Distinguished | Hospitality Leadership Podcast with Dean Upneja
What does it take to lead in one of the world's most dynamic industries? Distinguished brings you unfiltered conversations with the executives, founders, general managers, and investors who are shaping the future of global hospitality.
Hosted by Dean Arun Upneja of Boston University's School of Hospitality Administration, each episode goes beyond the headlines to tackle the real challenges facing hospitality leaders today from hotel operations and restaurant innovation to talent management, climate action, and the rise of AI and robotics across the industry.
Our guests represent every corner of hospitality: luxury hotels, independent restaurants, travel and tourism, entertainment venues, and more. They bring hard-won insight, bold ideas, and the kind of candor you won't find in a boardroom.
Whether you're a seasoned hospitality professional, an emerging leader, or simply passionate about the industry, Distinguished is your front-row seat to the conversations that matter.
Follow Distinguished on Apple Podcasts, Spotify, or wherever you listen and join a growing community of hospitality leaders who never stop learning.
Distinguished | Hospitality Leadership Podcast with Dean Upneja
Tipping & Wages Series: Restauranteur's Dilemma of Balancing Equity and Economics with TJ Callahan
Use Left/Right to seek, Home/End to jump to start or end. Hold shift to jump forward or backward.
TJ Callahan transformed neighborhood eateries into thriving “go-to” destinations with his acclaimed farm-to-table restaurants in the heart of Chicago. He is the co-founder and owner of Farm Bar and is the farmer at Brown Dog Farm, the Farm Bar farm in Southwestern Wisconsin. With an MBA in finance from the University of Chicago under his belt, he's stirring the pot on a topic affecting thousands in the hospitality industry: eliminating the tipped wage.
From the fields of his farm to the forefront of financial debate, we explore the pressing issue of fair wages in the hospitality sector.
The “Distinguished” podcast is produced by Boston University School of Hospitality Administration.
Host: Arun Upneja, Dean
Producer: Mara Littman, Executive Director of Strategic Operations and Corporate Relations
Research and Content Creation: Lan Lu
Marketing: Anne Dawson
Editing: Isabella Laikin and James Leon
Music: “Airport Lounge" Kevin MacLeod (incompetech.com)
Licensed under Creative Commons: By Attribution 4.0 License
http://creativecommons.org/licenses/by/4.0
Welcome & Guest Introduction: TJ Callahan and His Farm-to-Table Restaurants in Chicago
SPEAKER_02Welcome to Distinguished. Today we are slicing into a topic that's sizzling on the grill of public debate. But first, let me introduce a guest whose story is as rich and layered as a fine dining experience. Imagine this: a young, ambitious spirit, armed with nothing but a dream and a degree in hospitality management, embarks on a journey through the bustling world of hospitality, only to find himself at the crossroads of technology and culinary excellence. This isn't just any tale of success. It's the story of TJ Callahan, a visionary who not only transformed neighborhood eateries into thriving go-to destinations while claiming five-star reviews, DJ stayed grounded in the principles of scratch cooking and fresh ingredients. He purchased a farm that breathes life into every dish served across his four acclaimed farm-to-table restaurants in the heart of Chicago. But DJ's appetite for innovation didn't stop at the kitchen counter. With an MBA in finance from the University of Chicago under his belt, he's starting the pod on a topic that affects thousands in the hospitality industry, the campaign to eliminate the subminimum wage for dipped employees. So as you settle in, prepare your pallets for a conversation that intertwines the layers of economics, equity, and the epicurean delight that defines TJ Callahan's journey. From the fields of his farm to the forefront of financial debate, we are about to explore the pressing issues of fair wages in the hospitality sector. I'm Marunija, Dean of the Boston University School of Hospitality Administration. TJ, welcome to the Distinguished Podcast. It's an absolute pleasure to have you with
TJ's Background: From Hospitality Degree to MBA to Restaurant Owner
SPEAKER_02us today.
SPEAKER_00Wow. I don't know who you were talking about, but whoever that guy is, I'd like to meet him.
SPEAKER_01It's you. Well, thanks so much, Arun. I'm thrilled to be here. Uh your program has a warm spot in my heart, despite the fact I was not lucky enough to go to BU for hospitality. But my wife was a proud alumni of the business school there. And I'm always happy to talk to you guys.
