Why Businesses Can’t Stop Asking for Tips
Kanebridge News
    HOUSE MEDIAN ASKING PRICES AND WEEKLY CHANGE     Sydney $1,766,872 (+0.21%)       Melbourne $1,063,597 (+0.19%)       Brisbane $1,235,996 (-0.71%)       Adelaide $1,100,588 (+1.40%)       Perth $1,114,234 (+0.36%)       Hobart $869,301 (-0.74%)       Darwin $915,158 (+0.08%)       Canberra $1,030,597 (+1.34%)       National Capitals $1,197,064 (+0.25%)                UNIT MEDIAN ASKING PRICES AND WEEKLY CHANGE     Sydney $817,869 (+0.11%)       Melbourne $552,138 (-0.21%)       Brisbane $784,920 (-1.69%)       Adelaide $585,744 (+1.59%)       Perth $658,340 (-1.87%)       Hobart $565,063 (-1.53%)       Darwin $494,206 (+0.53%)       Canberra $485,800 (-1.53%)       National Capitals $640,344 (-0.70%)                HOUSES FOR SALE AND WEEKLY CHANGE     Sydney 14,003 (-141)       Melbourne 16,852 (-119)       Brisbane 7,876 (+60)       Adelaide 2,794 (-13)       Perth 6,084 (+33)       Hobart 771 (-22)       Darwin 139 (+2)       Canberra 1,196 (+25)       National Capitals 49,715 (-175)                UNITS FOR SALE AND WEEKLY CHANGE     Sydney 9,308 (-9)       Melbourne 6,777 (-31)       Brisbane 1,556 (-5)       Adelaide 434 (-6)       Perth 1,292 (+16)       Hobart 154 (-9)       Darwin 198 (+7)       Canberra 1,191 (+1)       National Capitals 20,910 (-36)                HOUSE MEDIAN ASKING RENTS AND WEEKLY CHANGE     Sydney $850 ($0)       Melbourne $600 ($0)       Brisbane $700 ($0)       Adelaide $650 ($0)       Perth $750 ($0)       Hobart $628 (+$3)       Darwin $850 ($0)       Canberra $750 ($0)       National Capitals $733 (+$)                UNIT MEDIAN ASKING RENTS AND WEEKLY CHANGE     Sydney $800 ($0)       Melbourne $590 ($0)       Brisbane $670 ($0)       Adelaide $560 (+$5)       Perth $700 ($0)       Hobart $503 (-$38)       Darwin $650 ($0)       Canberra $600 ($0)       National Capitals $646 (-$2)                HOUSES FOR RENT AND WEEKLY CHANGE     Sydney 5,466 (-47)       Melbourne 6,685 (-129)       Brisbane 3,539 (-24)       Adelaide 1,337 (+2)       Perth 2,237 (-54)       Hobart 240 (+8)       Darwin 38 (-10)       Canberra 431 (+10)       National Capitals 19,973 (-244)                UNITS FOR RENT AND WEEKLY CHANGE     Sydney 8,715 (+45)       Melbourne 4,547 (+16)       Brisbane 1,877 (-18)       Adelaide 430 (0)       Perth 686 (+10)       Hobart 66 (-5)       Darwin 65 (-5)       Canberra 721 (+2)       National Capitals 17,107 (+45)                HOUSE ANNUAL GROSS YIELDS AND TREND         Sydney 2.50% (↓)       Melbourne 2.93% (↓)     Brisbane 2.94% (↑)        Adelaide 3.07% (↓)       Perth 3.50% (↓)     Hobart 3.75% (↑)        Darwin 4.83% (↓)       Canberra 3.78% (↓)       National Capitals 3.19% (↓)            UNIT ANNUAL GROSS YIELDS AND TREND         Sydney 5.09% (↓)     Melbourne 5.56% (↑)      Brisbane 4.44% (↑)        Adelaide 4.97% (↓)     Perth 5.53% (↑)        Hobart 4.62% (↓)       Darwin 6.84% (↓)     Canberra 6.42% (↑)      National Capitals 5.24% (↑)             HOUSE RENTAL VACANCY RATES AND TREND       Sydney 1.4% (↑)      Melbourne 1.5% (↑)      Brisbane 1.2% (↑)      Adelaide 1.2% (↑)      Perth 1.0% (↑)        Hobart 0.5% (↓)       Darwin 0.7% (↓)     Canberra 1.6% (↑)      National Capitals $1.1% (↑)             UNIT RENTAL VACANCY RATES AND TREND       Sydney 1.4% (↑)      Melbourne 2.4% (↑)      Brisbane 1.5% (↑)      Adelaide 0.8% (↑)      Perth 0.9% (↑)      Hobart 1.2% (↑)        Darwin 1.4% (↓)     Canberra 2.7% (↑)      National Capitals $1.5% (↑)             AVERAGE DAYS TO SELL HOUSES AND TREND         Sydney 33.5 (↓)       Melbourne 32.6 (↓)     Brisbane 33.4 (↑)      Adelaide 26.4 (↑)        Perth 37.8 (↓)       Hobart 29.4 (↓)     Darwin 27.8 (↑)        Canberra 30.0 (↓)       National Capitals 31.4 (↓)            AVERAGE DAYS TO SELL UNITS AND TREND         Sydney 31.4 (↓)       Melbourne 29.8 (↓)       Brisbane 32.2 (↓)     Adelaide 26.2 (↑)        Perth 37.5 (↓)       Hobart 31.4 (↓)     Darwin 37.4 (↑)        Canberra 38.7 (↓)       National Capitals 33.1 (↓)           
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Why Businesses Can’t Stop Asking for Tips

