Latest / Choppin’ It Up by Bloomberg Intelligence / TipHaus’ COO on New US Tax Law, ‘Tipflation’

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TipHaus’ COO on New US Tax Law, ‘Tipflation’ · Choppin’ It Up by Bloomberg Intelligence

0:13
Speaker 1: Welcome to Chopping It Up. I'm your host, Mike Hallon,
0:15
Speaker 1: a senior restaurant food Service analyst at Bloomberg Intelligence. Our
0:19
Speaker 1: research and that of bi's five hundred analysts around the
0:22
Speaker 1: globe can be found exclusively on the Bloomberg terminal. If
0:25
Speaker 1: you enjoy the pod, do me a solid and give
0:27
Speaker 1: us a five star review on Apple or Spotify. Today
0:31
Speaker 1: we're joined by Kirk Grogan, chief operating officer and co
0:34
Speaker 1: founder of tip House. Welcome to the pod, Kirk.
0:37
Speaker 2: Thank you, Mike, really excited to be here with you today.
0:40
Speaker 1: Man, all right, let's start from the top. What problem
0:43
Speaker 1: did you and the team set out to solve when
0:45
Speaker 1: you created tip House.
0:46
Speaker 2: That's a great question. So founded by a restaurant consultant,
0:50
Speaker 2: a good friend of mine, and ultimately it was fined
0:53
Speaker 2: a tip solution for a couple thirty plus unit groups
0:57
Speaker 2: located in the Seattle area. Lots of tech challenges. They
1:00
Speaker 2: were implementing new poss and so they said, as we're
1:03
Speaker 2: going through a tech change, let's make it easy. Let's
1:07
Speaker 2: find a tip solution. And that ended up being the
1:10
Speaker 2: toughest challenge you faced. So contacted me, contacted a few
1:13
Speaker 2: of our developer friends in the Seattle area and said, ah,
1:16
Speaker 2: you know it's going to be a weekend project. Let's
1:18
Speaker 2: build something now, there'll be some passive income for us guys.
1:21
Speaker 2: It'll be great and it'll be easy. Every restaurant knows
1:24
Speaker 2: a restaurant, and you know, somehow that turned into us
1:27
Speaker 2: leaving some some well paying jobs to come and join
1:30
Speaker 2: a tech startup with nothing. Man.
1:31
Speaker 1: Oh that's exciting. Man. Well listen, man, I guess it
1:34
Speaker 1: comes in handy to have some tech developer friends. I
1:36
Speaker 1: need some of those.
1:38
Speaker 2: Seattle is a great place for it. You know, it's
1:40
Speaker 2: it's known to have a few talented individuals around.
1:43
Speaker 1: Okay, Cole, what was the biggest challenge in turning that
1:47
Speaker 1: idea into a real business?
1:50
Speaker 2: Great question, man. Realistically, it was the idea that every
1:56
Speaker 2: restaurant is a different tip policy. There is no standard
1:59
Speaker 2: operating procedure to follow. So you know, some groups are
2:03
Speaker 2: We've got a tip policy on a napkin that sometimes
2:05
Speaker 2: gets enforced. Some people, you know, thirty six tab Excel
2:09
Speaker 2: sheets to manage it. Some are doing whatever the manager
2:12
Speaker 2: before they're manager before their manager did. So it's understanding
2:16
Speaker 2: there's a lot of leeway and tips, and therefore a
2:19
Speaker 2: solution has to be unbelievably flexible to service those needs.
2:23
Speaker 1: And just let's talk a little bit about the solution.
2:26
Speaker 1: You know why your customers love it sure, First and foremost,
2:30
Speaker 1: I'll always give that.
2:31
Speaker 2: You know, our customers love the customer service read fried
2:34
Speaker 2: as hospitality, So that's one of the things that we
2:36
Speaker 2: really specialize in. But for our actual product itself, it
2:40
Speaker 2: saves them a ton of time, it saves them a
2:42
Speaker 2: ton of money, It automates the piece, reduces their liability,
2:45
Speaker 2: and it does that We integrate directly with the point
2:48
Speaker 2: of sale, with your time and attendance platform. If those
2:51
Speaker 2: are separate, we merge that data and then we allow you,
2:54
Speaker 2: as a restaurant owner, operator manager, to ensure that you
2:57
Speaker 2: can layer over whatever tip logic you use. If you
2:59
Speaker 2: use tip pooling, if you tip share two and a
3:02
Speaker 2: half percent of alcohol sales back to the bartender, if
3:04
Speaker 2: you do a lot of catering, banquets, events, all of
3:07
Speaker 2: those need to be tracked, brought into a system and automated.
