Joe's Crab Shack becomes first major restaurant chain to implement no-tipping policy

FOX 32's Dane Placko contributed to this report.

FOX News - Joe’s Crab Shack seafood chain is following in the footsteps of other restaurants, such as Danny Meyer's Union Square Hospitality Group, and dropping tips for servers.

"I was just a little bit surprised. It's something I haven't experienced in Chicago to be honest," said customer Katie Anderson.

Wages will be raised and begin at $14 an hour, but pay will vary based on each server's past performance, according to Restaurant Business. To offset the wage increase, the company is implementing a 12 percent to 15 percent increase to the restaurant’s menu.

In a statement, the company's CEO says: "We believe that consistently great service should always be included in the menu price.... I personally believe tipping is an antiquated model."

Restaurant analyst Mike Murphy says it could be a growing trend.

"Remember also there have been a lot of lawsuits against restaurant owners, class action lawsuits by people claiming to be underpaid because if a person works over 40 hours, they need to not only get minimum wage salary, but then they need to be paid overtime," said Murphy.

Joe's Crab Shack parent company, Ignite Restaurant Group --which also owns sports bar Brick House, began testing the no tipping this concept at select locations in August. The restaurant is now applying the policy to all of its 113 locations.

“We’re really leading in our industry with regards to national brand going out and testing this thing in a meaningful way,” Ignite CEO Ray Blanchette told investors last week. “So we want to be somewhat cautious.”

The no-tipping policy is also in effect at several New York restaurants owned by Danny Meyer, who's the founder of Shake Shack. He says it allows them to pay employees what they think they're worth.

"We get to determine what everybody's revenue, what everybody's income is. on a merit basis, do you know that every single waiter makes the same adjusted minimum wage whether they're good or not?" Meyer said.

But customers FOX 32 talked to that were leaving Joe's Crab Shack say they like having the discretion of tipping well, or poorly, depending on the service.

"We're like we want to give tips, kind of feel bad not giving them a tip. And then on the other hand it was nice that it's your final bill," one person said.

"I like to tip. I think tipping, that's the American way. I think it should just be left alone," another said.

Last month, New York restaurateur Danny Meyer, the CEO of the Union Square Hospitality Group, told Fox Business Network that tipping "has lost any value it had" and was dropping the practice and his restaurants including Union Square Cafe and Gramercy Tavern.

Any tips that are left will be given to charity.

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