How to Choose the Right Management Model for Your Restaurant

By: Tyler Cumella

22 Minute Read

Jul 30, 2019

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Staff Management Models

How often do you find yourself rehiring for the same positions? Does your staff struggle with the long-term implications of a career in the restaurant industry? How are you working to keep your high-performing team members inspired?

Restaurateurs face many uphill battles in today’s ever-shifting landscape, but one of the most complex comes down to restaurant staff — from hiring to engagement to retention and beyond.

According to the 2019 Restaurant Success Report:

  • 51% of restaurant professionals ranked hiring staff as a top challenge.
  • 35% of restaurant professionals ranked training staff as a top challenge.
  • 31% of restaurant professionals ranked retaining staff as a top challenge.

In addition to tackling challenges with hiring and retaining great restaurant staff, today’s restaurateurs need to convince their staff that the restaurant industry is more than a revolving door and can be a sustainable, legitimate career path.

To understand these staffing challenges, we'll look at the restaurant management and compensation models that exist today and their impact on restaurant workers.

The traditional staff management models have been in place for over a century and include the hierarchical employment structures and the tipping system. But there are so many different and new staff management models out there today, so we’re breaking them down. We’ll cover:

  • The gratuity-free model

  • Open-book management

  • Employee profit-sharing

  • Health insurance benefit offerings

  • Inclusive hiring and harassment management

  • Mission-driven community advocacy

This article covers definitions, challenges and benefits, and stories featuring restaurateurs’ first-hand experiences using these models. Some of these models are still the exceptions, not the rules, but we can learn a lot from them. Our hope is to provide you with the information you need to adapt and combat widespread industry challenges so you can keep staff around and focus on doing what you love.

Free Resource: The 2019 Restaurant Success Report

The Gratuity-Free Model

staff management models - gratuity-free

What Is It?

The gratuity-free model — also sometimes referred to as a “tip-free” or “hospitality-included” model — is a system where servers don't accept tips and are instead paid an hourly living wage, often plus employee benefits like health insurance.

While exciting and revolutionary in its approach, the gratuity-free model is still very much in its experimental phase. According to a Reddit thread about the gratuity-free restaurant movement, there are currently 231 known restaurants in the United States employing a tip-free model. One of these restaurants is Juliet in Somerville, MA.

restaurant staff management models - Juliet Somerville

Juliet and Barcito’s Experience: Benefits, Challenges, and Philosophies

While renowned for its technically brilliant food, detailed wine and cocktail programs, and immersive, performance-like dinners, Juliet is known just as well for its use of forward-thinking compensation and management models. According to Juliet’s media kit, “Prices at Juliet are inclusive of service; no gratuity is expected. Staff are paid a living wage above state minimums and participate in a profit-sharing program facilitated through the application of open-book management.” For more on both profit-sharing and open-book management models, see the sections below.

Related Article: How Two Restaurants are Thriving on a Gratuity-Free, Profit-Sharing Model 

Josh Lewin owns Juliet (and the newly opened Peregrine) alongside Katrina Jazayeri. He told us over the phone, “Our reason for being a gratuity-free restaurant is rooted in our beliefs that minimum wage should be fair and that wages should be equitable across front-of-house and back-of-house staff. We have noted through research and anecdotal experience that standard tips and lower minimum wages in restaurants lead to higher degrees of sexual harassment and racial discrimination, alongside issues tied to immigration status. There’s a lot of discrimination when you have positions that can be paid very low wages and aren’t really earning tips, but, many times, people in these positions don’t have much of a voice in their own career development."

Our reason for being a gratuity-free restaurant is rooted in our beliefs that minimum wage should be fair and that wages should be equitable across front-of-house and back-of-house staff.

Josh Lewin

Proprietor, Culinary and Creative Director at Juliet

Andrea Borgen, Toast customer and owner of Barcito in Los Angeles, CA, is also a supporter of the “no-tip” movement, but her case is an interesting one. She told us recently, “For the majority of our existence we had a hospitality-included, no-tipping model. We had implemented it about seven or eight months after opening. And we stuck with it until about three weeks ago.”

restaurant staff management models - barcito

Borgen recently switched Barcito back to a more traditional employee tipping model following three years of being gratuity-free. The gratuity-free approach addressed Borgen’s own issues with tipping. She found it to be a more equitable solution to employee compensation and allowed her to take more responsibility for how they were paid. Adding to this, it was considered illegal to tip out the back of house in Los Angeles three years ago, when the minimum wage was lower. Now, however, things have changed.

