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13 September, 2022

How To Use Tips To Retain Employees With Kirk Grogan

In this episode, we talked to Kirk Grogan, the COO of Tiphaus. Kirk shared his experience in digital marketing and serving and discussed things that restaurant owners can do to better market their company online. Plus, we chatted about ways you can help your team increase their tips.

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Listen on Apple Podcasts https://open.spotify.com/episode/4fNPZ76UbQ5raSadyZDxaA Amazon Music https://podcasts.google.com/feed/aHR0cHM6Ly9mZWVkcy50cmFuc2lzdG9yLmZtL2xvY2FsYml0ZXM/episode/Njg0N2VkODItYzUwMi00MzRjLTk4M2YtMjliNzk1NTI5OGY0?sa=X&ved=0CAUQkfYCahcKEwjY35jSn5L6AhUAAAAAHQAAAAAQAQ

 

In this conversation, we covered:

About Tiphaus

Restaurant Tipping

Employee Retention

Digital Marketing: Social Media & Email For Restaurants

Last Advice For New Restaurant Owners

 

About Tiphaus

Let's start from the beginning. Tell me a little about your restaurant experience. Did you have any restaurant or restaurant tech experience prior to Tiphaus?

The hospitality industry has been a recurring theme in my life. I've really enjoyed the opportunity to be in the hospitality industry.

In high school, I was serving at the major chain, Chilli's. That was my first real job. I started there at 16 as a host and started serving at 18.

I managed a wine bar throughout college to help pay for school, and then right when I moved to Seattle from Texas, my first job was managing a wine bar up here. I was 24 and broke, looking for an easy job to make some money. Restaurant opportunities always offered that.

 

Why did you join Tiphaus?

I moved to Seattle mostly to get involved in the tech culture up here. So when I moved here I was doing some consulting work and small projects for some tech companies.

Eventually, I found my way into a director role at a large consulting firm here in downtown Seattle, where I was working on conversion rate optimization. We worked with a lot of large Fortune 500 companies, working on specific projects, basically the digital conversion of them. Basically, how do you take people in an online world and make them take the action you want?

It was a great project and a great learning curve. This was also at a time when now this seems standard to all companies, but back in 2012-2013, it wasn't as prevalent. There weren't as many software or tools available. That's really kind of what started that whole role for me.

Then from there, I've always been entrepreneurially spirited, and the current CEO of Tiphaus and I had done some work previously. He launched a couple of companies previously on the smaller side, and he wanted to take a real stab at it. He was a restaurant consultant for a couple of large groups up here in Seattle.

The one thing he couldn't solve was tip distribution and how you move tips amongst servers within your restaurant. How do you make sure the back of the house is properly allocated the money that they've earned, and then as far as your major tip earners,  what do they keep and what amount of money they transfer?

I started working with him briefly on that. I was not a true Co-founder, although they list me as an honorary co-founder since I started chatting with them at the beginning. But it's about two months after their launch when they had to decide to make this a part-time project, a weekend project and keep our full-time jobs, or do we exit those jobs to really make an entire run at this tech company? And they did.

They chose that they wanted to exit their full-time jobs. I joined right on board with them right at that same time. We all kind of left our day jobs and the safety net behind us and moved straight into Tiphaus. 

Not two months later it was when the thick of COVID started happening. So it's an interesting beginning for this company. 

 

Can you take me through what COVID was like for Tiphaus?

I don't know if I could relive the exact emotions because they were darker times, certainly some despair in there with it. There are two technical co-founders, my CEO, and I and we're all kind of here together with it. Everyone had quite well-off jobs. I think we were relatively cushy. We were by no means wealthy but we were doing just fine and living well. So moving into a start-up, we knew we were going to be going through savings for a bit. We weren't taking a salary, and we all agreed to that. We knew that risk going in. What we did not expect was to extend that time frame by over a year and a half.

We caught some early traction. We had two beta customers that we kind of built the software in-house with them here in Seattle. And then as we started to expand we saw some early traction. They had referrals of restaurants. They said "hey, you got to check this out. You should try Tiphaus." So we quickly grew. We grew to about 60 or 70 restaurants using our software.

