Shake Shack Founder Just Sounded Off On When And Why He Doesn’t Tip

Discussions around when and how much to tip are intensifying and are at what some may call, ahem, a tipping point.

“Tipflation,” or the creeping appearance of screens with preset percentages in places where a tip was formerly not expected, is both on the rise and fueling frustration amid a rising cost of living — an annual Bankrate study found that the number of people who say they “always” tip after eating out fell from 77% in 2022 to 65% in the spring of 2023.

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The latest person to weigh in on expectations around preset tip screens is Shake Shack  (SHAK) – Get Free Report founder Danny Meyer. In an interview for CNBC’s “Squawk Box” morning news program, the restaurateur said there is no need to tip when getting takeout or grabbing a to-go drink at a coffee shop.

‘No Obligation To Tip Whatsoever,’ Says Danny Meyer

“If you’re just taking out food, and it was just a transaction — I give you money, you give me a cup of coffee,” Meyer told Squawk Box co-anchor Andrew Ross Sorkin. “I don’t think there’s any obligation to tip whatsoever.”

The earlier Bankrate survey mirrors similar views among the public as only 22% of the respondents said they always tip coffee shop baristas.

Shake Shack has gone back and forth on the policy regarding tipping at its restaurants (some restaurants are self-checkout while others have servers). After eliminating tipping in 2015 to bridge the gap between servers and cooks, Shake Shack ultimately brought them back amid the pandemic.

Meyer told CNBC that he felt it was “inhumane to tell our servers that you may not accept that expression of gratitude” from customers who wanted to say thank you for working during the pandemic.

But according to Meyer, a labor shortage in the food industry has pushed companies to lure workers in by offering higher wages. While preset screens are often meant as a way for those who want to throw in a little extra, he feels that the high percentage suggestions create a misconception that workers are paid less than they are.

‘Technology Has Replaced The Tin Cup’

“Technology has replaced the tin cup that you would see at so many different restaurants and coffee bars around the country,” Meyer said. “I don’t think I’ve ever seen anything as high as 30%, not even at the kind of restaurants I like to go to in New York City.”

He said that wage and tip can amount to between $35 and $50 per hour at full-service fine-dining restaurants.

To counter misconceptions and unclear expectations, Meyer argued against an adjusted minimum wage that allows restaurant businesses to pay employees less in order to account for tips. 

Meyer has frequently spoken out for tipping to bridge the gap that currently exists but argued that a lot of the problems around current tipping culture can be solved with a single minimum wage and higher rates — that way, a tip can truly be a little “something extra” one chooses to give the server instead of attempts to make up for underpayment and ever-shifting expectations.

“Many guests opt in and many guests don’t,” Meyer said of the option to tip at Shake Shack locations. “It’s completely up to them.”

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