“It’s now legal to tip out the back of house,” she said. “As I started to run some projections and numbers and think about how going back to a traditional tipping model would impact my employees, it really seemed like the best possible solution for them in terms of how much money they would be making. I thought this move would do a better job of addressing that inequality than even the no-tipping model could. It reached a point where, even though I still don’t love the practice of tipping in general, I couldn’t shy away from what the numbers were telling me. At the end of the day, this was and continues to be about my employees.”

At the end of the day, this was and continues to be about my employees.

Andrea Borgen

Owner, Barcito

Whether you already own a restaurant or are planning on opening one, going gratuity-free takes real dedication and won’t be without its challenges. Lewin had this advice to share for restaurants considering going gratuity-free: “Look closely at why you want to be a gratuity-free restaurant. You need to really believe this stuff within yourself, and if this is not what you believe in, that’s fine. You need to seek out the strategies that allow you to fulfill your beliefs. You can’t make our goals your goals and expect to have our level of success because it's a huge commitment of time and spirit. Our lives are pretty much defined by this, so it can’t be an afterthought or you chasing an idea of the moment. Whatever model you decide on, it has to be something you really believe in.”

Open-Book Management

restaurant staff management models - open-book management

What Is It?

Open-book management is a system where restaurant management shares the finances of the business with its employees. This allows employees to see how their work contributes to revenue and helps them have a greater understanding of their business impact.

Henry Patterson is a senior partner at Rethink Restaurants, a consulting firm that provides strategic advising, training, and services to the restaurant and food service industry. One of their missions is to help restaurants adopt an open-book management model. “For me, open-book management is about creating a great place to work and a great company,” Patterson told us. “Instead of having employees walk around and not know what's going on, you can actually include them in a really big way. Let’s put it this way: How do you have somebody play on a sports team and not let them know what the score is?”

For me, open-book management is about creating a great place to work and a great company.

Henry Patterson

Senior Partner, Rethink Restaurants

Underdogs Restaurants and Rethink Restaurants’ Experience: Benefits, Challenges, and Philosophies

An open-book management model involves every staff member in the management of the restaurant to some degree, empowering them to be participants in running the business. Doug Marschke — Toast customer and owner of Underdogs Too, The Taco Shop at Underdogs, and Tacko in San Francisco, CA — has seen a lot of success with open-book management at his restaurants. He credits some of his business philosophies to Zingerman’s, a well-known community of businesses in Ann Arbor, Michigan.

In particular, Marschke has seen the positive impact of open-book management on staff engagement and retention. He told us recently, “[Open-book management] keeps everyone involved acting as a sort of owner. It made all the staff realize how hard the restaurant business is and how pennies really do matter. It also gives them insight into how much money I’m actually making. Our model requires us to be very busy in order to actually make anything, so people always assume that I must be a millionaire. But to see how much money and revenue we have to make in order to generate a small profit per month, I think it goes a long way in changing the mindset of our staff and gives me as an owner a little bit more credibility.”

Marschke’s restaurants are rooted in a strong culture and values, so it’s hard for him to say that open-book management is the sole reason they’ve seen great employee retention. But he believes the success comes from the powerful combining of culture, values, management, and compensation. He told us, “I think a lot of restaurant owners and managers are afraid of having that level of openness and honesty. People might get scared giving out all that information. But it really works out, good times and bad.”

I think a lot of restaurant owners and managers are afraid of having that level of openness and honesty. People might get scared giving out all that information. But it really works out, good times and bad.

Doug Marschke

Owner, Underdog Restaurants

While restaurants like Marschke’s and others including Juliet, Mei Mei, Paris Creperie, and The Rail Trail Flat Bread Co. have found success employing an open-book management model, it’s a big commitment getting there. Patterson and the team at Rethink Restaurants have found, in their experience, that making the transition from a more traditional management model to an open-book model takes at least eighteen months. It also requires deep dedication on the part of restaurant leadership. Patterson shared, “We have learned the hard way that unless the leadership team is really committed to making this happen, it won't. The crises of the day will take over. People will do what they always do.”