And then, that very brief first quarter, let's say March 2020 kind of came around, and everything shut down. No one knew what was going on and that was what made it so unique. Looking back in hindsight, there could have been some great decision-making at the time, and I think we actually made some good decisions. We certainly made our fair share of mistakes as well.

But what we realized was no restaurant wanted to buy software at that time. It makes sense because most restaurants weren't even allowed to keep their doors open. It felt bad to even ask, and try to make that sale. 

So what we did, was we decided we were going to do two things. We were going to stop charging our existing customers because they could not keep their doors open. If you're not allowed to sell food and pay for the bills Tiphaus, we shouldn't be charging you. We immediately paused all billing and then doubled down on the idea that we were going to focus on the product. We were going to collect a lot of feedback during this time. We were gonna understand what restaurants out there needed, what was going to make their lives easier, and then we were going to really get to work on that side of things. 

It was a great idea, and I think we executed it fairly well. The caveat to all of it was we had no idea what the timeline was, and so there was a moment, as we got into January of 2021, ten months after COVID started. A lot of restaurants still weren't up to full speed—if they were open at all—and we discussed if this was going to be something that we could carry forward, or if this was going to go on for the next three years. If so we needed to walk away.

We ultimately had that final chat with each other. We were going to give this another 3 months, and if we could not up the sales if we could not find some solid restaurants out there, really find that use case and build that value proposition.

Thankfully, looking at it from now, we certainly did. COVID kind of lightened up a little bit, and the government came in with lighter restrictions. Restaurants found ways to be adaptive and to really overcome those hurdles. Now we've all grown together over the last year and a half.

 

Restaurant Tipping

How did you figure out how to solve that restaurant's pain point?

I think the main point we try to solve is always dependent on each customer. We really value customer feedback, directly one fo the things we believe in is we will help any restaurant at any time with anything that's in our wheelhouse.

You do not have to be a customer. You don't even have to have the ability to be a customer if you use a completely unique technology stack that we can't integrate with.

Anything like that, we just love knowing the restaurant space. Every one of our founders has worked in that space. A lot of us were in that not too long before we came on to Tiphaus itself. So we really value even getting to know that day-to-day life. The pains, the struggles, and the wins.

As for our direction, what we do solve, what's the pain point that we are most sought after, it really comes down to calculating tips is a nightmare for most restaurant managers. The more tips, the more employees, the more square footage you have, and the more of a nightmare that is for you. 

Whatever the end result looks like, it is going to take a lot of time and money to run things through an Excel sheet to understand how tips should be allocated, and who should be most appropriately rewarded, and ever larger hassle to adjust that tip structure which is certainly needed in today's time. When you look at the turnover of restaurants, when you look at retention and employing staff, it's really hard to be able to find a system that you're able to quickly tweak and adjust to most fairly reward the employees that need it, and be able to keep that retention.

Tiphaus is completely automated so that our real pain point element as we integrate with the point of sale, and we will plug in your tip rules, your logic, however, you want that to be--a simple pool where we want everyone to come in together and they all take equal shares, or it can be as complex as servers tipping out on alcohol sales to bartenders during a number of hours based on the minutes they worked which cheques were open. That is, we can get from the simplest of all tip pools to the most complex scenarios but all that to say it's a tremendous about of time and headache, and really, our big element is transparency.

This is something I knew from being a server and a bartender, but when cash started dying and COVID, of course, accelerated it, and cash is basically out of the picture—that means restaurants really no longer have cash on hand. They don't get it from their guests, so either they have to make bank runs, or you'll see in the real large organizations out there able to schedule armoured truck deliveries and things that are logistically too complicated for most restaurants out there.

So we started seeing servers go two weeks without actually getting their tips.

They'll go on your paycheque, but as you can imagine, they earn 200 dollars today, 150 dollars tomorrow, and then when their pay cheque comes in, they have to go through and figure out, "Okay, is this accurate?" Knowing that they should have been tipping out 3% to the bartender this day, and 1% to the host, and 0.5% to the busser in the bar back. All of this math really leads to a lot of discretionary issues between managers and employees, and what that looks like is nobody has truth or transparency in reporting.