SPEAKER_02Great. Now, if you didn't have that MBA, I would have said come here for a master's degree. Okay. So your journey is nothing short of remarkable from managing restaurants, food service, technomics, and then diving headfast into the world of gastronomy and finance. You've seen the restaurant industry from angles most can only imagine. So before we sink our teeth into the meaty discussion of today's wage debate, could you share a bit about what drives your passion for the farm to table movement and how this philosophy is baked into the essence of your restaurants?
The Philosophy Behind Farm-to-Table: Growing, Harvesting, and Serving
SPEAKER_01Sure, Auron. So why do we do what we do? Why do I go through all the incredible effort to plant, grow, nurture, harvest, haul, transport, and uh grow things on the farm and bring you to the restaurants? Well, yeah, it's there's a unique feeling of satisfaction to grow things at the farm and then bring them to the restaurant and see guests enjoy them and see how much this resonates with them. If you think about what farm-to-table restaurants actually mean, you know, really all restaurants are farm-to-table, right? I mean, um, at one point the product was on a farm, you know, but uh and in a lot of ways it's it's kind of a throwback to what the restaurants were in the 1800s and then the early 1900s before the massive uh multinational food manufacturing companies got involved.
Chicago's Tipped Wage Law and the Phase-Out of the Tip Credit
SPEAKER_02Very good. Um, I just came back from a week in Paris, and you know, freshness and everything is just so good. And then industrialization of food is a pet peeve of mine, but we'll dive into that in another day. Let's dive into our topic. So let's start with Chicago. As of July 1, 2023, the minimum wage in Chicago is $15.80 an hour. Tipped employees can be paid as low as $9.48 per hour. The catch is that employers must make up the difference if they earn less than the minimum wage. Now, last year, Chicago City Council passed a measure phasing out subminimum wages in five years. So just some overall thoughts from you on this issue.
Tipping's History: Racism, Sexism, and the Research Behind It
SPEAKER_01Okay. Uh so let's start from the 40,000-foot level, tipping. So there's all kinds of research uh created by marvelous uh hospitality academics from programs like yours about tipping. You know, uh what its history is, it goes back to um the days of slavery, and the and it goes back to the Pullman car porters. Uh it's the the research has proven that it's sexist, it's racist, it's lookist. I've also seen research that says that there's no correlation between tipping and the quality and caliber of the service provided. You know, so it's it's there's many ethical things wrong or potentially wrong with tipping. On the other hand, the American restaurant industry has been structured around tipping as part of the financial structure which which drives the industry and what the guest expects. So, you know, when people have harper around tipping, I I understand the thoughts, right? On the other hand, you know, the restaurant industry is not a lucrative way to make a living, unless you're a very lucky individual who has has who has gotten lightning in a bottom. Your ability to make a ton of money as a restaurant entrepreneur and owner is fairly unlikely, right? You guys know more than uh than I, but you know, the number of restaurants that make more than a few percentage points on the bottom line is a relatively small share of full service restaurants. Now, there's part of the reason why fast food and um and quick service restaurants do as well as they do is because you know they're they're structured and they have uh the benefits of big balance
The Financial Reality: A 1.5% Bottom Line on $2.2 Million in Revenue
SPEAKER_01sheets and and on pricing power and all the rest of it. But for independent restaurants, for those neighborhood restaurants that make living in a city like Boston or Chicago special, okay, very few of those places make a ton of money. You know, I shared with you guys uh the actual performance of one of my restaurants, you know, and you know, the 2022 performance of a restaurant that did, you know, almost 2.2 million uh was, you know, a point, one, I think it was 1.5% was my bottom line profitability. So it's this is not a lucrative way to make a living, right? And our restaurants are predicated on the fact that we're allowed to assume that our our front-of-the-house servers, bartenders, busers are able to make a chunk of their income from gratuities and tips. In my restaurants, it's 75% of their take-home compensation, roughly, is gratuities and tips. So even though I can understand the viewpoint around tipping, you know, from all those reasons we just covered, if if I wasn't able to take advantage of the tip credit law, then uh I'm uh deeply in the red at that point. So that's why we do what we've done. Why don't I stop there and let you know?