3:10
Speaker 1: I'd imagine the restaurant.
3:11
Speaker 2: Employees love the tool that is our number one proponent,
3:15
Speaker 2: may be a payroll team as well as they don't
3:18
Speaker 2: have to go through these thirty six tab Excel sheets.
3:21
Speaker 2: But employees do you know. I think back I started
3:24
Speaker 2: at Chili's at sixteen, and I was always doing an
3:27
Speaker 2: end of shift report, running it to the manager saying, hey,
3:30
Speaker 2: you know, I brought in two hundred dollars in cash?
3:32
Speaker 2: How much am I owed? We're doing this awkward exchange
3:34
Speaker 2: at the end. But the issue there is always there's
3:37
Speaker 2: no transparency. I know we tip pool technically, I know
3:40
Speaker 2: I owe three percent to the bus or whatever it
3:42
Speaker 2: might be, but I don't get to see how that
3:45
Speaker 2: impact actually plays out over time. And so you know,
3:48
Speaker 2: it's a manager bringing me to an Excel sheet he
3:50
Speaker 2: covering with two pieces of paper every other row that
3:53
Speaker 2: isn't my name, and we're just taking it at face value.
3:56
Speaker 2: That yeah, I believe that's about how much they made,
3:58
Speaker 2: and that's you know, how it tipped would work. And
4:01
Speaker 2: I'll take it, you know, and take it with it.
4:03
Speaker 2: And so what we've done is the employees all get
4:05
Speaker 2: a free mobile employee app. It tracks their best shifts,
4:08
Speaker 2: how much they're contributing, what their net is from the
4:10
Speaker 2: tip pool, the tip share, and so first of its
4:13
Speaker 2: tie visibility available to those employees so they can plan
4:17
Speaker 2: better financials, they can be smarter, they have more faith
4:20
Speaker 2: than their restaurant, their team members, their management, et cetera.
4:24
Speaker 1: Transparency is a beautiful thing. Are your customer seeing reduced turnover?
4:29
Speaker 2: They are? I appreciate that, Yeah, absolutely so, you know
4:33
Speaker 2: ivers if you're in the Pacific Northwest. That's one of
4:35
Speaker 2: our great case studies we did recently. Fame is famous
4:38
Speaker 2: Fish and Chips joint thirty five quick service restaurants located
4:42
Speaker 2: all around the Puget Sound and when they implemented us,
4:45
Speaker 2: I believe it was a thirty one or thirty two
4:47
Speaker 2: percent reduction and turnover. Transparency as you touched its key,
4:51
Speaker 2: and it's one of those things that's hidden. It leads
4:53
Speaker 2: to a lot of issues. You know, you get into
4:55
Speaker 2: an argument with your manager. It may not seem like
4:58
Speaker 2: it's about tips or take home or money, but typically
5:00
Speaker 2: it is right and so you want to make sure
5:02
Speaker 2: that people are always blown away. When we implemented this,
5:05
Speaker 2: everyone kind of came up to the same page. We
5:08
Speaker 2: started operating like a true team. We did all of
5:10
Speaker 2: these things that you know, end of the day, it's
5:12
Speaker 2: how much money you take home it's can you provide
5:14
Speaker 2: for your family and yourself and a lot of tension
5:17
Speaker 2: around that you know is mitigated if you can understand
5:20
Speaker 2: all of these teams, team items and how you work
5:23
Speaker 2: together in the restaurant as a team.
5:24
Speaker 1: All right, good stuff, man, So how do you see
5:27
Speaker 1: the big beautiful bill impacting restaurants here through your end
5:31
Speaker 1: and into twenty.
5:32
Speaker 2: Six the million billion dollar question? Maybe, man, it's going
5:36
Speaker 2: to have some impact. As for restaurant operators in an
5:40
Speaker 2: ideal world, it's going to have very little impact on
5:43
Speaker 2: them in a negative manner, right, it should make things
5:45
Speaker 2: streamlined a little easier, So a lot of misconceptions around it.
