and reduce income for payroll.

    • That is a good option for some models, but we decided against it for ours. It’s also difficult with the laws in NH because that service charge would have to go entirely to the server by law, making it difficult to create equity in the payroll model. It also is a a perception and mindset issue that says to our guest, you’re still responsible for paying the wages but we’re going to make you do it, versus let us manage our menu pricing and employment practices. It becomes more complex as we price our new menu items not exactly the same percentage increase per item, but blended across the menu to make it more reasonable for the guest.

  3. I am an occasional customer of 7th Settlement, but after reading this very thoughtful and insightful blog, my family and I will become regulars. It is refreshing to see such values put to the forefront of a for-profit business and it is important that us customers who share these same values support your efforts. It doesn’t hurt that your beer and food are excellent! But seriously, I will gladly pay more when I know a business cares about the welfare of their employees. Good luck!

    • Thanks for the support! We look forward to creating the best experience we can for you.

  4. My wife and I were away for the forum but wanted you to know that we strongly support your efforts. The arguments you present are persuasive and I hope the community responds positively. My wife has also written in support. Thank you for taking the initiative on this issue.

    Mark Taft

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