Outside of the amount of energy and time required of the leadership team, open-book management success is also impacted by employee hiring. You have to hire people who want to participate in this model along with you and your team because it involves greater employee accountability. Patterson has this piece of advice to offer employees joining an open-book management restaurant: “You're going to be part of an organization that isn't just doing today's job. You're going to be involved in project-based work and doing things that require longer-term involvement and commitment. You won’t just be doing your shifts and leaving."

While not without its challenges, an open-book management offers long-term benefits that are hide to deny — from increased job security to reduced cost of goods sold to higher rates of staff retention.

Related Article: What Servers Think of Alternative Restaurant Management Models

Employee Profit-Sharing

restaurant staff management models - employee profit-sharing

What Is It?

Profit-sharing (also known as revenue-sharing) is an incentive-based system in which staff receive payment — in addition to regular compensation and bonuses — depending on the restaurant’s profitability.

While not every restaurant that employs an open-book management model does profit-sharing, the two models often go hand-in-hand.

Juliet and Underdogs Restaurants’ Experience: Benefits and Philosophies

Juliet Restaurant, featured above, combines profit-sharing with open-book management, along with the gratuity-free model. Owner Josh Lewin told us, “Using open-book management and profit-sharing, we’re able to create incentives through alternative means. Everybody’s incentivized by the success of the restaurant because they play a direct role in it. The incentive in a traditional service environment is to sell as much as possible to each individual person because it’s literally your own money. What we're looking for is a more comprehensive view of what success looks like, what revenue growth looks like over time, and how our team can share the wealth.”

Using open-book management and profit-sharing, we’re able to create incentives through alternative means. Everybody’s incentivized by the success of the restaurant because they play a direct role in it.

Josh Lewin

Proprietor, Culinary and Creative Director at Juliet

The Juliet team believes that profit-sharing and open-book management lead to a more unified staff, with everyone working together toward better service, performance, and guest experience throughout the restaurant.

Underdogs Restaurants, also featured above, is currently only doing profit-sharing for employees in manager-level positions, but owner Doug Marschke, seeing the model’s benefits, is figuring out how to do it for all employees. He told us, “If we're not doing well or having a bad quarter, my employees know that it's going to have a financial impact on them. It inspires them to bring ideas that tie back to our open-book management model. It gets them thinking about things like ways we can save money on labor, reduce food waste, or new ways we can generate revenue. It’s amazing how many ideas will get spun out of all of that.”

Offering Health Insurance to Restaurant Staff

restaurant staff management models - offering health insurance

The State of Health Insurance in Restaurants

Currently, there are no federal or state laws mandating that small businesses in the restaurant industry provide health-related benefits — though the Affordable Care Act requires that all businesses with more than fifty employees offer some sort of health insurance plan. But in the face of industry-wide challenges with employee turnover, offering health insurance, while certainly with its hurdles, is a highly valuable tool for both recruitment and retention.

Barcito and Underdogs Restaurants’ Experience: Benefits, Challenges, and Philosophies

Andrea Borgen, featured above, provides health insurance to all full-time Barcito employees. She told us, “The turnover that you see at a place that offers more benefits versus one that offers basically nothing aside from what you can try and smash into your pocket by the end of the night is really significant. This is one of the tightest labor markets that we’ve ever seen, at least in the span of my career, and trying to attract and keep talent is really challenging. So you need to stack your deck with everything you can in order to be appealing and stand out.”

The turnover that you see at a place that offers more benefits versus one that offers basically nothing aside from what you can try and smash into your pocket by the end of the night is really significant.

Andrea Borgen

Owner, Barcito

Doug Marschke, also featured above, is a believer in the employee retention power of benefits like health insurance. He shared with us, “Hiring and training a new person takes a lot of effort. It’s a big time and financial investment. It takes time to train new people, but it also takes time for new people to become good at their job. The first thirty days are a whirlwind, and they may not really be up to par with the rest of the staff until sixty days in. This is all a huge investment. If you have to keep doing this over and over again, you’re losing thousands of dollars. That’s why we spend the money upfront on benefits like health insurance to help us retain employees.”