5:50
Speaker 2: But the big things are going to affect full time
5:53
Speaker 2: servers and bartenders, right, No tax liabilities on individuals making
5:57
Speaker 2: less than fifteen thy seven hundred and fifty. So if
6:00
Speaker 2: there's less than that, no change to them. Sliding scale
6:03
Speaker 2: as you go up, and you know the results are
6:05
Speaker 2: impacted over about one hundred and fifty thousand, you'll start
6:08
Speaker 2: mitigating down. So really, right in that sweet spot that
6:10
Speaker 2: i'd say is the majority of your full time servers
6:12
Speaker 2: in full service restaurants, and from that they should see
6:15
Speaker 2: more money in their pocket. Realistically, for twenty twenty five,
6:20
Speaker 2: it is going to be on their annual taxes coming
6:22
Speaker 2: up that they'll file in twenty six, and then in
6:25
Speaker 2: twenty six, twenty seven, twenty eight. You should see these
6:28
Speaker 2: on every paycheck. So we'll get rid of those peaks
6:30
Speaker 2: and troughs, will stay a little more consistent keeping money
6:33
Speaker 2: in their pocket. But you know, lots of misconceptions will see.
6:38
Speaker 2: There's always the idea of how do consumers react and
6:40
Speaker 2: do they misinterpret the bill? Do they adjust their tipping structures?
6:44
Speaker 2: Groups that are doing service charge models do those take impact?
6:47
Speaker 2: Right now, it's looking like no, so we may see that.
6:50
Speaker 2: I'm really hopeful and optimistic we get a influx of
6:55
Speaker 2: workforce back into the service industry. Turnovers heavy, it's hard.
7:00
Speaker 2: Big economy has really taken an impact on the service styles.
7:03
Speaker 2: So ideally, you know, in a real scenario, seventy five
7:06
Speaker 2: thousand dollars earned total comp at a restaurant versus seventy
7:10
Speaker 2: five thousand at an office job, you should have a
7:13
Speaker 2: higher take home at that seventy five thousand in the restaurant.
7:15
Speaker 2: So ideally, managers operators are doing a great job at
7:19
Speaker 2: conveying that the industry comes together to kind of help
7:21
Speaker 2: build that information and knowledge campaign, and we see some
7:25
Speaker 2: groups come back and stay longer in the restaurant industry
7:27
Speaker 2: and provide much needed release there.
7:29
Speaker 1: Yeah, that would be great, and it would be great
7:31
Speaker 1: if they're you know, they spent that money and put
7:34
Speaker 1: it back into the economy and got things moving, you know,
7:38
Speaker 1: because things have been slow for the last year and
7:40
Speaker 1: a half or so and to that point, have you
7:44
Speaker 1: seen a meaningful decrease in tip size percentage over that timeframe.
7:49
Speaker 2: We are tracking heavily, so we run, you know, several
7:54
Speaker 2: billion dollars in tips annually through a system that will
7:57
Speaker 2: track and manage. I have not seen a decrease yet,
8:00
Speaker 2: but I'm always mindful that, you know, the backlash, let's
8:04
Speaker 2: say it starts online of people sharing what they perceive
8:07
Speaker 2: to be correct I think, incorrect information. But what we'll
8:10
Speaker 2: see here is a slight decrease on tips. Potentially there
8:15
Speaker 2: is people saying, oh, well, if they're not paying taxes
8:17
Speaker 2: on it, then you know, if I tip eighteen percent
8:19
Speaker 2: instead of twenty percent, it'll be the same for them.
8:21
Speaker 2: And again, there's too many scenarios that that's not necessarily
8:25
Speaker 2: going to be the case. So I'm really optimistic. Industry
8:27
Speaker 2: needs to get together and you know, a lot of
8:29
Speaker 2: education going on right now for managers and operators, for employees.
8:33
Speaker 2: There's a little bit which is great, and there needs
8:34
Speaker 2: to be more there. But I don't see a lot
8:36
Speaker 2: for customers or consumers. And I would love to see
8:39
Speaker 2: us put together and around some information because what we
8:42
Speaker 2: want are more people working in this industry providing great service,
8:44
Speaker 2: sticking around longer. And that only happens if those tips
8:47
Speaker 2: indeed do lead to more take home for the servers.
8:51
Speaker 1: Okay, cool and tipflation, it's been a hot topic even
8:56
Speaker 1: of ripe target for comedians like Sebastian Mask calcol and
8:59
Speaker 1: Jim gaff Again, are people fed up? Have you seen
9:03
Speaker 1: any change to the size and frequency of the limited
9:05
Speaker 1: service tipping over the last couple of years?