Managers don't understand their Excel sheet because the manager before them built that out. They may no longer be with the company. Then the employees of course don't have the full picture. They only see their tips and what they actually make from their tips. So you leave this giant vague gap for a lot of people, and that's really one of the values that we try to bring in.

There are obvious pain points of time and money, but I think transparency, and bringing that full house together is kind of our major goal.

 

What's the average per-hour tip rate? Is that similar across the board?

It varies tremendously. We work with everything from coffee shops and quick-service restaurants to high-end fine dining, full-service restaurants, and full of bars at the upper end.

You can see people making six figures on tips and that's not a shock to many people out there in the world. When I used to work back in high school, I was not making that because I was in high school. But some of the career servers at that location were making $150,000 in a year working four days.

So there are those opportunities and I think as long as we're honest about what's the average ticket price, what that looks like, and how much support you are giving the service staff, that's really where values can increase. If servers have longer to engage with that table; if they can increase that dessert bill at the end; if they can sell and upsell one extra drink; if they can build that personal relationship they are naturally going to have higher tips. Any of that support level information you can get these tables, and these service staff, you really give them an opportunity to increase those tips.

Just general numbers, looking over it, I'd say on average we look at about $10-$15 dollars an hour for middle-of-the-road full-service restaurants. These are not going to be highly dialled-in operational franchises. These are generally one to five units. But that's about where they will land.

Bartenders typically track just above that in the $20-$30 dollars an hour.

And then we highly encourage, and I think most restaurants are kind of seeing this pivot of making sure you're bringing in back of house and the supporting staff who really lead to a great guest experience. Let them have some of that tip value. There can be small amounts you can do. Tip out a percentage of sales, you can do tip pools, and you can weight your employees slightly differently on points systems or you can even just do "flat 3% of tips will go back to a support staff for a pool." All of those are valuable, but I think we often underestimate the value support staff brings to a great customer experience. 

The server and the bartender obviously they're face to face. They're building the report. They're building that relationship. But having busters be able to run things for you, having a barback who's gone above and beyond. All of these elements indirectly lead to a great customer experience because now we're allowing those people who do engage with the guest more of that engagement. They can be a little lighter-hearted, have less side work to do on the back, and less buss work. They really get more face time and are able to pay more attention. 

 

What about coffee shops and quick service restaurants?
Interestingly enough, coffee shops can be one of our largest variances. On the smaller end, we typically see a minimum of $3-$5 per hour in tips. That can really be determined by how many options you are giving this customer. If you have an online app, can they tip through that? Can they tip in cash only? Can they tip by credit card? Can they do it easily?

I think that something people often get is on drive thrust it can be a little clunky to pass a clipboard back and forth when you're just trying to get in and out. I would say $3-$5 minimum. And that's on a menu where it's pretty hard to tip all the way up. $20 an hour is not unheard of, or even that uncommon. It's really high through well-located coffee stands and quick service in general.

I think really just paying attention to them is always going to be the debate of whether we should allow tipping at this location, is this going to be just part of the guest experience? Is that going to be off-putting? Generally, as long as I think you implement it in a way that it's not expected, it's a bonus, "Hey you had a great experience here."

If you encourage that you can see that you'll get $2-$3 dollars an hour minimum going extra either to support staff, to the people directly behind the counter, or whatever that looks like. At the end of the day, that's serious money on their cheque each month. An extra $400-$500 dollars really move the needle as far as your employee retention and how you stack up against your local competition in your market. 

 

How can restaurants benefit from getting their tips higher or more consistent?

I think that's a major thing that a lot of restaurants don't pay enough attention to. They all certainly track it but I think really driving in the idea that if you can increase the tips that your guests are leaving for employees by $2/jour, you're making what—a $4000 annual increase to their annual salary. That's not chump change. That's real money that we need to focus on.

 

Do smaller tip presets in your PIN pads increase tips at quick service restaurants?

Absolutely. I think you're spot on. We're seeing this trend, and so this is something obviously we track closely. The press goes out, new coverage, and just overall dining guest perceptions of tipping and what that looks like. I love that approach. We try to encourage several restaurants to adopt that and I think exactly to your later point, it really comes down to what was the level of service you received.