One Measure, Two Realities: Diners vs. High-End Restaurants
SPEAKER_02Right. Yeah. So that's uh you've uh said so many different things, and we'll um unpack them one by one. But yeah. Um just one thing that I do I did want to start off by saying that um this measure is putting all tipped employees in one category. So a server working at a diner and a server working in an expensive high-end restaurant, they are facing two different situations. But this is gonna force everyone onto that minimum wage. I suspect that a server working in a diner with low average tech is gonna benefit with this extra income. But if you force a server in a high-end restaurant, because there's another thing associated with it, which is tip pooling and sh you know, across with the back-of-the-house uh staff as well. So that's gonna hurt the servers in the high-end restaurants. Do you agree?
Is Eliminating the Tip Credit a 50-Pound Cure for a One-Pound Problem?
SPEAKER_01Uh do I agree? Let me put it this way. The the coalition that uh is formed to attack uh the tip credit law in Illinois would told numerous stories about evil owners that uh take money out of the pocket of their service employees and do not pay the full minimum wage uh if the server, bartender, or busser did not make enough gratuities. Now, I'm sure there are such bad actors out there, but uh you know, to me, this feels like a 50-pound cure for a one-pound problem, right? A vast overreaction to something that uh is politically hard to find, right? Everyone wants to make sure that everyone uh can make a good income, you know, is so I can't speak to whether the fact in some um economically challenged location, a an owner of the restaurant is not paying the full minimum wage to a depth employee when they don't pay uh at least the minimum wage and gratuities. I can't speak to that. I can speak that that in my restaurants, which are positioned as casual upscale restaurants in decent neighborhoods, my servers do extremely well. They average $40 an hour in compensation between uh what we pay and the gratuities. And they're working, you know, 30-ish hours a week, and they're making $50,000, $60,000, $70,000, and $80,000 a year. So I think that's a pretty decent living. But um it's uh as I said, I can't speak to what might be happening in some other
Enforce the Law First, Don't Blow Up the Economic Model
SPEAKER_01spot.
SPEAKER_02Perhaps that's a question of enforcement of laws. Yes, enforce the law.
SPEAKER_01Enforce the law rather than uh blowing up the economic model that supports uh American restaurants. You know, it's um it's uh uh to me, it's a gross overreaction to uh what may be a problem here and there. I'm like, okay, fine. If there's bad actors out there, let's attack the bad actors.
The Real-Life Experiment: Going to a Service Charge Model in Evanston
SPEAKER_02So um I I know you you talked about that sharing of that financials. I really appreciate your sharing. It gave me an insight into what an actual restaurant and financials for the entire year. But you kind of did a thought experiment. Uh well, yeah, not a thought. You actually did a real experiment um in one of your restaurants. So can you s describe what that experiment was and what did you learn from it?
SPEAKER_01In one of my restaurants, I had uh a farm-to-table restaurant in Evanston, Illinois, across from Northwestern. I believe it's the fourth or fifth largest city in the state of Illinois. And for a variety of reasons, I decided to reconcept the restaurant away from the kind of rustic farm-to-table concept that we had, looking to do something much more polished and upscale. So I invested with my investors a whole lot of money, a repositioning of the restaurant, moving it upscale. Um and as part of this, you know, I've long believed that it was likely that Tip Credit would eventually uh get attacked and eliminated in the state of Illinois. So trying to be proactive, I said, okay, well, if that's the case, what can I do about that? So I took a look at what's been going on uh out in the industry, you know, and it's been this whole topic has been fascinating for the last five, six years when you have, you know, industry thought leaders like uh Human Square Hospitality in New York City, and many others have uh tried to eliminate tipping, or had the tipping included in the price of the restaurant, or gone to a service charge model, or uh done various approaches to try to do this, you know, um uh and with mixed, very mixed success. But but at any rate, we looked at all these things and we implemented and developed a program that we thought would make sense, right? So uh given that we thought we were in a very, very progressive uh and highly educated and affluent trade area, we we thought that our guests would support a