9:08
Speaker 2: I have, I have, And that's a great topic and
9:10
Speaker 2: a great distinction you already called out there is I
9:13
Speaker 2: don't expect inflation to impact and I hope it doesn't
9:16
Speaker 2: ever full service restaurants, man, that's uh. Those people are,
9:20
Speaker 2: you know, working hard every single day. That's a tough,
9:24
Speaker 2: demanding job. Anyone out there who does not believe that
9:26
Speaker 2: I'd encourage you to go get into a restaurant, man,
9:28
Speaker 2: give it a go. Those are some rock stars, you know,
9:30
Speaker 2: this frontline service, so there shouldn't be on the full service.
9:35
Speaker 2: Where it comes into play is quick service and then
9:38
Speaker 2: particularly on these industries that you know. At my convenience
9:40
Speaker 2: store the other day, there was a tip option and
9:42
Speaker 2: that was crazy to see. So you get in those
9:45
Speaker 2: awkward scenarios of you know, I'm going to click a
9:47
Speaker 2: zero here because I went and grabbed my Peanut m
9:49
Speaker 2: and M's and my Red Bull. You know, I don't
9:51
Speaker 2: need to need to pay on that behalf, but I
9:54
Speaker 2: expect quick service, you know. Ideally lands, I think there's
9:57
Speaker 2: an opportunity to tip there. Five percent under ten percent
10:00
Speaker 2: great a little something, especially if they're you know, being
10:03
Speaker 2: delightful to your kids, they're explaining ingredients to you, they're
10:05
Speaker 2: given recommendations their service there. I don't think it's the
10:09
Speaker 2: level of a bartender, you know, creating a perfect cocktail
10:11
Speaker 2: for you and recommending what wine's going to go with
10:14
Speaker 2: your entree or this ale goes really well here. So
10:18
Speaker 2: I would like to see this be a responsible scale
10:20
Speaker 2: of you know, the best service getter getting full up
10:23
Speaker 2: to twenty plus percent tips and then people are providing quicker, shorter,
10:27
Speaker 2: less service, you know, to scaling down effort there. So
10:31
Speaker 2: we'll see if that comes.
10:31
Speaker 1: Into play though, Yeah, I think that's a big part
10:34
Speaker 1: of the frustration. Right, It's like, you know, you go,
10:36
Speaker 1: you get your penut M and m's and you're drinking.
10:38
Speaker 1: It's twenty percent is the suggestion, and not five.
10:42
Speaker 2: Right, it's And here's the crazy part is that's always
10:45
Speaker 2: on you know, the management of the place, right, they
10:47
Speaker 2: can set those presets and so you know, we've run
10:50
Speaker 2: some studies with it and relatively inconsistent results. But it
10:54
Speaker 2: was if you show five to ten percent, do you
10:56
Speaker 2: get more tips? You get a greater quantity of tips,
10:59
Speaker 2: but not greater denomination. Often so it seems more people
11:03
Speaker 2: are willing to give five percent, but you get those
11:06
Speaker 2: let's call them the awkward people who are very afraid
11:08
Speaker 2: of social interaction and clicking a zero, who are willing
11:11
Speaker 2: to tip twenty percent. So you know, really though, the
11:13
Speaker 2: long term impact on the customers, do they start shopping
11:15
Speaker 2: somewhere else for that? You know, we want to look
11:17
Speaker 2: short and long, and so I'm a big believer, well
11:20
Speaker 2: much smaller percentage, make it not a hassle to click
11:22
Speaker 2: zero in places that weren't traditionally tipped. Let's be a
11:25
Speaker 2: little more responsible with it.
11:27
Speaker 1: Sounds good. What's the latest update on the tip wage
11:30
Speaker 1: elimination in Washington, d C.
11:33
Speaker 2: It's going to be a challenge, so you get a
11:35
Speaker 2: lot of adjustments. And this is kind of spearheaded by
11:41
Speaker 2: you know, Danny Meyer was one of the most public
11:42
Speaker 2: people to say that we should look at these items,
11:45
Speaker 2: that we should be removing tips, we should go to
11:47
Speaker 2: service charge models, we should do these items, and I
11:50
Speaker 2: think great intention. Danny Meyer is a hell of an operator,
11:52
Speaker 2: right has been for many, many years. That's Union Square
11:55
Speaker 2: for those not aware, but you know, not many people
11:58
Speaker 2: realize Danny Meyer himself walk that back right they started
12:01
Speaker 2: taking tips. They are starting to look at these items,
12:03
Speaker 2: so you're going to run into scenarios where it doesn't
12:07
Speaker 2: make sense to pass that cost onto the guest. Guests
12:10
Speaker 2: like the feeling of control of a tip. They like
12:13
Speaker 2: the ability to make sure that they feel the service
12:15
Speaker 2: is directly related to it. And then there's the number
12:18
Speaker 2: of no tax on tips as what we just talked about,
12:20
Speaker 2: part of the one big beautiful bill. If there is
12:23
Speaker 2: not a voluntary tip given that is not eligible for
12:26
Speaker 2: reduction in taxes, at least to my understanding so far.