Were they running drinks for you? Were you having several glasses of wine? Did you have a bottle of wine you opened at your table? What did all of that look like? When you come down to the simpler quicker touch points where it's 3-5 minutes at most, I think a lower percentage of tips absolutely leads to increased tips.

I will throw out a caveat that I see, and some of the hatred out there for some of these restaurants that are charging 25%-35%, some of the frustrations that go around I think are not necessarily on their end. They are pre-programmed tip amounts in a lot of the point of sales out there. I think several of the managers say "Hey, activating tips, that sounds like a great idea!" and they never think to go through and see what those opinions are or realize you can adjust them.

I do love that idea and I think more and more restaurants will be adopting that. Because I think that's a fair way to go about it. If my options are to tip 0% or 25% on a quick service engagement, and it was a quick interaction where there wasn't much report or happiness to it on either front then why am I going to? You didn't go above and beyond to tip 25% here.

And usually, I'll do it, I enjoy the space, we work in that space, and try to support it. But I think 3% to 5%, 8% even up to 10% is more likely to get a tip.

It comes down to the level of interaction your guests are going to have with your staff. Play it off of what's a reasonable amount that you could see on that front. Because looking at the numbers, if you're doing $100,000 in sales a month and you're getting $3000 additional on tips, on just the 3%, just your lowest barrier entry there that's outstanding to be able to re-deploy that to your staff. 

That's hundreds of dollars a month that you're able to redeploy on these smaller restaurants, smaller footprints, smaller staff counts. That money is going to really go a long way. And I love that idea.

 

Employee Retention

How are you seeing that transparency help restaurants keep their staff around longer?

That's a great question. I would say unequivocally it's been a win across the board. We have a free mobile employee app that is basically just your financials. If they serve, then the bartender you see your total sales, your tips, and how much you've paid out to other people. But it completely removes that veil or that food that you don't know what's going on. 

Harvard Business Review put out a great study showing employee transparency, and a highly trusted and transparent workplace will enjoy 78% longer tenure, 50% more trust, 22% more work productivity, and all this fun stuff. But really, what it comes down to is everybody wants to work at a place they understand "the hours and the work that I put in right now translate to x." If you remove that x, or if that isn't obviously visible to them, you lose a lot of that trust, that motivation. Why do I want to go to work where I don't know what the results will be from that work?

Should I work harder today? Should I be lazy today? What does that look like? If you don't have a direct comparison, you don't see that it can be really difficult. To your exact point, we see a lot of restaurants and speak with a lot of them that are having trouble with staffing elements. That's one of the largest reasons people will reach out to us.

So realistically for worker shortage, what I've seen that's effective that restaurants are doing, is paying attention to your opening hours. A lot of times we're spreading staff too thin, and if you see that on the tail ends of this bell curve, let's call it, of the day, if you're not having a ton of sales, consider shortening those service hours, those working hours. Right there it's effective.

We've seen doubling down on your existing employees. There's no value you can put on those existing employees who already know your regulars, who know your menus in and out, who are the lifeblood of your system, who pick up the cleaning slack, the rolling silverware, all of these things. Because I want to see that run well.

So often, we see managers focusing on bringing in new talent, and I know that is critical, and I know we always have to keep the hopper full-on front, but really, don't forget that the people that are there are your rock stars today.

They understand everything and how your system works. They help out your new employees that keep people training up. They keep morale high. So making sure that you're chatting with those employees, that you're performing interviews with them, and taking honest and candid feedback.

What is it that those employees really love about working at your restaurant? What are their pain points? What is their hustle? What are they dealing with? As a manager, you won't always be able to solve those of course, but if you can find and at least just hear your employees out, they'll feel more validated. They'll know that at least their concerns are justified.

You want them bringing those up. Maybe you two can work together to kind of bring those out and bring them forward.

 

What are the other mistakes that you've seen that people make? What other successes like putting employees first in the restaurant have you seen?

To build off of your statement, the obvious element is offering these new incentives to employees without recognizing the value of you're existing employees. Everyone could agree if you're in that spot, that's frustrating right? I've been with you for years, I've been working hard through this year, probably been through COVID together, and you're telling me that a brand new employee is worth more to you than I am? When I'm obviously contributing more. I know the system, I know the point of sale, and I lead to greater guest satisfaction. 