service charge model. Now, uh for those listeners uh that are out there, there's multiple ways you can you can do this, right? For example, we can eliminate all tipping and just increase the prices of all the food by 20%. That's one way you could do it. So a burger that is that was 10 bucks is now gonna be 13 or 14 bucks, and you have um a note on your menu that says, you know, no tipping at all. All right, you can do that. You can do a service charge model. Now, a service charge model would say that a service charge is not voluntary to the guests. They can always tip on top of that, but a service charge is just like we charge for a cup of coffee and we charge a service charge and we opted for in many cases is 20%. In many cases, you'll find a model like this in in uh chef-driven high-end uh bucket list kinds of restaurants. You'll find this. Okay. And another way to do this is we could eliminate uh tip credit, and then legally, under those circumstances, I can take the gratuities and deploy them to the most, in my mind, some of the most deserving people in the restaurant are the people who work in the kitchens. And legally I could take a third of the gratuities or whatever and give it to um enhance the compensation for the land clerks, the dishwashers, uh the uh those folks in the back, as long as not one penny of that goes into the restaurant's pocket, right? Okay, so that that is an option. Now, um what we opted
What Happened When Guests Encountered the Service Charge
SPEAKER_01to do for right or wrong is we went with a service charge model. One of the things we were hoping to do was uh when it's served service charge, we can allocate this as we choose. Okay, uh you know, uh, and legally, if we want, legally, as far as the law is concerned, I could have kept all of it, right? You know, and um we obviously didn't do that. We used the service charge. We we we we took out the credit card desk and we kept that, but all the rest of it went to the front of the house or the servers, the bartenders, the busers, and the line cooks in our restaurant in Levinston. So, how did this work? Is obviously uh the next question. It was a massive spreadsheet exercise on our part, and how did it work with the guests? Well, uh, it was on our website, it was on their reservation communications, it was on their checks, it was on the uh on the check that was presented. There was a separate flyer that was put down on every table when we sat the guests about what we were doing and why we were doing it. Um now I'll just say that the serve, there was a lot of reasons why that uh restaurant is no longer with us. Uh, some of these are self-inflicted. Well, a lot of these are self-inflicted about mistakes we made from strategic positioning, menu structure, all kinds of things that we did. But I will say that without a doubt, that the service charge was a contributory factor for the reason why I had to close that restaurant. Guests hated the service charge. We got reviews that accused us of being a socialist restaurant. Okay, saying, well, you you know, if you want to do this kind of thing, you should look somewhere else. You know. It was amazing uh the vitriol that this generated with some guests, you know. You know, uh, we were uh that restaurant was located in a hotel. I did have a certain chunk of my uh segment of my guest population that was from out of state, you know, coming in from the Oklahomas and the Arkansas and what have you. But people did not like this. And they would argue that they like the ability to decide what the guest, uh, what uh the server, bartender were were tipped, you know. And you know what is interesting is that the tipping percentage that we saw as farmhouse was 22 or 23 percent of sales. And then when we um opened up with as Thomas and Dutch the new restaurant with the service charge in place, the overall between service charge and uh and the additional incremental gratuities, it dropped and dropped down to 21%. You know, so there was a lot of anger built up. Well, I don't know if I'm overstating it, but um but people really did not
Why Mandatory Gratuity for Large Parties and Service Charges Feel Different to Guests
SPEAKER_01like this model.
SPEAKER_02Aaron Ross Powell Yeah, uh obviously so many questions spring to mind. But one is that um, you know, when you whenever we go with a party of five or six, most restaurants have a mandatory um service charge or a gratuity that's already built in. So I'm very surprised that there was so much vitriol, so much anger about this policy, where all you were doing it was you were imposing it on, you know, not just parties of five or six or more, but even, you know, all of them, right? So if you are a party of six, what's the issue? I mean, most restaurants already have this built-in.