12:29
Speaker 2: And I'll be mindful that ton of gray area on
12:31
Speaker 2: that bill still, So I'm not going to ever speak definitively.
12:34
Speaker 2: We'll see things get challenged and play out in court,
12:36
Speaker 2: but we'll see how it goes from that end. Man.
12:38
Speaker 1: Yeah, it's interesting because you know, typically what you hear
12:40
Speaker 1: is the best servers and the customers in the United
12:43
Speaker 1: States don't want it, right, but politicians still love to
12:49
Speaker 1: try to push it. Man.
12:50
Speaker 2: I couldn't agree more. Man, it's something I think, it's
12:53
Speaker 2: a good sound bite, right, It's something that gets attention.
12:55
Speaker 2: But I couldn't like the best servers when I was serving,
12:58
Speaker 2: I would have never worked at a place that paid
13:00
Speaker 2: a flat wage on it, even with the benefits and things,
13:04
Speaker 2: and so much of that at least on my young
13:06
Speaker 2: and ignorant mind was lost to me. Right, I'm twenty one,
13:08
Speaker 2: I'm in great shape. Man. I don't need benefits. I
13:10
Speaker 2: don't need any of this item. But yeah, your best
13:13
Speaker 2: servers are killing it because they provide outstanding service. They've
13:16
Speaker 2: been there for five years. They have the regulars that
13:18
Speaker 2: love tipping, and you feel like you lose some control
13:21
Speaker 2: as a consumer. Right, what is my incentive for the
13:23
Speaker 2: server to be wonderful to my kids to make great
13:26
Speaker 2: recommendations if they're making the same on this at the
13:28
Speaker 2: end either way?
13:29
Speaker 1: Right, all right? So what's the impact of tips being
13:31
Speaker 1: received daily versus in cash back in the day or
13:35
Speaker 1: via paycheck?
13:37
Speaker 2: Oh, this is the number one thing I think facing
13:41
Speaker 2: the industry that it needs to get aligned on. And
13:44
Speaker 2: the reality is so again, I started at Chili's. Man,
13:46
Speaker 2: I used to walk out with my eighty one hundred
13:48
Speaker 2: dollars a night, and I loved that was me as
13:51
Speaker 2: a server. I was largely not in a spot with
13:54
Speaker 2: great financial responsibility. Yet I was young and so I
13:57
Speaker 2: wasn't setting a ton of side for savings. I wasn't
13:59
Speaker 2: doing things of nature for you know, if my car
14:01
Speaker 2: had an issue. But that was the beauty of it is. Hey,
14:03
Speaker 2: you know, I forgot it was my girlfriend's birthday coming up, right,
14:06
Speaker 2: so I can go pick up a double on Saturday,
14:08
Speaker 2: walk out with two hundred dollars, take her out to
14:11
Speaker 2: a nice dinner. All things are great. Obviously, cash is
14:14
Speaker 2: fading from the economy has been for many, many years.
14:17
Speaker 2: COVID really amplified that. And now we're in this situation where, Okay,
14:22
Speaker 2: the big guys in the space, your major or major
14:25
Speaker 2: players in the restaurant industry, they can afford to keep
14:28
Speaker 2: fifty thousand dollars cash and a safe. They can afford
14:31
Speaker 2: brinks armored car deliveries, you know, twice a week to
14:33
Speaker 2: bring them cash so they can still pay that out.
14:35
Speaker 2: The vast majority of restaurants said, hey, this is a hassle,
14:38
Speaker 2: it's cost time consuming. My managers are off site run
14:41
Speaker 2: making bank runs. They're dealing with these items. I don't
14:44
Speaker 2: like my servers walking out at night two am in
14:46
Speaker 2: the parking lot three hundred dollars cash. We had a
14:49
Speaker 2: string of robberies, you know where our seems like our
14:51
Speaker 2: former servers or someone who worked here, because they knew
14:54
Speaker 2: the location of the safe, they knew when people would
14:56
Speaker 2: be here. All of those are real deal concerns when
14:59
Speaker 2: you're dealing with cash. And now the flip side of
15:02
Speaker 2: that is if you're putting those tips onto paychecks, kind
15:05
Speaker 2: of defeats the purpose of a lot of the service
15:07
Speaker 2: mentality again, of being able to make that money the
15:10
Speaker 2: day you need it pick up shifts, and so we
15:12
Speaker 2: saw a major decrease in servers and bartenders willing to
15:16
Speaker 2: pick up shifts if it ends up going on to
15:18
Speaker 2: the paycheck. You know, it's not that instant gratification of
15:21
Speaker 2: I get to go take that money home. So what
15:24
Speaker 2: we see now is a big push to move money digitally,
15:27
Speaker 2: and tip House obviously was one of the forefronts of that.