Employers far beyond restaurants rely on the practice to avoid paying higher wages; testing customer limits

By RACHEL WOLFE
Mon, Jul 24, 2023 8:39amGrey Clock 5 min

American businesses have gotten hooked on tipping.

Tip requests have spread far beyond the restaurants and bars that have long relied on them to supplement employee wages. Juice shops, appliance-repair firms and even plant stores are among the service businesses now asking customers to hand over some extra money to their workers.

“The U.S. economy is more tip-reliant than it’s ever been,” said Scheherezade Rehman, an economist and professor of international finance at George Washington University. “But there’s a growing sense that these requests are getting out of control and that corporate America is dumping the responsibility for employee pay onto the customer.”

Some businesses that are new to tipping said they have turned to the practice to try to retain workers in a competitive job market while also keeping their prices low. Asking for tips allows them to increase worker pay without raising their wages.

Consumers seeing tip prompts at every turn say they are overwhelmed—and that worker wages should be business owners’ responsibility, not theirs.

Sixteen percent of the 517 small businesses surveyed by employee-management software company Homebase for The Wall Street Journal ask customers to leave a tip at checkout, up from 6.2% in 2019.

Payroll company Paychex, which provides software for thousands of businesses in leisure, hospitality, retail and other service industries, said more employees are receiving tips as a portion of their pay than at any time since the company started tracking tipping in 2010. As of May, 6.3% of workers whose employers used the software earned tips, compared with 5.6% in 2020. The number remained relatively flat between 2016 and 2020.

As of June, service-sector workers in non-restaurant leisure and hospitality jobs made $1.35 an hour in tips, on average, up 30% from the $1.04 an hour they made in 2019, according to an analysis of 300,000 small and midsize businesses by payroll provider Gusto.

Tips now increase wages for service workers by an average of 25%, compared with 20% between 2019 and 2020, according to Gusto. In May, the average hourly service-industry worker earned $16.64 an hour in base wages and $4.23 an hour in tips.

During pandemic lockdowns, customers of many service businesses began tipping to acknowledge workers who put themselves at risk. Rehman said that made businesses reliant on the practice. Employers with already tight margins say there’s no going back.

“With businesses still preparing for the possibility of a recession, they don’t want to lock into higher wages,” said Jonathan Morduch, a professor of public policy and economics at New York University. “Tipping gives them more flexibility.” He said the practice pushes the financial risk that employers would ordinarily shoulder onto workers.

“Businesses are happy to let workers earn more from tips, especially when there’s no pressure to raise the tipped minimum,” he said, referring to the $2.13 an hour plus tips many bar and restaurant workers across the country earn.

Holding on to workers has been especially difficult in the services sector, particularly since the pandemic. Lodging and food service have had the highest quit rate for workers since July 2021, consistently above 4.9% per three months, the U.S. Chamber of Commerce said in a May 2023 report. The quit rate for the retail trade industry isn’t far behind, around 3.3% so far in 2023. In May 2023, the overall quit rate for workers was 2.6%, according to the Bureau of Labor Statistics.

Dan Moreno, founder of Miami-based Flamingo Appliance Service, decided in 2020 to add an option for customers to tip his employees, reasoning that his home-repair technicians were taking health risks by entering customers’ homes during the pandemic.

About one-third of customers now leave a tip of between 10% and 20%, Moreno said. The requests add an average of $650 a year to his 182 technicians’ salaries, about 1% of their total yearly income.

Rising costs, he said, persuaded him to retain the option after the pandemic abated.

“You wouldn’t believe the margins we operate with,” he said. Competition for workers is fierce. Were he to eliminate the gratuity prompt, he said, he would have to raise prices beyond the 18% he already has, on average, since 2019—likely costing him clients.