SPEAKER_01Well, you would know better than I, but I remember four or five years ago, we eliminated the mandatory gratuity for larger parties because we got some feedback that there was uh uh that there are some legal issues associated around that. So I know a lot of restaurants have eliminated uh the mandatory uh mandatory gratuities for larger parties. You know. Um one thing about the whole service charge thing, I think it was a barrier to trial for us, right? You know, when people are uh when I'm on open table and I'm looking for a party of seven, you know, or a party of four, whatever, on a Tuesday night at seven o'clock. You know, I think for a lot of people, the fact that we had a service charge in place was contributed to their reluctance to try our restaurant, right? You know, uh I can't know that. That's just an impression, that's just uh an impression we had. But yeah, I honestly I would have reacted and thought the same thing as you, right? Really, what's the difference? If you're going to tip 20% on a $100 bill, or you or I'm going to charge you $120 with a 20% service charge baked into it, it's the same amount of money coming out of your uh out of your uh bank account. Or, you know, so uh but I think the the reality of it is guests don't think that much, right? So, you know, uh you know, economists tell tell us all the time that if you expect rational behavior out of consumers, you are irrational, right? And uh and uh it's you know charge in that's just the way people behave, right? At least right now. You know, uh one of the things that always comes up, well, my primary business partner is from Ireland, you know, and he always talks about the European restaurant models, and no one expects gratuities over there, and everyone is you know on salary and all that. And I'm like, and you know, we actually kind of looked at trying to do something like that, you know, but we you kept running into America. And labor laws that made that kind of model problematic here in the U.S., where you know, if somebody works a 45-hour work week and they're in a salary position, um, if they're not in a supervisory position, then you have to pay them overtime, right? And it's like I kept running into those issues when we were trying to explore other
Why the European Model Doesn't Translate Directly to the U.S.
SPEAKER_01models. Trevor Burrus, Jr.
SPEAKER_02Yeah, but there are you know TJ, there are many other things that are different about Europe. So, you know, healthcare is one of them. Everyone, regardless of their salary level or wages level, is guaranteed healthcare. So you know how do you I mean we don't have that in the US? Then the public transportation is so I mean, I just like I said, I was in Paris and it's just incredible public transportation. So you can go live anywhere in Paris or outskirts of Paris and reach your destination efficiently and at a very low cost. So you really can't compare, you know, people who compare and say, oh, how what how are they doing this in Europe? It's very hard to compare. But I I want to go back to you know, one of the concerns I've had is um with the lack of a lot of restaurants and a lot of service employees are a lot of service establishments are not able to find enough employees to work. And this was exasperated during the COVID. And coming out of COVID, you know, pretty much everyone has had, okay, jobs are available, please apply. And service employees are don't get usually paid very highly. And so we are going to continue to have this problem for a long time. And so one concern I've had is that Americans are used to tipping, and how do we make use of that tipping to elevate the service level, the the the compensation level of all the employees? So the one model that you spoke of where which you did employ in this restaurant, which is okay, let's impose the service charge and um and let's distribute the tips all around to kitchen and everyone. Um but when you remove that and you went to traditional tipping, you didn't try out that experiment where you said, okay, no one will be paid the subminimum wage, but we will share the tips uh uh regardless. So with that average of 21% that you mentioned, might have flown up to 22, 23 percent, at the end of the day, achieving what you wanted to achieve, anyways.
What Could Have Been Done Differently: Paying Living Wage and Sharing Tips
SPEAKER_01You know, when we uh pulled the plug on the service charge, you know, uh uh the restaurant at that point had become a uh a financial bloodbath. Right. So so uh so any so I needed to do whatever I could to uh reduce uh the cash burn. So uh I at that point I was not in a financial position to pay uh pay the full minimum wage rather than the tip credit rate. And uh I mean I ended up closing you know six weeks or two months later. Um but you know, in hindsight being 2020, you know, would it have worked better if I just uh said, okay, we're going to eliminate, we're gonna pay um what do they call it, a living wage, right? And we're gonna pay the full 1580. Uh and you, you, Joe uh diner can can uh tip whatever you want. You know, I've seen people do a separate line item for uh additional amount for the kitchen folks. I've seen folks do things like that. And maybe that would have worked better, right? Because under the if I had done that, I could have legally taken some of the gratuities and given to the kitchen guys.
SPEAKER_02But you know, the the the interesting thing is that real life is never as neat and clean as academic experiments, thought experiments we can do in our labs or in our research papers, or you know, we can dream up all of these uh amazing experiments, but real life is messy. You know, real investments are at stake and real people's livelihoods are at stake there. But one other very quick question, since you've already done a whole lot of uh given some thought into this, um if you are raising all the server and front-of-the-house staff to minimum, full minimum wage, and then you are able to share um with everyone back at the house as well. Is there some element of cost saving that you can do by paying your back-of-the-house staff a little less than what you were paying because now they're getting the share out of tips?
Could Paying Back-of-House Less While Sharing Tips Have Worked?