15:30
Speaker 2: We pioneered earned tip access not a secret that it's
15:33
Speaker 2: a play on earned a wage access, of course, but
15:35
Speaker 2: now it seems like every company's trying to come out
15:37
Speaker 2: with something recognizing that your servers are more likely to
15:40
Speaker 2: stay at your location if they're receiving their tips within
15:44
Speaker 2: a timely manner post shift. If you're making them wait
15:47
Speaker 2: two weeks a long time, you almost forget. You know
15:50
Speaker 2: where that tip came from. That's from a great Tuesday
15:52
Speaker 2: that I had a delightful service, is from a slammed
15:54
Speaker 2: Friday because there's a ballgame in town. You kind of
15:57
Speaker 2: remove that incentive and it's a easy to be honest. Now.
16:00
Speaker 2: It was tough at the beginning, a lot of groups
16:02
Speaker 2: trying to figure it out. We rolled out a solution
16:05
Speaker 2: many people have, but it's something now that should be
16:07
Speaker 2: a simplest click and a button dispatching that money directly
16:10
Speaker 2: to those serve staff and making sure that they're able
16:13
Speaker 2: to use that money how they see fit.
16:14
Speaker 1: All right, good stuff, and it's interesting. Cash leaving the economy.
16:17
Speaker 1: I feel like I've been using cash even more in
16:21
Speaker 1: the last year because everybody's charging me three percent to
16:24
Speaker 1: use my credit card. Man, I agree.
16:26
Speaker 2: You see that cost getting passed on, right, the merchant
16:29
Speaker 2: processing fees. Businesses are picking up. They want cash, and
16:32
Speaker 2: I'm in that same boat. I'm a regular ATEM visitor
16:36
Speaker 2: and that's just you know, selfishly, it's from my own business, right.
16:39
Speaker 2: I'm a big tipper and always have been. It's hard
16:41
Speaker 2: for me to be at a conference at an open
16:43
Speaker 2: bar or something like that with groups wearing my tip
16:45
Speaker 2: house gear and not leaving tips. So you know, I'm
16:48
Speaker 2: always got a stack of fives or stack of tens
16:50
Speaker 2: on me to make sure they go around. But I
16:52
Speaker 2: like cash man. The digital world on some levels is
16:55
Speaker 2: its own form of spooky, right, So I hope cash
16:58
Speaker 2: is always here to remain. Love to see more businesses
17:01
Speaker 2: except cash. I know we're seeing the digital payments only
17:04
Speaker 2: type trend. But you know cash should always be available.
17:07
Speaker 1: Yeah you're old school like me. I love it has
17:10
Speaker 1: tip fraud to decrease now that cash tips have gone
17:13
Speaker 1: away to some degree.
17:16
Speaker 2: They it certainly has, certainly has, but I think, like
17:20
Speaker 2: many things, sometimes it takes shape in different manners. So
17:23
Speaker 2: one of the things that we see most commonly when
17:27
Speaker 2: we have a customer who I'm going to say, has
17:30
Speaker 2: an error. And you'll see where I'm going with this,
17:32
Speaker 2: which is we get up in a running we're implemented
17:35
Speaker 2: and you know, maybe one out of one hundred customers
17:38
Speaker 2: will reach out and say, hey, the numbers aren't adding
17:40
Speaker 2: up where we should be on tips is not what
17:42
Speaker 2: you know, my excel sheet that I was running showed
17:44
Speaker 2: that we had say okay, you know, well, we're integrated
17:46
Speaker 2: directly into your point of sales, so we're pulling directly
17:48
Speaker 2: from the source of truth. Let's go in and look
17:50
Speaker 2: at it. And so now some of the tip fraud
17:53
Speaker 2: we see as actually people creating separate individuals to clock
17:56
Speaker 2: in is take a cut of the tip pool, or
17:58
Speaker 2: we're captain managers that dipping into the tip pool, you know,
18:01
Speaker 2: five dollars from each server. Each shift adds up quickly,
18:04
Speaker 2: so we see that piece. From an employee standpoint, it's
18:08
Speaker 2: definitely dropped tremendously, and so the honest answers. We see
18:13
Speaker 2: groups that are still cash heavy and they you know,
18:16
Speaker 2: let's say, we can determine pretty quickly that you're under reporting.
