Joe's Crab Shack’s No-Tipping Policy Isn’t Working Out

As the no-tipping movement picked up steam last year, Joe's Crab Shack made waves by becoming the first national chain to give the service model a trial run. The experiment hasn't been well received, and the company is mostly pulling the plug, reports Nation's Restaurant News. In an earnings call last Wednesday, Joe's announced it will restore traditional tipping practices at 14 of the 18 locations that have been testing the new policy.

"The system has to change at some point, but our customers and staff spoke very loudly," Bob Merritt, chief executive officer of Ignite Restaurant Group, said in the call. "And a lot of them voted with their feet."

Ignite is the parent company that operates Joe's Crab Shack. In a first-quarter SEC filing, it revealed the no-tipping experiment played a role in quarterly labor expenses increasing by 3.2 percent, year over year. Those higher expenses resulted in Joe's income dropping by 16.2 percent compared to the first quarter of 2015.

Merritt said the no-tipping locations have seen customer counts drop by 8 to 10 percent, on average. While the policy has been rejected at most restaurants, Ignite will continue to explore ways to implement it in the future.

"We are going to try to figure out why it worked in some places and why not in others," Merritt said. "The way we look at it is: We are really continuing the tests in place with where it works."