He knows the requests might turn off some customers, but as the son of a repair technician and a former technician himself, he said, he tries to do as much as he can for his workers.

Within the food-service industry, tips as a share of compensation are rising faster at limited-service establishments such as bakeries and coffee shops than at full-service ones, according to Gusto.

At the Main Squeeze Juice Co. in Mandeville, La., tips add $3 to $5 to workers’ hourly pay, which starts at $10. Owner Zachary Cheaney said he added the option when he opened the location in 2020.

“We can’t just say, ‘Oh, we’re going to charge $2 extra’ instead of having tips, because we have a duty to our customers to have a very fair price point,” said Cheaney, who also consults for Main Squeeze’s corporate office. If customers think the price is too high, he said, they won’t return. Asking them to tip, he said, is different because it’s optional.

“If customers completely stopped tipping, we would be forced to pay employees more, and it would be hard on us as business operators in this crazy environment of rising costs,” he said.

The juice bar’s general manager, Tiffany Naquin, said tips make up about one-tenth of her $46,000 annual pay. Workers like tips, she said, “in all industries. It’s that little extra.” Knowing a customer will see a gratuity screen at the end motivates employees, she said. “If you give employees incentives, they are going to give you better work,” she said.

Checkouts that include a tip screen are more awkward for customers than for workers, she said. She understands if someone declines to tip, she said, and she wouldn’t let that affect the quality of service.

Morduch, the New York University economics professor, said that while most people tend to think of tips as steady income, many businesses fluctuate seasonally—which means employee pay goes up and down. Service workers who receive tips, he added, are often lower income and struggle to deal with such volatility.

Saru Jayaraman, a labor advocate and director of the Food Labor Research Center at the University of California, Berkeley, said that boosting tips without increasing base pay is bad for workers. If customers stop tipping, she said, worker pay effectively declines, which it wouldn’t if employees got a raise.

“Employers think they’re being smart by using tipping instead of raising wages,” she said. “But really they’re risking losing staff, because it’s pissing consumers off and the employees are the ones who have to deal with it.”

A May survey of about 2,400 Americans by financial services company Bankrate found that consumers are tipping less often than they did at the height of the pandemic. Forty-one percent of respondents said businesses should pay their employees better rather than rely so much on tips. Roughly a third said tipping culture is out of hand.

Denver retiree Mary Medley, though, said she sees being a generous tipper as part of her economic responsibility. For her, it isn’t about how difficult a task was, but whether she can lighten someone else’s financial burden, even a little.

“It’s not my job to figure out where it goes or how it gets distributed,” she said. “But if they’re giving me the opportunity to participate in supporting a business in a tangible way, I’ll do so.”



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The Global Talent Fund, which has a maximum raise of US$100 million, focuses on building and investing in consumer businesses alongside celebrities, athletes, and influential personalities who play an active role as co-founders rather than simply endorsing products. 

The strategy is based on the belief that changes in consumer behaviour, particularly the rise of social media and digital engagement, have fundamentally altered how brands are built and scaled. 

GTF founding partner Jeremy Hunt, who is helping lead the fund’s strategy, said consumers increasingly feel connected to personalities they follow online and are more willing to support products developed by those individuals. 

“Consumers are searching for content to engage with, and when a celebrity they like or follow takes them on the journey of creating a product or brand, they genuinely feel part of that process,” he said. 

The fund is targeting high-growth consumer sectors including wellness, hydration, beauty and recovery, areas Hunt believes continue to benefit from strong global demand and ongoing innovation. 

Rather than backing celebrity endorsement deals, the fund is seeking businesses where talent is deeply involved in product development, brand creation and long-term growth. 

According to Hunt, authenticity remains one of the biggest differentiators between successful celebrity-backed brands and those that fail. 

“The consumer can see clearly if someone is simply being paid to promote a product,” he said. “The winners are typically the brands where the celebrity has genuinely helped build the business from the ground up.” 

The model has attracted support from several prominent Australian investors and business families, reflecting broader interest in alternative investments with global growth potential. 

Hunt said consumer brands offered a level of tangibility that many investors found appealing. 

“Consumer brands are what we touch, feel, smell and taste every day,” he said. “Our investors understand the growth potential in the model, but they also want to be part of the journey.” 

The fund’s rapid progress towards its fundraising target comes amid growing recognition that celebrity influence, when combined with strong commercial execution and scalable business models, can create significant enterprise value. 

With several high-profile celebrity-founded businesses generating billion-dollar exits in recent years, supporters of the strategy believe the opportunity remains in its early stages. 

For more information, contact marc@kanebridge.com.au

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