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Jeff Grossman

Jeff Grossman
Now that the California wine industry isn't burning to the ground, there is interesting news in other parts of the world:

- Patricia Green has died. Apparently, an accident.

- Mead, mead, mead! A new meadery every three days?

- Buried Beaujolais... in barrels, not amphorae. Was this truly about how to deprive wines of oxygen?

- The "tips included" thing turns out to be even harder than imagined. The public reined in their spending in response to higher prices so wages went down... and staff left.

- Finally, a fabric-free grape harvest. Not really what is usually meant by the phrase 'natural wine', mes amis.
 
This isn’t just about Americans loving tips.

Sounds like what it came down to is the USHG didn’t think carefully enough about how this would affect employee incomes, and thereby indirectly the QoS, and didn’t correct course when it wasn’t working. You can’t force people trying to make ends meet in NYC to accept a system that cuts their income from say $60k to $50k per year when your competitor will pay. And it’s basic basic microeconomics that higher prices will lower demand and/or shift spending to lower priced items. It was naive to think that having no tips and shifting the average tip amount into pricing would suffice. A customer very well may not want to pay $50 for what used to be a $40 steak if she can have the $32 fish for $40 and save steak for another night at a cheaper place or forego it altogether, even if she would have bought the steak at $40 under a tipping regime. It seems sort of obvious to me even if some may argue it should be a zero sum game for a rational customer. That depends on the customer’s utility function for the steak, fish, and excess cash, which is a function of price and tipping preferences. Higher tippers are now capped and can choose lower priced food. Lower tippers can choose lower priced food and might object to having 21% service charge forced on them.

I don’t run a business and haven’t taken microeconomics since the 80s. And I’m sure some of this is not a hundred percent right. But they should have thought this through and they should have corrected course faster.
 
I don't know. It may be a matter of habit. When I look at restaurant prices in France, it's pretty easy for me to compare to US values by recognizing that you have to discount the price by around 30% for tax and tip. If the $40 steak went up to $50, unless one is a cheap tipper, it shouldn't be hard to see one is paying the same price. I expect if your not used to thinking that way, though, it won't look like that. That may be freakonomics more than microeconomics.
 
I was in process to edit to add the generous and cheap tipper issue when you posted, Jonathan. The elimination of tips would necessarily skew customer spend lower if the the across-the-board service charge is selected to be the average tip under the tipping regime. You have to factor in the distribution.
 
This was my thinking, too: I think fine restaurants probably have a much smaller fraction of low-tipping patrons compared to high-tipping patrons. The included charge may drag a few up but it drags more down.

And who said consumers were rational? You call that a Science?
 
Wait, if fine restaurants have more higher tippers than lower ones, that would make the deal better for most people and, according to rational economic calculus, they might even feel they could buy a lobster instead of a steak. If the restaurant calculated a true mean, then it should even out. This, of course, is merely mathematics. Jeff's last sentence is what I was trying to say when I said it was freakonomics.
 
originally posted by Jonathan Loesberg:
This, of course, is merely mathematics.
Click to expand...
Which takes us back to MarkS' comment: Americans prefer to buy the $40 steak and tip $20 on it than buy the prix-fixe $50 lobster.
 
I know little about Richard H. Thaler's work but I expect he'd have something relevant to say here.

Part of the reason "service compris" works better in France than in New York is probably because restaurants in France tend to have far fewer servers.
 
originally posted by Jonathan Loesberg:
I don't know. It may be a matter of habit. When I look at restaurant prices in France, it's pretty easy for me to compare to US values by recognizing that you have to discount the price by around 30% for tax and tip. If the $40 steak went up to $50, unless one is a cheap tipper, it shouldn't be hard to see one is paying the same price. I expect if your not used to thinking that way, though, it won't look like that. That may be freakonomics more than microeconomics.
Click to expand...

And old habits die hard. I offered a tip to the coat check person at NEG last week and was politely informed that it is a no tipping establishment. I was "Duh, I knew that."