So that's an absolutely great point. I think that is spot on with that assumption and that analysis of it.

I think something I've seen work well, and actually, potentially work poorly that lines up directly with that is employee referral programs. The trick here is making sure they benefit both parties. I see a lot of times that exact point. It may not be a higher salary, it's just a bonus for signing right now. Well, offer that bonus to both sides, your employees most likely know great staff members. 

I'll give a great example. We work with a fantastic chain out east, a franchise group called Dog Haus—one of the fastest growing franchises in the US—and they have a young staff, with a young owner at one of their franchises. They are smashing sales goals for their company, and across their franchise.

What that looked like was, that they instituted the idea of tip sharing being able to give your employees all the same amount of money. No new staff, no new individual element there but they just asked their individual staff "Hey, if you know someone who is a great candidate to work here please go let them know, and we'll reward you both equally."

What they've seen is that they've lowered turnover, that all their staff is happy at the franchise, and the corporate office stepped in and got to witness. They said "Hey, this is one of the smoothest and best functioning restaurants we've ever seen. What's your secret?"

And they said to the exact point, we put our employees first. We reward everyone equally. If you're bringing something to the table or bringing another employee that you know, and they come in and do a great job, we'll bonus you both for that. So that's encouraged all their staff to go out and find their friends who they really think are reliable candidates who would be a great fit for this role. They all benefit together. You work together with people you already know. There are unbelievable mutual benefits if you can find a referral program that benefits both parties. That's the trick—not just benefiting or incentivizing those new staff but making sure all staff kind of benefits together. Those who participate.

Additionally, I think technology is your friend to a degree. I'd say that several restaurants out there really implementing it quite well. There is obviously technology you all know of course at Craver that really benefits the restaurant and can help your staff. And then I think there are times where restaurant operators are kind of bringing in technology that they don't vet and they themselves don't ever try to use. They tell their staff "Hey, learn this technology." But what you've just done is added to their workload without showing them the upsides of it. Why do I want to benefit from this technology? How does this make my life as a server easier when I know that I can go give better services and talk to my guest more to increase my cheque sizes? That seems like a better use of my time.

When you're bringing in new technology, when you're working on that technology, make sure you're painting a win-win scenario. How does your staff benefit from that? How do you benefit from that? And what's the long-term play?

I always think getting in the trenches and learning a little bit about that technology yourself really pays dividends on the back side of that.

 

Digital Marketing: Social Media & Email For Restaurants

Back to your background on the digital marketing side of things. Your experience was in how to make people take action from digital interaction. What advice do you have for restaurants?

The core of anything marketing and sales in general usually will go hand in hand, no matter whether you're doing something online or in-person. There are a lot of themes that run across them all together, but if we look at it in this case, conversion of an online piece still applies very much even though they may not be buying it online. We may not be going through an app, we may not be making the transaction, the conversion online.

Having an online presence that allows that customer to break the plane of your restaurant. They step their foot through the door, and now they are inside ready to presumably spend money and enjoy your experience.

We can start looking at it from that standpoint. It's going to sound very close, but I think a lot of people really overlook the idea of a brand identity for your restaurant.

What are you actually known for? Are you a family fun place? Are you a place where people like to hang out in a neighbourhood bar to watch the games? Everyone has an idea as a restaurant operator and owner of what they want to be. You want to be a Cheers bar, or you want to be the big new nightclub that kind of transitions into a brunch spot on Sundays.

All of that is great, but how are you invoking that? How are you living that day to day? It goes from training your staff on how they speak to what your customer engagement should be, to how you're getting involved in the community et cetera.  

Make sure you know what you're wanting to go for. Too often, we have a quick idea, the restaurant gets launched, and then we just let ourselves drift into whatever lane the community pushes us into, as opposed to us trying to define that lane or keep those parameters up.

Outside of that, I think there are two major elements we want to pay attention to:

  • Make sure you have a searchable and usable presence online.
  • And make sure we're using our social media opportunities and our emails effectively to drive those customers in.

