Jay Porter founded the Linkery, a Farm-to-table Restaurant in San Diego. After he moved his location up to San Francisco, he decided on a little experiment. He just charged a flat 18% service fee to all bills, and refused all other payment, and some strange and wonderful things started to happen:

Our service improved, our revenue went up, and both our business and our employees made more money. Here’s why:

 

Researchers have found (pdf) that customers don’t actually vary their tips much according to service. Instead they tip mostly the same every time, according to their personal habits.
Tipped servers, in turn, learn that service quality isn’t particularly important to their revenue. Instead they are rewarded for maximizing the number of guests they serve, even though that degrades service quality.

 

Furthermore, servers in tipping environments learn to profile guests (pdf), and attend mainly to those who fit the stereotypes of good tippers. This may increase the server’s earnings, while creating negative experiences for the many restaurant customers who are women, ethnic minorities, elderly or from foreign countries.

 

On the occasions when a server is punished for poor service by a customer withholding a standard tip, the server can keep that information to himself. While the customer thinks she is sending a message, that message never makes it to a manager, and the problem is never addressed.

 

The whole story can be found here, but it is an interesting idea. Thanks to Dr. Sam Wang of the Princeton Election Consortium (via Twitter) for highlighting this piece.