SPEAKER_01Yeah, that's a great uh thought. And I'm not sure maybe that could have worked. Um, you know, it it for us, uh the way it worked is that they were getting actually two to three bucks an hour, right? As a uh, which was uh their effective share of the service charge. You know, could we have you know paid, you know, uh I I I don't know what the average line cook thinks in Boston these days, but I'm paying 22, 23 bucks an hour for line cooks, right? Could I have paid them 19 and offset it with a share of the tip pool, possibly. Um, you know, um I I can't now with that
The Risk of Cutting Server Compensation: They Leave for Other Restaurants
SPEAKER_01sport.
SPEAKER_02Right. But again, the question is um if you know you mentioned that your servers are making $40 an hour. So they are essentially, you know, with the subminimum wage, so they're making almost $30 per hour in tips. But now if you were to take all the tips and divide it equally between front and back of the house, the the back of the house would make considerably more than the three or four dollars per hour, right?
SPEAKER_01And in theory, right, a lot of your servers, bartenders, uh would support that. In reality, what happens is uh it's if I cut if I cut their compensation by 20%, they go looking for another job somewhere else where that doesn't happen, right? I mean, that was uh if you look at the postmortem on Union Square Hospitalities uh tipping project, and they have okay, that's what happened, right? It's like in theory, they love the idea that the lion cooks were going to make 32 bucks an hour or whatever worked out. But you know something? My monthly rent payment in New York City is $2,500 a month, and and they end up going and finding a job where that was where their tip tips weren't going to be cut. So uh, you know, uh could it work? Sure, in some places in some circumstances, you know. Uh could it have worked if we launched uh the Evanston restaurant under that? Perhaps. Maybe we just picked the wrong choice. Um, but it's always um what one of the things that's always bugged me as a restaurant entrepreneur, and who's we're fighting to have any kind of bottom line in our restaurants. There's always people slicing away at our ability to make money, right? And one of the things that has always made me crazy is that if if I if if if if the guests pay a hundred dollars in tips, okay, I turn around and give a hundred dollars in tips to the servers, bartenders, and busers. But around, I don't get a hundred dollars from the guests. I get 96.50, right? So I am paying the servers, bartenders, and busers, money I never got from the guests. I am fronting them that money, right? Okay, and this always seemed vastly unfair to me. And I've known some restaurant companies that have the pricing power with their employees that uh they deduct the service charge from uh the tips, right? You know, I mean the the um uh the credit card fees from the TEPs, right? Yeah. And that so so that was part of the reason why we went to the service charge model, because then I could legally reimburse myself for the credit card fees, right? But um, you know, uh it's 2020.
The Credit Card Fee Problem: Fronting Tips You Never Received
SPEAKER_02Yeah. But but you know, it's very interesting that there are some states where you're not allowed to deduct the credit card fees, whereas if you go and talk to any ordinary, any you know, consumer on the street, they'd say, yeah, that makes sense. If you know you get $100 in tips, but the credit card takes $3, then you give out $97. And I think by giving that $97 or $96.5 and deducting only the credit card commissions, you are actually being very, very fair by saying, okay, this is what the customers gave you, and you know, minus the credit card fees, here it is.
SPEAKER_01In Chicago, there's a couple of the higher-end restaurant companies that I are able to multi-unit restaurant companies. And I haven't looked recently, so I don't want to say which ones there are, but um, but they deduct the credit card fees from the gratuities that get uh out to the servers and bartenders. Um and to me that seems more than fair, but uh it you know it's uh when you're competing for staff, you do want you do not want to do anything that puts you at a uh in a um uh more challenging position to recruit top-tier
Multi-Unit Operators Who Deduct Credit Card Fees From Tips
SPEAKER_01people.
SPEAKER_02So I guess one way around this, I mean I know that if you have servers that are very good at their craft and and they are able to increase the the the you know the average check per person, and if you stand to lose them, then obviously you're not gonna adopt a model where uh the all the tips are being shared across because that server is the one that is getting um a whole lot of revenue. I guess there have to be different models in which uh the people taking the order are on salary and you know, and then there is some sort of a distributed service model. But you know, that's what you know wanted to ask you, where there's a lot of disruption in the market right now, in the restaurant market, and a lot of models have to change. I mean, you know, just for a simple thing, that Chicago City Council measure has passed. And so in five years, I mean there's a phase-in
Illinois State Law May Eliminate Tip Credit Faster Than Chicago's Five-Year Phase-In
SPEAKER_02period.