18:19
Speaker 2: We know your region, we know your category, fsr QSR, CRAFT, casual,
18:24
Speaker 2: whatever you may fall into. The trick to this is
18:26
Speaker 2: the IRS has well into the information that we have
18:30
Speaker 2: plus a lot more. And so you know, we've seen
18:33
Speaker 2: groups that often contact us after they get popped by
18:36
Speaker 2: the IRS saying, hey, we got to fill out form.
18:39
Speaker 2: I believe it's eighty twenty seven. We have a preset
18:41
Speaker 2: build for it. But where you're reporting everything, but they
18:44
Speaker 2: know the averages. If your restaurants in your nearby area
18:47
Speaker 2: or you know, twelve percent and you're reporting at four percent,
18:50
Speaker 2: expect to get a visit. Not a good time for you.
18:53
Speaker 2: You know, no one likes that. And so you know,
18:55
Speaker 2: even if you're doing things on the up and up,
18:57
Speaker 2: or you think you are and your staff aren't, you
18:59
Speaker 2: can get it some dicey situations there, so best to
19:02
Speaker 2: keep a track of it. Employees are only hurting themselves. Man,
19:05
Speaker 2: we see this where they need credit in the future,
19:09
Speaker 2: they need to prove income for housing or for cars,
19:11
Speaker 2: whatever it may be. And suddenly all that thirty thousand
19:14
Speaker 2: dollars you buried in cash last year, you really wish
19:17
Speaker 2: that showed up so that you could have gotten that
19:19
Speaker 2: apartment you just got declined for. You know, so it's
19:21
Speaker 2: best to get it all on the up and up,
19:22
Speaker 2: make it legitimate. And now again no tax on tips
19:25
Speaker 2: hopefully gives another incentive to stop trying to hide things
19:28
Speaker 2: like they did in the old days with cash.
19:30
Speaker 1: Yeah, it's interesting when Dominos shifted, you know, to more
19:34
Speaker 1: digital and really saw their you know, digital sales growth grow.
19:39
Speaker 1: Their seam source sales got a bump because a lot
19:43
Speaker 1: of franchises were under reporting the cash piece of it.
19:45
Speaker 2: Right, I can buy it. And you know, Domino's was
19:48
Speaker 2: a pioneer in the digital space. Man, they're their pizza
19:51
Speaker 2: track or all the things they did there. But we
19:52
Speaker 2: see that time and time again, as things go into
19:55
Speaker 2: the electric records of you know, filing, you'll start to
19:59
Speaker 2: see a total change in the numbers. And how'd you
20:02
Speaker 2: grow revenue seventeen percent this year? Well, you know, we'll
20:04
Speaker 2: talk about it later, right, so very cool.
20:08
Speaker 1: Hit me with your fun tipping facts. What do you got?
20:11
Speaker 2: Ooh, okay, there are plenty, man, and so some of
20:15
Speaker 2: them are you know, where is the best tips in
20:17
Speaker 2: the US, And typically, no surprise, it's going to be
20:20
Speaker 2: in your major outdoor area. So you see a lot
20:23
Speaker 2: in Miami, that's huge in Miami, you see New York,
20:26
Speaker 2: you see Dallas, you see some major areas there. And
20:29
Speaker 2: then it's always, you know, what are the actual tip
20:33
Speaker 2: averages for fsr QSR all the fun stuff that you
20:36
Speaker 2: might encounter, and I think you know, it's higher and
20:39
Speaker 2: lower than most people would expect. So always I can
20:42
Speaker 2: pull up some stats here for you. And what that
20:44
Speaker 2: looks like is, if we were to dive into quick
20:48
Speaker 2: service restaurants, average monthly tips right out about fifteen hundred
20:51
Speaker 2: dollars on scale across the entire board. So nice. It's
20:55
Speaker 2: a good help for your servers, your you know, counter
20:57
Speaker 2: workers that are working there, maybe two three dollars an
20:59
Speaker 2: hour extra, which is excellent to trying to keep overhead.