I ΩA couple of examples, you know, running socials and making sure of what that looks like on the back end of it. Sending emails, are generally very easy, with very low time commitments and cheap or free opportunities. You do not have to have a professional social media manager.

Generally, someone on your staff—the service industry generally skews young—someone is going to be better at social media than you as the manager. Just have a conversation with them, it could be a few extra dollars a week on that, it could be an extra perk, a bonus. It could be picking your shifts. But most of the time those are going to be fairly quick items that they're going to have a good eye for.

You can always get that rocking and rolling. You can use tools out there, software to schedule things if you're really going to advance it, that you want to pay attention to. There's Hootsuite, Loomly, there's a bunch of different software out there you could use.

Then email a similar thing. I think we often get against email. But they've signed up for us, they've dined with us before. They're looking to dine again. They kind of all get lumped into the same category of "Hey, we're just going to send everyone who's ever been on our email list the same email. We don't care if they opened the email previously. We don't care if they've dined once with us or 600 times with us. They're all going to receive the same elements.

So the end result I would love to see is that everybody is segmented into their own category. We've got funnels and tools of communication. We have methods to reach these people slightly different than others.

We don't have to start at the end. We can work our way there. A good segment right at the beginning is guests that have dined with you once, and guests that have dined with you more than once. Because, how you speak to those people is very different. Right after your first experience, you need to understand if was it a great experience. Was it not what would make you come back? What did you have? How did you like it? With all these questions you're still building that relationship. With the dating analogy, you've just had your very first date. Are you going to get together and see each other on another date?

Whereas if you go to this restaurant three times a week, it's your regular. I should not communicate with you the same as the first time a customer walks in. So simple segmentations at the beginning. There's always an end going in mind. 

So many people get frustrated, intimidated, and scared. If I can't make it all the way and don't have time to write 16 different emails for 16 different groups, then you start with two and see what happens from there. If you see that working you can continue to branch out and you may find a sweet spot. You may only need 2 to 3 segments. If that's all you need for it then you're going to have a great experience with it. 

And lastly, the earlier piece that I mentioned, searchable and usable presence, oh my goodness this is important! Never going to be more important than it is every new day. We are not sliding away from the digital era. We are embracing and running full force into it.

So understanding the baseline of being listed on Google, and having Google reviews available. Make sure your presentation looks good, your opening hours are accurate, and your photos look high quality. Those are not overly complicated. You can get it all banked out in a couple of hours. But, it does need a little bit of planning. Then, of course, any of the other review sites out there, I think Yelp, Zomato, there's a bunch out there that are always great to have, but Google is a must. 50% of people that are looking at Google are looking for someplace physically related, and generally, that's where restaurant searchers are going to start for your first-time or second-time customers. They're looking at that. As they become a favourite, they'll use that source less but you need to always be driving in new sources of revenue.

I think a major component that people really botch and don't pay enough attention to is the fact that yes, you make your money with people being there in person, generally. However, so much of the decision criteria for quests on where they are going to go starts online. You never see that. You never got to interact with it. So it's easy to overlook. But that is such an important piece. 

 

Last Advice For New Restaurant Owners

What piece of advice do you have for someone that wants to start their own restaurant?

It's not for the faint of heart, and it's a tough spot to be in now. You got to be passionate, and you've got to love it. You really have to want to contribute and commit to that local community.

An overarching piece of advice, secondary to that, is to find a lane and keep things as simple as possible. You can have a complex menu while still being simple with ingredients. You can make sure you're not overcomplicating, you're not trying to solve every problem at once, and you're not trying to find multiple things to bring in. Find a lane and establish yourself.

Look at the top performing restaurants out there today from quick service to full service. Most of them are fairly simplified and have one exact direction. Chick-fil-A is the obvious answer of what they've done with chicken is remarkable in their growth. But there are so many examples out there where you don't need to make everyone in the world happy. You need to find a small base that you can continually make happy. They will come back to you time and time again.

 

Picture of Amin Yazdani
Written By: 

Amin Yazdani is the CEO and Co-Founder of Craver, a fast-growing mobile platform for Restaurants, helping them gain and retains their loyal customer base.

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