SPEAKER_01Well, it actually may happen faster than that, because the state of Illinois is now looking at an extremely aggressive implementation of the elimination of tip credit, right? So, and that will supersede the city of Chicago in the if if if it does in fact uh pass. You know, uh when I think about what am I going to do, you know, when they eliminate tip credit completely in three and a half, four years, you know, I don't know, right? You know, uh what is my ability to continue to raise pricing or eliminate costs or eliminate jobs?
What Comes Next: QR Code Ordering, Leaner Staffing, and Technology
SPEAKER_01You know, will I go to a model where guests are ordering for themselves? You know, a lot of the point of sale technology is in improv uh improved dramatically where the guests can order off of their phones via a QR code. And, you know, am I going to be put in a position where in order to stay in business, I have to eliminate jobs from servers and and folks like that? Um, I don't know. I I hope not, but there's only so many things I can do. You know, is a guest willing to pay $26 for a cheeseburger? You know, I'm at $20 right now, right? How yeah, well, it's a well, it's it's an extremely good cheeseburger to run. But uh it's a very special cheeseburger, but um, but you understand the point, right? You know, how much can I keep pushing that price point? Uh, you know, uh, we run leanish restaurants, and part of our model in the restaurants is we run a chip-pooling model, right? Uh so all the gratuities go into a bucket. So, and the way it has worked historically in our restaurants is we have bartenders running food and expediting and doing everything they can to make sure that the restaurant as a whole succeeds, right? You know, so um, you know, the obvious downside um that can be there of with a tip pool model is, you know, you can have free riders, people that are not uh as good at their craft as others that are taking advantage of the increased skills of the better servers and bartenders. But for the most part, we've uh ended up kind of kind of a self-regulating uh team where the people that don't perform seem to get edited out of the staff by themselves, right? So, you know, um, but that that that that model allows us to run a little leaner labor models than uh many other uh competitive full service uh restaurants might be able to do. And that offsets a little tiny bit what's going on uh in the city of Chicago in the state of the whole way.
A Leaner Staffing Model May Actually Pay Remaining Servers More
SPEAKER_02So when you mentioned, I mean, you know, it it always sounds terrible to most people when you said, okay, I might have to shut some jobs and I'll have to go with this leaner or maybe a more palatable um term, okay, I've got to go with a leaner staffing model. But you know, there is another fact, which is that restaurant industry has has trouble finding enough employees. So if you're able to work with a leaner staffing model, that may not be a bad thing.
SPEAKER_01Because they make more money, the ones that actually work there. You know, it's like if uh if I'm running four servers or two servers in a tip-pool model, right? Yeah, as long as the guests are getting the quality of the service that you want with two servers, you know, then you know, uh the the the two servers are going to make a heck of a lot more than they would have made out otherwise. We yeah. So uh it's yeah.
Robots, Hybrid Service, and the Future of Restaurant Labor
SPEAKER_02So how about leveraging technology? So, you know, if you have two servers now and they're gonna have trouble going into the kitchen to get everything, but you have a robot that brings in the food from the kitchen to the to the main dining room, and then the server places it on the table so that you maintain that final step of personalization and final step of actual service, but you eliminate the the thing. And uh again, robotic bartenders where you just you know program it in and the drink is made, but the service is done by the bartender. So now you instead of serving, you know, 15 people, you can serve 20 or 25 people.
SPEAKER_01You know, my knee-jerk reaction is like my guests would have liked that kind of stuff. But you know something, if you think about it, how the guest journey has changed over the last 10 years, that things that would have been anathema to the guests, you know, five years ago is a well-accepted map. You know, um let's talk about your um your robot food runner, right? So that's a pretty mechanical function when you think about it. You're all you're doing is transporting, well, you gotta make sure you have the right plates. So, but you're transporting plates from point A to point B, right? So how would that go over with the guests? I think for the most part, that would probably be okay. Now, what if the guests uh are are uh if the the cocktails coming from the bar were being made by uh an uh a robot bartender? Well, if the guest sees that, that's not going to go over particularly well, at least not now. In 10 years, 20 years, maybe the guest would would react definitely. You know, one of the things I'm working on right now, because the the labor sensitivity is becoming higher and higher and higher every time we work on things, is um we're uh in what in one of my restaurants, I have a roof deck with a full bar, and we're implementing we're creating a new restaurant concept for the roof. So I'm not trying to do the foreign bar concept on the roof. We're gonna do something different. And one of the things we're looking at doing is a hybrid service model where I have just a couple of servers with handhelds taking orders, but the guests can, by scanning a QR code, can access their own check and order additional items uh going. So, you know, maybe I can eliminate one or two servers that way, right? You know, so I'm looking for ways to not destroy the traditional business model, but perhaps enhance it to make it a little more labor efficient than it would have been otherwise.
