Saturday, June 23, 2007

Reason #42 I won't open a Restaurant

I've often thought it would be exciting to open a restaurant. At one point I looked at it very closely. I'm sooo glad I didn't get into that business. has a poster's story about "questionable tipping practices" at a restaurant they work for. Here's the story:
I've been there a week since it opened (mid-april) All of our tips are given to us in a paycheck after we submit all our paperwork AND cash tips to the finance office. This wouldn't be a huge issue however, the tip out procedure changes week to week. I never know what I'm actually making. Legal? yes no? Secondly, which I found out today, on all of our large party events we are charging a 22% service charge. However, a staggering 7 percent is given to the house. Is this legal?
This question reflects such an obvious misunderstanding of how businesses work that it's mind numbing.

First, just because you get a cash tip doesn't mean you don't have to pay taxes. It's income. Putting it in your pocket and taking it home without declaring it is tax evasion. If you don't pay your taxes on it, the IRS will come after your employer for not withholding enough. Worse yet for the employer, they still have to pay FICA, worker's comp, and Social Security on your tips. When you add it all up, about 10% of what you make comes out of the employer's pocket as additional tax. So the employer can hardly be blamed for trying to have an accurate accounting of what their employees are receiving in tips. And yes, I would expect a new business to change its procedures for a while until they get all the kinks worked out.

You're only getting 15% on large parties when the company charges 22%? What's your problem? 15% is customary for large parties. Sounds like a pretty good deal to me. What a shame that you'll actually have to pay taxes on it like the rest of us.

This just reinforces for me my theory that it's much better to be a customer at a restaurant than an owner.

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