Related Resource: Finding, Hiring, and Managing Restaurant Staff

While 31% of restaurant professionals provide health insurance to their staff, according to respondents of the 2019 Restaurant Success Report, there are blockers to providing health insurance and benefits.

One challenge is employee turnover, which has reached an annual rate of 74.9% according to the Bureau of Labor Statistics 2019 Job Openings and Labor Turnover Survey. This challenge leaves restaurateurs at a crossroads: If a restaurant employee is unlikely to stick around for more than a few months, and insurance waiting periods can take up to ninety days, is investing in employee health benefits really worth it? Some owners and managers don’t think so, citing a lack of regulatory requirements and poor restaurant profit margins as justification.

Another hurdle in offering health insurance to restaurant employees is cost; health insurance is expensive to provide in a low-margin business. One way restaurateurs are offsetting some of the cost of health insurance is through a surcharge on guest bills. Marschke said, “Surcharges like these are pretty controversial, but they’re becoming more common. I know more restaurants are starting to do it. It's a few percentage points, like three and a half percent. But, honestly, that only covers one third of our bill. Because of our price point, we can't really raise our menu prices. We do tacos and burritos, not items that you can sell for $20. In a white tablecloth environment, I think you can hide a dollar or two into a menu item, and it won’t be a big deal. But for us to hide one or two dollars in a menu item would be a huge thing. So we do the surcharge and are very open with our customers about what it’s used for. It’s described on our menu and lets guests know that it only pays for a portion of the total cost of employee health insurance.”

Borgen doesn’t employ this surcharge method and instead takes on the full cost of employee health insurance. It’s challenging, but she believes it’s worth the cost. “It's not easy, and it's very expensive, especially for a small independent restaurant like us,” she said. “But I definitely think that it pays for itself in terms of employee loyalty and fostering the culture that we want out of our workplace. We see the impact in turnover and labor costs, and all those things start to add up. You can also talk all you want about taking care of your employees, but if there are no tangible benefits to them working there versus the place across the street, I think it’s just lip service.”

Related Article: The Ultimate Guide To Restaurant Employee Benefits

If you’re interested in providing your restaurant staff with health insurance and benefits, but don’t know which HMO to choose, consider using a platform like Health Care HQ, Stride Health, or others that are designed for restaurants. They provide users with a comprehensive suite of health care insurance programs that they can pick and choose from, with plans for small restaurants, large restaurants, and individuals.

Inclusive Hiring and Harassment Management

restaurant staff management models - inclusive hiring and harassment management

What Is It?

Homeroom is a renowned restaurant in Oakland, CA (specializing in mac and cheese) that has baked two key elements into its unique management model: inclusive hiring and harassment management. For Erin Wade, co-founder and CEO of Homeroom, it wasn’t enough to just open a restaurant that served world-class mac and cheese. She also wanted it to be a safe, enjoyable place to work for people from all walks of life.

Homeroom’s Story and Experience

Homeroom’s commitment to creating an inclusive restaurant environment starts with the hiring process. As Wade told us back in an April episode of The Garnish podcast, “We seek out people with diverse life experiences. And I'm not talking just in terms of race or gender. We also work with organizations that place refugees, we hire people who are formerly incarcerated, and former foster youth. We're really looking to have a company that's as diverse as [Oakland, CA], the city that we live in, which is one of the most diverse cities in America.”

Once a new employee is hired, they’re given a two-hour cultural orientation, run by Wade herself, to emphasize the company’s commitment to inclusion and to teach it as a core value. Wade said, “We talk about it, and we train for it, and then we really try to try to live it. I mean, more than 70% of our leadership team are women and people of color. We just feel like that's really important. We work in an industry where, honestly, women and people of color comprise most of who is in the lowest paid positions in the industry. But once you start going up that power ladder, you start seeing a lot less women, a lot less people of color. So we feel really committed to honestly just saying that that's important to us, so lots of different people raise their hands whenever we have leadership positions open up. We promote from within pretty much exclusively.”

restaurant staff management models - homeroom

Beyond actively promoting values like diversity, inclusivity, and empowerment, Homeroom has developed and utilizes a much lauded anti-harassment policy — one that Wade wrote about for an op-ed in The Washington Post.

