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Old 08-20-2005, 03:52 PM   #51
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Quote:
Originally Posted by GB
I know that the profit margin in restaurants is super low and that most restaurants end up folding in their first year. What I don't understand about the above statement though is how other countries can make this work.
Just by completely different economic and taxation systems. Everything is relative according to the parameters that each country lives by.

Also why can't the industry just charge a few buck more and pay that to the servers. Again back to Andy's example of getting a bill for $100 and leaving a $20 tip or getting a bill for $120 and not leaving a tip. It is the same amount of money.
In order for the restaurants to give a 20% increase to the tipped employees based on the menu pricing, the restaurant would have to raise their prices by at least 27-30% to cover the taxes. It's not the same or as simple as the example that was given. If you give $20 to a server as a tip, only the server gets taxed on that. If the $20 is included in the pricing (not as a service charge, but as an actual price increase like what was suggested) the restaurant will get taxed on that because it will be considered as revenue and payroll. Being that 30-33% is the average tax deduction (State, Federal, SS, etc.) the restaurant would need to cover that by raising their prices accordingly so that it would balance.

I hope I am not coming across as antagonistic, I just am trying to understand (and not doing a very good job of it LOL).
From a restaurant standpoint, it's much different to run than a regular business like say, a sundry store. That's partly why so many restaurants go under. They're owned/managed by people who have good backgrounds in business, but not in the restaurant industry.
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Old 08-20-2005, 04:01 PM   #52
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IC:

All businesses have to deal with payroll and income taxes. If the restaurant's revenue goes up in this example, so do its expenses. The bottom line (income) wouldn't increase unless the owner didn't pass all of the extra 20% to the employees.
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Old 08-20-2005, 04:02 PM   #53
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Thanks ironchef. I think that has cleared it up for me somewhat
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Old 08-20-2005, 04:29 PM   #54
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Old 08-20-2005, 05:08 PM   #55
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Quote:
Originally Posted by Andy M.
IC:

All businesses have to deal with payroll and income taxes. If the restaurant's revenue goes up in this example, so do its expenses. The bottom line (income) wouldn't increase unless the owner didn't pass all of the extra 20% to the employees.
The only expense that should increase is payroll, but in an ideal situation, revenue will directly reflect that or it should stay the same after deductions and allocations. The bottom line would actually decrease if you increased prices by only 20%, if you planned on giving the waitstaff their full 20% increase without full taxation. After you allocate the price increase to wages, the restaurant will take the bite on the tax relief that you are giving the waitstaff, in order to give them their full gratuity. You would then be taking money out of the revenue after tips to make up that percentage, resulting in less profit.

If you plan on taxing the full 20% so that it will not affect revenue, the waiters will actually make less (consider the fact that most waitstaff do not delcare 100% of cash tips) and will not be happy with the situation. The restaurant's profit margin will most likely stay the same, but the waiters will only get say 12-13% of the money that was intended with the price increase, after tax is deducted. They'll get even less if your restaurant tips out the bussers, bartenders, hostesses, etc., say 5-7% total so they'll end up with only 6-7% of the total 12-13%, plus their hourly wage (which again, doesn't amount to much since they get taxed on their sales and not only their tips).

Everyone needs to remember that with this system that is being "proposed", do you guys intend it to benfit the employees or the customers? The waitstaff where I work often make 30-40% sometimes on tables that appreciate their service (keep in mind that this is on a $70-80 per head check average) and would be outraged if their average income would be mostly limited to 20% (at best--before tip outs and/or taxes) of their revenue on average. I would say they make on average 25% tips a night, so they would be taking a huge decrease in pay. Imagine if someone told you that they would be taking away 20% of your salary? Sure, some guests would be inclined to leave extra cash on the side, but with added gratuity, the inclination to do that lessens considerably, unless you wait on people who are in the industry. Remember that most waiters, unless the tips are pooled, do not declare anywhere close to 100% of their cash tips unless they've been audited before. Under the proposed system, all tips, be it cash or not will be taxed because it will all be recorded and sent to the IRS.

Either way, under the proposed system, somebody will be guaranteed to lose or be forced to spend more money beit the guest, the restaurant, or the waitstaff.
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Old 08-20-2005, 06:18 PM   #56
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Originally Posted by ironchef
Consider the fact that most waitstaff do not delcare 100% of cash tips
IMO they have no right to complain if they are not playing by the rules (read: obeying the law) and putting the burden on other people, but that is an issue for another thread.
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Old 08-20-2005, 06:35 PM   #57
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Didn't read all the posts, but for my money the only thing that should be "required" are shirt and shoes. (Or I won't be served.) All tipping should be abolished. The exception would be only if I have a really good seat & am treated really, really, really well at Chippendales.
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Old 08-20-2005, 06:50 PM   #58
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I haven't read all the posts yet either, but I agree that tips should be abolished. I don't know why we should have to supplement the income of an employee of another company so the owners don't have to pay a living wage.

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Old 08-20-2005, 07:01 PM   #59
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Quote:
Originally Posted by GB
IMO they have no right to complain if they are not playing by the rules (read: obeying the law) and putting the burden on other people, but that is an issue for another thread.
GB, you do have a point, but consider this: Do you always obey the speed limit? Do you always come to a complete stop at an intersection? Neither do I. One cannot chastise another for disobeying the law when one disobeys the law themself. One deals with money and one deals with driving, but it's the same basic concept. Laws get broken in this country all the time. America has one of, if not the highest amount of criminal activity in any country that goes either unreported, unsolved, unpunished, or not punished severly enough. That's just how our country works. (I read the site rules...this doesn't fall under politics now does it? )

Remember that the basis of this thread was not from a waiter or waitress who was complaining about tips, or lack thereof. It was from restaurant diners who had a problem with tipping.
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Old 08-20-2005, 07:06 PM   #60
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Originally Posted by BlueCat
I haven't read all the posts yet either, but I agree that tips should be abolished. I don't know why we should have to supplement the income of an employee of another company so the owners don't have to pay a living wage.

BC
For Mish and BlueCat, this is nothing personal against either of you but in all honesty, you really should really read all of threads before you respond so that you can see the entire picture. Being that including myself, probably less than 10% of the regulars who post on here have any type of restaurant experience, the views are pointedly one sided because of the lack of exposure garnered. That's not a knock against anybody, just the truth. But please read the entire thread. Hopefully it should shed some light on the matter.
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