DC restaurants make profit without tip and higher wages
Kelly Phillips is Co-Founder and Director of Hospitality for DC-based Destination Unknown Restaurants, which includes Destino, Las Gemelas and Espita. Destination Unknown’s restaurants eliminated tipping in 2020 — guests now pay a standard service charge and front desk staff are salaried — and staff members earn bonuses based on happy customer reviews. In May 2021, President Joe Biden visited Las Gemelas to announce that the taqueria would be the first restaurant in the United States to receive a grant from the Restaurant Revitalization Fund.
Writing is my first love. I studied journalism in college and started as an intern at a local newspaper in Philadelphia. I really fell in love with the culinary scene, exploring and learning more about chefs and restaurateurs. I had this idea in my head that I would like to open a restaurant one day.
It’s really important that your guests understand what you’re offering, the story you’re telling. Everyone looks at restaurants on Instagram, they read websites. They care more about the chefs and the operators, the people behind them. You tell a story from the moment they book a reservation on your website, follow you on Instagram, and then when they walk through your door. You have to be good at lots of different things, telling that story, cooking the food, and making sure it gets to the table on time.
DC restaurants have always been very influenced by what happens in politics, so if Congress isn’t in session, restaurants might be a bit slower. It changes. You have more people here for different industries, and there’s more of a creative scene. But if there is a big rally, it definitely has an impact on the service. Many of our guests may not be able to reach us due to traffic. We are always listening to the demonstrations that are taking place. If there’s a large audience and people want to watch TV at home, they can order from Ghostburger that night instead of dining at Destino.
Receiving the first Restaurant Revitalization Fund grant was actually crazy. We got a call the day before that someone from the White House was coming. We didn’t know why. They checked the backgrounds of all the partners. Then, an hour before, we learned that President Biden would hand over the grant to us in person. I took his order. He ordered very well, by the way – four tacos and two quesadillas.
We were all completely shocked and surprised. It was the busiest day we have ever had.
We had signed the lease for this new restaurant before the pandemic. All of our investors have pulled out. We only had a handful of people who were willing to support us, and we had to get creative with how we built the restaurant. Normally when you open a restaurant you want to have a buffer, you want to have money in the bank because your first year is usually not profitable. You need to have some savings to survive your first year. With Las Gemelas and Destino, we started with nothing. We have barely arrived at our opening.
There were two people in our team, Rogelio Martinez and Yesenia Neri Díaz, who were both from Mexico and had been with us since 2016 when we opened our first Espita restaurant. We wanted them to partner with us at Las Gemalas and Destino to showcase their skills and showcase Rogelio as a butcher and Yesenia as our tortilla program manager.
We had this idea with the opening of the new restaurant: what if we offered a salary to full-time employees? It was mainly for the front of the house, because we were already paying the back of the house as much as we could, trying to be very competitive and make it worth it for them. So for the front of the house, if you’re full time, you’re entitled to a salary with a monthly bonus for great reviews. Each month, if the restaurant has a certain score on Google and Yelp, the waiter or bartender would receive a bonus. Everyone gets the same bonus if we hit our exam goals, which keeps it simple and encourages teamwork, not making it competitive.
On Yelp, the bonus goal is 4.5 stars, and on Google, it’s 4.7. They may also receive additional bonuses for a Michelin star or Washington Post review.
Every month, they report the scores to me, and we distribute the bonus on the first pay of the month. Self-declaration is an important way for them to feel involved in checking and caring about our improvement and feedback. This has helped us attract and hire more talented people over time, people who want to work in a team environment and want to have a stable, reliable income and a path to growth.
We have removed tipping during the pandemic. We wanted to make sure people were paid fairly. It’s a scary time to work in a restaurant, and we wanted to eliminate a lot of that stress and fear. They show up for work and risk their lives to feed people, so they deserve to be paid well. We chose 20% for service charge because that’s on average what most people leave anyway.
With the traditional tipping model, you’re trying to entice customers to spend more money. The waiters try to resell everything. They want to put this beautiful bottle of wine on the table. With our new model, the goal is for customers to have a great time and come back again and again. We try to build long-term relationships with these guests. Over time, they will spend money with us. But our servers don’t try to get giant tips on every table. They don’t focus on that tip, so they don’t worry about how much money they’ll make. If it’s slow, if it’s raining outside, or if it’s snowing outside, they know they’re going to get the same pay.
For customers, the experience is pleasant, authentic. When they get up at the end, they know there is a service charge. We report it to them, so it’s transparent. It feels less transactional, more intimate, and they know our team is taken care of. If they have questions about our salary model, the servers say, “Oh, yeah. I am paid a salary. There is no need to tip. If anyone wants to tip extra, they certainly can. It happens, but there is no pressure.
So the focus is really on customer satisfaction and getting great reviews. We are one of DC’s top rated restaurants. If you look at our reviews for Destino, you will see that the reviews mention their server names.
One of the benefits is that payroll is easier than ever because you don’t have to worry about tips. What used to take several hours now takes less than an hour. Income can play such a stressful day-to-day role for many people in our industry, so the sentiment in the room has changed with the new model. My team is a lot happier, and they’re not around wondering how much money they’re going to make.
Operators get started very quickly. We all want a healthier work environment. I mean, who doesn’t want that? Our customers see it everywhere they go. They’re happy because they don’t have to do any math at the end, and they know the waiter is taken care of – tipping is so inconvenient. It also puts a lot of pressure on the guests.
I really like this professional salary structure. I don’t know if it would work for other companies, but I would love to see more people try it. The crucial part of this for us is our bonus structure and the incentive for good service. I think it will have a huge impact on our industry if we are able to find a way to attract talented people and motivate and empower them to do the best job possible. Right now, I feel like we’re still trying to catch up in how we support our team and focus on customer experience. People are having a hard time hiring right now, so the last thing on their minds is customer experience.
Our team is so focused on providing a great experience because it’s part of their bonus, it’s part of what they do. The success of the restaurant is very important to them. It’s created more business for us, so our numbers are up. We are profitable with this model.
I’m looking for serious people, who have been in the industry for a while. If you are new, I would definitely hire you as a food courier. Training has become easier because you have these salaried servers who are very good at taking people under their wing and training them – they want to make sure that a new person isn’t going to lower their service standards.
I think our guests also pay attention to it. They know what’s going on, they know what the restaurants are dealing with. Their level of comfort with service charges has definitely changed. They understand what we are going through and why we have to charge what we charge. I very rarely get pushbacks on something like this. If anyone complains about the prices, we’ll definitely direct them to Las Gemalas for tacos, or they can order from Ghostburger.
We also try to be very competitive with our back of house salaries. I wish I could give everyone a salary one day. It’s kind of a dream scenario. You need to have a very stable business model to do that. I think right now stability has been tricky with the pandemic and what’s going on in politics.
Recruiting leaders was probably the hardest part. I can train someone to be a good waiter. But it is really difficult to find a very talented chef who is not only good at all the tasks in the kitchen, but also at all the administrative tasks that would fall to a chef or a sous chef. Many of them left DC during the pandemic.
I wish I could get through this year without another wave of the pandemic. The restrictions are always changing here. You just have to think fast. We have learned to be creative, to react quickly and to make good decisions quickly. We’re certainly very active in our community and we talk to a lot of other restaurateurs. We all lean on each other and provide resources and guidance. We are always in constant communication here.