I'm not used to discounting menu prices for tips. I should really go there again sometime soon because I really want to support the model.
 
originally posted by Jeff Grossman:
originally posted by Jonathan Loesberg:
This, of course, is merely mathematics.
Click to expand...
Which takes us back to MarkS' comment: Americans prefer to buy the $40 steak and tip $20 on it than buy the prix-fixe $50 lobster.
Click to expand...

Just as many prefer to pay a $50 markup to order from a wine list rather than pay an "exorbitant" $30 corkage.
 
originally posted by Jay Miller: "exorbitant" $30 corkage.
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Jay, I give consideration to: depletion of my inventory + corkage = cost.

As a result, I usually search out good buys on the wine list for wine(s) that I don't normally get to have. Plus, this approach is easier, all things considered, especially since I often preorder the wine.

. . . . . Pete
 
originally posted by Peter Creasey:

originally posted by Jay Miller: "exorbitant" $30 corkage.
Click to expand...

Jay, I give consideration to: depletion of my inventory + corkage = cost.

As a result, I usually search out good buys on the wine list for wine(s) that I don't normally get to have. Plus, this approach is easier, all things considered, especially since I often preorder the wine.

. . . . . Pete
Click to expand...

I'll buy wine off the list if I can find appealing options that fit within my (admittedly, psychologically imposed) wine budget for the meal. Failing that, I'll either pay corkage or simply not have wine with the meal. Locally, this dilemma has been resolved satisfactorily by our local "country club" (NB: since I'm a big Groucho fan, I'll add that it barely lives up to the name and is more of a community social club) which has one of the better restaurants in town and also permits people, for a small annual fee, to be members of their "wine club." Membership in this club entitles one to a locker in which wine can be stored and brought to dinner at the restaurant. In practice, this means that I can bring wine from home for service with meals at the restaurant. The end result is that it now has, by my lights, the best wine list in town.

Mark Lipton
 
originally posted by Ben Hunting:
I know little about Richard H. Thaler's work but I expect he'd have something relevant to say here.

Part of the reason "service compris" works better in France than in New York is probably because restaurants in France tend to have far fewer servers.
Click to expand...

I know a fair bit of Thaler, but more Tversky and Kahneman (and Dan Ariely and I overlapped at UNC) and you are exactly correct, they would have a lot to say here. I believe this phenomenon is asymmetric dominance.

It's also true what people are saying about this being a psychological phenomenon* (well, that's what the above Professors would say as well).

I REALLY want this model to work. It professionalizes the service industry that will have many long term positive effects for both the people who work there and the people who dine. As a restaurant owner, the tipping model works great because it essentially allows me itinerant waitstaff. Being neither famous nor a significant player I can't change anything (remember, it's probably also not in my economic self interest to do so) which is why it is so important that people like Danny Meyer lead the way. There are a couple people in my market that could maybe lead the way and I'll wait until they do.

I plan to go to 1 Danny Meyer restaurant for every 3 meals I eat in NYC from now on. I mean, probably. Maybe. I'll try.

* BTW, anyone who still finds neo-classical economics even remotely relevant is clearly just a religious zealot.
 
originally posted by slaton:
I was sorry to hear about Patty.
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Ditto. An Internet acquaintance visited her in the Summer and said that he came away concerned about her health . I don't know what underlying medical issues there may have been, but it's sad news nonetheless. I have enjoyed several of her Pinot Noirs, both at Torino Mor and her own gig.

Mark Lipton
 
originally posted by Ben Hunting:
I know little about Richard H. Thaler's work but I expect he'd have something relevant to say here.

Part of the reason "service compris" works better in France than in New York is probably because restaurants in France tend to have far fewer servers.
Click to expand...

my uneducated guess would be that their base pay is a more significant part of their total wage package. also, health insurance an integral part of french citizenship (and most often not for servers in america), so their wages are not burdened with the cost of buying health insurance--nor paying the cost of medical care when the need arises.

i've been to france a number of times and have never come up with the observation that floor staff in france is less abundant than in america--but i've never observed dining in france it with that in mind--i do work front-of-house in the restaurant trade. in fact, my main observation is that in france it seems that the front-of-house staff are less likely to appear to be temporarily in that line of work.
 
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