After stories started cropping up from Homeroom’s servers about issues of harassment from customers, Wade give her team the agency to develop an anti-harassment system themselves. They decided on a color-coded system in which different types of customer behavior are categorized as yellow, orange or red:

  • Yellow refers to a creepy vibe or unsavory look.

  • Orange means comments with sexual undertones, such as certain compliments on a worker’s appearance.

  • Red signals overtly sexual comments or touching.

During a shift, the affected staff member reports the color to their manager — they don’t have to explain what happened right away. Wade said, “In the case of a yellow or an orange, the manager just goes in and takes over the table. And in the case of a red, the manager goes in, takes over the table, and asks the guests to leave.”

It’s an approach that cuts off harassment at the source, blocking it from escalating. “What's been so amazing is that we came up with it as a way of dealing with the problem, but what it's actually done is really help curb the problem,” explained Wade.

Implementing the system has shown a marked reduction in incidents of harassment in the restaurant. “When we first held that meeting, sadly, every woman had a red story,” said Wade. “Now, they're happening maybe once a year. It's really uncommon. And it's a really elegant system ‘cause it's super easy to use. It's not complicated. You can use it on the floor of a busy restaurant. And, most importantly, it doesn't rely on managerial judgment of ‘is this harassment/is this not.’”

She’s working on a training piece for other restaurateurs to help them get there. “We do just generally believe our staff, and the system is set up to do that. A lot of restaurants are not really based on a model of trust and transparency. But I want to get restaurants that maybe aren't based on that model to still use this, because I think it can make a huge change in our industry if more restaurants picked it up.”

A lot of restaurants are not really based on a model of trust and transparency. But I want to get restaurants that maybe aren't based on that model to still use this, because I think it can make a huge change in our industry if more restaurants picked it up.

Erin Wade

Co-Founder and CEO, Homeroom

Mission-Driven Community Advocacy

restaurant staff management models - mission-driven community advocacy

What Is It?

A mission-driven approach, accompanied by a dedication to community advocacy, is a different spin on the newer wave of restaurant management models. Sidewall Pizza Company, a Toast customer that currently has four locations in South Carolina, is a shining example of this approach.

Sidewall Pizza Company’s Story and Experience

Sidewall operates on a profit share model (not to be confused with profit-sharing). This means that, every time a customer dines with them, a portion of the proceeds are dedicated to the Sidewall Pizza Community Fund. According to the restaurant’s website, “The Sidewall Pizza Community, Fund is an ongoing fund from which we donate to individuals, families, and organizations in need in our area.”

restaurant staff management models - sidewall pizza

Laura Smith is the Director of Community Engagement and Special Events at Sidewall Pizza, and she’s been with the company since May 2018. She was brought on to focus on the restaurant’s community fund and donations, to help build relationships with the communities where they’re opening new restaurants, and to help develop partnerships with new nonprofits and the schools in the area. She tells us, “We’re always doing things for people in the community, giving back, and donating stuff. If you pop into a Sidewall, everybody is always so happy and also happy to do anything to help their guests.”

Sidewall Pizza’s dedication to giving back to its communities has had a strong impact on customer relationships, but it also helps create a more positive work environment for its team. Smith tells us, “I think our community work helps everybody at Sidewall feel like they're part of a good team that is doing more than just making pizza. They're helping their communities.”

I think our community work helps everybody at Sidewall feel like they're part of a good team that is doing more than just making pizza. They're helping their communities.

Laura Smith

Director of Community Engagement and Special Events, Sidewall Pizza Company

While not 100% quantifiable, Smith also believes that Sidewall’s mission-driven approach has had a positive impact on employee hiring and retention. She says, “This is my first restaurant-related job, but I'm always surprised to see how many people stay for as long as they do. You know, you think about the restaurant industry as a revolving door. People are always hopping from restaurant to restaurant. But there are a good number of people that have been here since Sidewall Pizza at Travelers Rest opened four years ago.”

Which Staff Management Model is Right for You? 

Choosing a staff management model is a big decision that can change the course of your restaurant forever, influencing employee hiring, engagement, and retention. Every restaurant is unique, but we hope the information and restaurant stories above leave you feeling more well-equipped to answer the question: Which staff management model is right for my restaurant?

What are your thoughts on the models covered above? Are you already using one or several? Are you using a new model not featured here? We’d love to hear from you. Share your thoughts with us on Twitter.

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