What Restaurants Should Know about “Tip Fatigue”

Today’s consumers are feeling the pressure all around—from higher interest rates to erratic inflation and an uncertain job market, it seems like every dollar gets us a little less each day. But the influx of new services that came into play during the pandemic have possibly added to the amount of things we pay for that we never did before. For example, take a food delivery business like GrubHub; the pandemic essentially pulled it from the grips of bankruptcy, and it remains popular today. And while folks are dining out more these days, they’re also still accustomed to getting their favorite foods delivered right to their door. During the pandemic, folks were being asked to tip for services they never used to provide tips for—prompts for gratuity are popping up everywhere, it seems. That tipping expectation hasn’t dwindled, and cash-strapped consumers aren’t as able to keep up with those standards. This is just one piece of the puzzle known as “tip fatigue,” which can best be described as the exhaustion consumers are experiencing as demands for tips on goods and services increases. It’s a huge problem facing consumers and the restaurant industry alike, as more folks are developing a negative view of tipping. Here’s what you should know as a restaurant operator.

The Tipping Point

Before COVID-19 took hold of the globe, tipped restaurant transactions sat at around 43 percent, according to mobile-payment company Square. Today, that number sits at over 74 percent. The biggest culprit? Self-serve kiosks at restaurants. These no-human-needed methods of placing an order are also experts at asking patrons for tips, although in a less outward way. Customers are very used to ordering something from a kiosk and then being presented with those three tipping options, conveniently broken out into percentages of their bill. This kind of mental conundrum, one that puts the pressure on the customer to actively select the “No Tip” option in front of the person who rung up their order, isn’t sitting well with consumers. When we factor in tipping for grooming services, furniture delivery folks, and dog walkers, that’s where “tip fatigue” increases.

The Data

Earlier this summer, a survey from Bankrate revealed some interesting statistics about the tipping culture: 66 percent of U.S. respondents have a negative view about tipping, with 41 percent asserting companies should pay their staff higher wages rather than asking them to rely on tips. Thirty-two percent are “annoyed” by those pre-populated tip-suggestion kiosk screens, and 30 percent believe tipping has gotten out of hand. A number of folks—16 percent—”would be willing to pay higher prices if we could do away with tipping,” according to the readout.

The Takeaway 

Pre-populated tipping suggestions have a tendency to come off as overly aggressive. And while there is a decent percentage of folks who would be willing to pay more for food just to avoid tipping, that doesn’t mean you should immediately hike your prices. Some restaurants are considering a “no tipping” policy in exchange for higher menu prices and staff wages—essentially enabling their workers to survive on their paycheck rather than the hospitality of diners. Continue to be mindful of tipping fatigue and how it might be having an impact on your staff’s wages. Too many opportunities to tip can be a turnoff—so there is a balance to be had, and that is just going to depend on your unique business needs.

For decades, ARF Financial has been the #1 lender for restauranteurs across the country. Why? Our team of expert loan consultants specializes in offering best-in-class financial guidance to restaurant owners who are otherwise struggling to get the funding they need. Our affordable, fixed payments and flexible terms combine with loan products we can customize to meet your business needs. And on top of that, we live and work in your communities, allowing us to understand your customer base and challenges. So, whether you’re looking for funds to buy out an investor or open a new location, ARF Financial has something great in store. Visit us today to learn more!