Chef Cara Stadler’s experiment with a “no tipping” policy has ended nearly five months after it began at her restaurants in Portland and Brunswick.

Bao Bao Dumpling House in Portland and Tao Yuan in Brunswick reversed the policy Wednesday after a review of the books for the first quarter of the year revealed it had been a failure.

“We really wanted it to work,” said Chris Peterman, director of operations for the restaurants. He said customers balked at the higher prices the restaurants had to charge to make up for the higher wages paid to servers who lost tip income.

Peterman would not divulge specifics about the restaurants’ bottom line or how large their losses were, but he said customers were ordering less at meals and generally not spending as much money. Revenue, he said, “was not where we wanted it to be, and it wasn’t trending in the direction we were hoping for.”

Stadler announced the no-tipping policy in October, just before Maine voters approved an increase in the state’s minimum wage, which went into effect Dec. 1. The restaurant began paying servers hourly, based on experience, at a starting rate of $15 to $16 per hour. Cooks’ pay increased to $13 per hour from $12. In some cases, Peterman said, the back-of-house hourly wage increased to $14.

Originally, Stadler had planned to use a service charge system allowed by federal law that would charge customers 18 percent of their pre-tax bill to cover the higher wages plus other benefits, such as paid vacation time, health care and parental leave. Then an attorney informed Stadler and Peterman that Maine’s interpretation of that law allows a service charge to be used only at banquets and special events. Maine is the only state that interprets the law that way.

“If you charge any kind of service charge, it can only be distributed amongst the front-of-the-house staff,” Peterman said. “We abandoned that, and we just went to a model where we raised our prices on average 18 percent to cover the hourly (wage increases).”

Steve Hewins, president of the Maine Restaurant Association, said he supports any idea that will help restaurants make money, and he was not against Stadler’s plan.

“I think there’s a lot of negotiating going on across the street from me (in the Legislature) on this,” he said. “The servers have made a very big impact on legislators relative to their concerns about (traditional tipped) serving going away.”

Hewins said that in other states that use service charges, the money goes to the owner, who can then “dole out that money in any way they feel is appropriate.”

“So it is still an issue for many of the servers that prefer to work for tips,” he said.

Julie Rabinowitz, director of policy, operations and communication at the Maine Department of Labor, said a bill that’s being drafted but hasn’t been submitted yet – it should be out next week – restores the spirit of the federal law by allowing Maine restaurants to assess a service charge.

“The department believes that those employers who want to eliminate tipping or create a higher wage, for example, for their non-tipped employees, should have the ability to charge a service fee in the same manner that is allowed under federal law,” she explained in an email. “Ultimately, whether labor costs are covered in part or totally by tips, service charges or increased menu prices, the restaurateur needs flexibility in designing a structure that keeps both their employees and customers happy. Service charges might not be right for some restaurants, and might be totally fine for others.”

Peterman said his restaurant group would like to revisit the idea of a service charge if the Legislature changes the rules about how it’s used.

“I think a lot of it is customers just didn’t get the idea of it, and it just looked like we were charging a lot more money,” he said. “That being said, some people really liked it.”

A few customers noticed the price increases and posted about them on social media.

One Yelp reviewer wrote that, when he got the $80 bill for the chef’s tasting menu he had just enjoyed, it not only knocked his socks off, but “my socks actually fell off my ankles, unlaced my shoes and left the building without me.”

But another reviewer on TripAdvisor wrote about the same meal: “For $80 with tip included I had a culinary experience that was exceptional and worth every penny.”

Peterman said the new system helped keep servers’ pay higher during spare winter months, when snowstorms kept customers away and waitstaff would have typically brought in lower tips.

Although three employees left Tao Yuan and one or two left Bao Bao, Peterman insists there were no layoffs as profits dropped during the no-tipping period. Some employees left on their own as they usually would for different jobs, such as one server who wanted to move into a management position. The restaurants gave employees a month’s notice so they could decide whether they wanted to be a part of the new system or move on.

Servers at the restaurants have gone back to the tipped minimum wage, which went up to $5 an hour this year. The back-of-house workers, which includes cooks, will keep their raises.

Tao Yuan is closed until the end of the month for an unexpected kitchen repair and because Stadler is in California for a week, teaching a class at the Culinary Institute of America.

Meredith Goad can be contacted at 791-6332 or at:

mgoad@pressherald.com

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