With a mission to inform, empower, celebrate and advocate for British Columbia's current and aspiring business leaders, BCBusiness go behind the headlines and bring readers face to face with the key issues and people driving business in B.C.
Issue link: http://digital.canadawide.com/i/364562
54 BCBusiness September 2014 At the age of 53, he figured there had to be other ways for him to help people without destroying himself. "We didn't have a lot of money," he says, "but my mom nurtured our family with food. I knew that could be the basis of a business philosophy." He started scouring the classifieds, and in November 2013, found a turn- key lease on a restaurant inside the Pacific Shores resort in Parksville, B.C. (He'd vacationed there the previous August and was already familiar with the area.) But while he loved the resort, the restaurant's location wasn't ideal. "There are two kinds of restaurants you don't want—one that's connected to a hotel, and one that's a destination restaurant," says Jones. "It's a beautiful location, a great view of the ocean, but signage is poor. As for the 150,000 tour- ists a month in the summer, we're not getting them from driving by." Jones's plan was to create a value- filled menu that would draw tourists and locals alike. "Coming from the Los Angeles area, I felt that 90 per cent of the restaurants I tried on Vancouver Island disappointed me in price, qual- ity and quantity," says Jones. "This was the opportunity to put my money where my mouth was." But while dropping his daughter off at preschool one day, he heard a fateful interview on CBC radio that changed his plans: Bruce McAd- ams, a professor from the University of Guelph's Hospitality and Tourism Management program, was chatting on CBC's The Current about tipping culture and no-tip restaurants—describing a cul- ture that resulted in great pay inequities between front and back of house. That system, he explained, was due for an overhaul. The interview had planted a seed. Jones got home, Googled "no tip- ping Canada," and discovered that he couldn't bring up a single hit for a Cana- dian restaurant that followed that sys- tem. He knew he'd hit on something big: a concept that could both create some buzz for his new restaurant, Smoke 'N Water, while challenging an established system that might be in need of a big fix—the perfect fit for someone used to taking care of others for a living. The restaurant business is a $10.3-billion industry in B.C., accord- ing to industry association Restaurants Canada, employing more than 170,000 British Columbians. The typical pay model is almost universal: so long as the restaurant serves alcohol, wait staff is paid a basic server's wage (cur- rently $9 an hour in B.C., versus $10.25 standard minimum wage). The rest of their income is supplemented by the customer in the form of a tip on their bill—though they don't keep all of it. If a customer tips 15 per cent, typically two to six per cent is "tipped out" to cooks, dishwashers, hostesses, and in about a third of restaurants, managers (though the latter has its controversy). It's a system that's been a part of North American culture for as long as most of us can remember. The underly- ing assumption is that the incentive of a good tip will result in better customer service—and conversely, good service will encourage generous returning cus- tomers, padding the bottom line of res- taurant and server alike. But Bruce McAdams—the prof that inspired David Jones to rethink his business plan—believes that the tipping model is fraught with problems, the most significant for restaurateurs being the financial uncertainty it creates. "By allowing tipping, restaurant owners are giving away the decision on how 15 per cent of their revenue is distributed," "By allowing tipping, restaurant owners are giving away the decision on how 15 per cent of their revenue is distributed. If I'm going to spend $100 and I know I'm going to tip 15 per cent, then I'm willing to spend $115 on this product. We can't find any other instances of industries where the consumer is allowed to determine where such a high percentage of revenue goes" —Bruce McAdams, University of Guelph professor