Fun Questions: Dream Dinner Guests — Danny Meyer, Frank Lloyd Wright, and More
SPEAKER_02So at this point, what I want to do is ask you some fun questions. So, can you name up to four people living or deceased, you would like to have dinner with?
SPEAKER_01Let me think about that. So uh um I'm forgetting his the guy's first name, but I just finished watching Masters of the Air, which is the uh uh the um uh uh HBO Max uh nine-part series about the air war in Europe. And the the author of the book, fascinating guy. He wrote, I believe he was involved in Bander Brothers and some of his other books. I would love to sit down and and talk to him. I find that fascinating. I would love to have dinner with Danny Mayer. Okay. I mean, it's like I consider him to be one of the smartest restaurant guys I have uh that ever has that has ever been in the United States. And uh understanding, you think about what he's done by putting aside the restaurants in in Manhattan or what have you. He created a Shake Shack too, right? Which I think is probably a billion dollars, and I don't know how big it is now, but a billion-dollar uh group of restaurants. So there's a uh a couple of folks. Um, I would love to uh meet uh Frank Lloyd Wright and have dinner with him, right? You know, you know, my farm is near Tellyason, uh his summer home in Wisconsin. And almost every year we visit Tel Yasin. It's just an amazing place in a gorgeous part of the world. And I would love to uh meet uh him. I understand he was incredibly arrogant and had very little patience for people that weren't as smart as him. So uh so maybe he would slap me down. Um, but uh there's a couple people I would love
What's on the Menu: A Farm-to-Table Feast From His Own Farm
SPEAKER_01to talk to.
SPEAKER_02Now, since you're a restaurant, at this dinner, what's on the menu?
SPEAKER_01It would probably be as much as I could from my farm, right? You know, you know, so that means apples and asparagus and honey and garlic and horseradish and raspberries and blackcurrant. Uh, you know, uh it might end up being a vegan uh menu simply because I don't grow livestock. You know, so unless you want to call my honeybees livestock, which I don't, you know, so yeah.
Keep Calm and Carry On: TJ's Version
SPEAKER_02Restaurant industry is absolutely chaotic and frantic, and just so much is going on. And you've heard the phrase keep calm and carry on. Can you substitute calm with your word?
SPEAKER_01You get something positive done every day, right? You know, that moves the ball forward, right? You know, it's uh it's yeah, this is a game of inches, right? It's it's uh getting the little things done every single day uh is what keeps your uh restaurants uh progressive. So little things done all the time, every
Closing Remarks & Credits
SPEAKER_01day.
SPEAKER_02I love that. Uh muddling through their days in which I feel that I'm just muddling through the days. So um TJ, thank you so much. You shed so much light and so much more nuance into this discussion of uh subminimum wage. And thank you so much for coming on the podcast and sharing your thoughts. I always enjoy talking to you, and today was really special. So thank you.
SPEAKER_01Uh it's a pleasure uh to have uh this conversation. Uh always, as I said, have a warm spot for the B hospitality program. And um, you know, hope to see you next time you come out to Chicago. I would love that.
SPEAKER_02And thank you all for listening today to our distinguished podcast. If you like what you're hearing, be sure to follow up and give us a five-star rating. If you want to join the conversation and share your thoughts and suggestions, email me at shaden at bu.edu. That's shawdean at bu.edu. Special thanks to the team who produced this podcast, Mara Littman, Andy Halleck, and the entire team at BU School of Hospitality Administration. To keep up with Distinguished Podcast, be sure to subscribe wherever you listen to your favorite podcast. You can also learn more about our undergraduate and graduate programs at BU School of Hospitality by visiting BU.edu slash hospitality. Have a wonderful day and thank you for listening.
