This Restaurant Tripled Profits By Banning Tips

By: Laura Meyers 

A restaurant in Pittsburgh banned tipping and decided instead to pay servers a salary with extensive benefits. The result? They tripled their profit margin.

Bar Marco, founder Bobby Fry, is a progressive entrepreneur with new ideas that are challenging the status quo of restaurant operations.

Marco’s restaurant has 26 workers on staff that are provided with a luxurious employee lounge and shower (complete with vintage high school lockers for personal items), health care from date of hire, 500 shares in the business, paid vacation, bonuses, and a base salary of at least $35,000.

As a server, that sounds like a kickass deal. And I’m normally pro-tipping.

How can the restaurant afford the new policies?

The answer can be found in a retooled menu- comprising for cheaper, local ingredients, and portions slashed into shareable platters.

“Here’s the funny thing,” says Fry, “great ingredients are the only thing in this world where the higher the quality, the less the price.”

Bar Marco serves inventive fare, including a $17 dandelion risotto dish, a $14 espresso burger and $16 chimichurri meatballs.

Hipsters will buy anything that sounds fancy.

After one month of the no-tipping policy implementation, revenues exceeded expectations by 26% and overhead costs dropped from 40% to 32%.

“Our water bill was cut in half, our linen bill was cut in half, our liquor inventory was lean,” Fry says, and gives credit to employees taking more pride and care in their work.

Weekly profits of about $3,000 (after $26,000 in sales) have now climbed to $9,000 (after roughly $33,000 in sales,) he says.

More than that, a portion of these profits are going right back into employees’ pockets. Having already handed out bonuses, annual salaries at Bar Marco are expected to reach between $48,000 and $51,000 this year.

“You cannot tell me that your business model relies on paying people below the poverty line,”  Fry says. “You gotta have more pride in your business than that. Google is the best company in the world for how much money they make per employee, and that’s because they put all their time and energy into their employees. It pays off for them in fistfuls.”