21:02
Speaker 2: Low craft casual, so that's the term now for counter
21:05
Speaker 2: service that also has beer and wine, sometimes full liquor
21:09
Speaker 2: but you'll see a massive jump there seven thousand dollars
21:12
Speaker 2: average monthly tips, so you can see the impact of alcohol, obviously,
21:16
Speaker 2: license and regulations going around it. Full service is leaning
21:19
Speaker 2: right around fifteen thousand, and then fine dining, no surprise,
21:23
Speaker 2: a huge jump just at forty thousand dollars is your average.
21:27
Speaker 2: And we take this across each one of these sections.
21:31
Speaker 2: We pulled five hundred of our customers data, we anonymized it,
21:34
Speaker 2: we ran it through, but we accounted for geographical regions,
21:37
Speaker 2: everything else included. So expect to see that if you're
21:39
Speaker 2: significantly above or below that, you know, good job. If
21:42
Speaker 2: you're above, If you're below, there's some areas I'm sure
21:45
Speaker 2: you have room for improvement on. And then you know
21:48
Speaker 2: funny stories. Man, I got a good one, which is
21:52
Speaker 2: a bar in Miami, called our customer success team and said, hey,
21:56
Speaker 2: you know, we had a I won't name a celebrity,
21:59
Speaker 2: but I mean a list profile celebrity, very very popular
22:04
Speaker 2: individual in the music industry come in and left no
22:07
Speaker 2: tip dift our staff. Can you help us figure this out?
22:10
Speaker 2: How much should it have been? Can you run some
22:12
Speaker 2: numbers on their table, their bar tabs. All of these
22:15
Speaker 2: items and we said, you know, of course we can.
22:17
Speaker 2: We can pull that real easily. And so we showed
22:19
Speaker 2: it to them and didn't hear anything for about a week,
22:21
Speaker 2: and pure curiosity I followed up man. I said, hey,
22:24
Speaker 2: what did you do with that info? You know, like?
22:26
Speaker 2: And he said, oh, we called them, We called their manager.
22:29
Speaker 2: We started shaming them online. They reached out immediately when
22:32
Speaker 2: we shamed online. They pulled every asked us to pull
22:34
Speaker 2: it all down, and I think they ended up cutting
22:36
Speaker 2: them a check for ten or fifteen grand, which was
22:39
Speaker 2: just the tip. I mean, it was one hundred thousand
22:40
Speaker 2: dollars tab that got stiffed. And that's just not awesome. Man.
22:46
Speaker 2: Those people are working for that money. They're out there,
22:47
Speaker 2: they're trying to be impressed with you, and you're throwing
22:50
Speaker 2: one hundred thousand dollars that you obviously have at the
22:52
Speaker 2: bill and then you just walked out. Man. So that
22:55
Speaker 2: was a once in a lifetime call. I've never had
22:57
Speaker 2: another scenario like that. But good on the manager for
22:59
Speaker 2: taking in protecting his staff.
23:01
Speaker 1: Oh yeah, and that must have been heartbreaking for the
23:05
Speaker 1: staff when we know that check.
23:07
Speaker 2: Oh they're working what two three hours on that table.
23:10
Speaker 2: I'm sure. You know they're trying to. I mean, they're
23:12
Speaker 2: busting ass on it. They're taking care of everything they can,
23:15
Speaker 2: and they look at the end. You know, it's always
23:17
Speaker 2: that exciting moment as a server you open the check
23:19
Speaker 2: to see what was written on that credit card slip
23:21
Speaker 2: after a huge and yeah, I'm sure that was a
23:24
Speaker 2: matter of shock and frustration and fury. So again, really
23:27
Speaker 2: ups to that manager who took it on himself. And
23:29
Speaker 2: so I'm calling everyone, I'm shaming you online. We're doing
23:32
Speaker 2: this thing until you make my staff hole. So he
23:34
Speaker 2: went and did it. Good for him, man, We're not
23:38
Speaker 2: going to top that. So let's wrap it there. Thanks
23:41
Speaker 2: for doing this, Kirk. Hell yeah, man, I appreciate your Mike.
23:44
Speaker 2: I love the podcast, man. I really appreciate the opportunity
23:47
Speaker 2: and thanks again. You got it man.
23:49
Speaker 1: I want to thank the audience for tuning in as well.
23:52
Speaker 1: Check out tip House t I, P H A U
23:56
Speaker 1: S dot com to find out more about what Kirk
23:58
Speaker 1: and his team are up to. If you liked our discussion,
24:00
Speaker 1: please share it with your friends and colleagues. Check back
24:03
Speaker 1: soon for an interview with Chris Brandt, chief brand officer
24:06
Speaker 1: at Chipotle.