Hyperbolic Perceptions of Black-White Tipping Differences

Jar_for_tips_at_a_restaurant_in_New_JerseyDr. Zachary Brewster and Dr. Gerald Roman Nowak III of Wayne State University recently published an article in Cornell Hospitality Quarterly, which is entitled “Racial Prejudices, Racialized Workplaces, and Restaurant Servers’ Hyperbolic Perceptions of Black-White Tipping Differences.” We are pleased to welcome him as a contributor and excited to announce that the findings will be free to access on our site for a limited time. Below Dr. Brewster reveals the inspiration behind the research, as well as additional information not included in the final publication.

cqx .jpgWhile a fair and growing number of studies have observed statistically significant Black-White differences in tipping, the size of the estimated difference has varied greatly across studies. As such, it is not readily clear how much less Black customers on average actually tip their servers when compared to Whites. Further, there have been no studies published that have seriously interrogated the accuracy of servers’ perceptions of the Black-White tipping differential.  In fact, the existence of a Black-White difference in tipping is often taken as prima facie evidence that servers’ perceptions are generally accurate. Moreover, studies that aim to identify and test for individual and/or environmental factors that encourage the development and sustainment of exaggerated perceptions of Black-White tipping differences are lacking. These shortcoming in the literature on interracial differences in tipping motivated us to pursue this particular piece of research.

More generally, we were motivated to advance this line of inquiry because of the many implications surrounding servers’ perceptions of interracial differences in tipping practices—not the least of which is the threat that such differences pose to customer service. The majority of times that Black consumers visit a full-service restaurant they are likely to receive good service. However, when this is not the case, when Black customers are given a level of service that is less than should reasonably be expected, or even outright poor, it will inevitably sometimes stem from servers’ negativity towards these customers’ tipping practices. To curtail this threat to Blacks’ dining experiences scholars have advocated for initiatives that aim to increase Black Americans’ awareness and adherence to the U.S. norm prescribing that customers leave a tip that is equivalent to 15% – 20% of their bill if the service was acceptable. If Black Americans were as familiar with the 15% – 20% tipping norm as Whites, racial tipping differences would logically be attenuated.

However, our findings indicate that any initiative that is intended to curtail race-based customer service will necessarily have to be targeted towards changing servers’ perceptions as much as, if not more than, changing consumers’ tipping behaviors.  For instance, while a Black-White tipping difference does appear to exist (as a percentage of the bill we estimate the difference to be about 3.3 percentage points) our results underscore a segment of the population of restaurant servers who cognitively exaggerate the magnitude of this difference. Racially prejudiced servers as well as those who work in racialized workplaces are, in particular, likely to overstate the difference between Black and White customers’ actual tipping practices. Thus, to curtail the industry challenges that stem from Black-White tipping differences (e.g., service discrimination, lawsuits, etc.) we encourage restaurant operators to devise strategies to attenuate the individual and environmental manifestations of the racial prejudice that underpins servers’ stereotypic perceptions of Black customers’ tipping behaviors.

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Tip Jar photo attributed to Free-Photo (CC)

 

The Impact of FSMA on Restaurants

restaurant-2623071_1920[We’re pleased to welcome author Mark Johnson of Michigan State University. He recently published an article in Cornell Hospitality Quarterly entitled “An End User Perspective: The Impact of FSMA on Restaurants,” which is currently free to read for a limited time. Below, Dr. Johnson talks about the background of this research:]

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On January 4, 2011, President Obama signed into law the Food Safety Modernization Act (FSMA or P.L. 111-353). This act may be the most far-reaching food safety legislation since the Food, Drug and Cosmetics Act of 1938 (FDCA). FSMA aims to ensure that the U.S. food supply is safe by shifting the focus of regulation from contamination response to prevention. This legislation imposes administrative costs on the food supply chain in the U.S. by requiring additional record keeping and safety procedures.

The law created record keeping requirements for firms. These requirements are often referred to as one-up-one-down. This nickname emphasizes the fact that the act requires grocers, wholesalers, and food processors to keep track of the immediate parties that they buy food and food products from as well as the parties that they sell food and food products too. This ensures that any contamination problems in the U.S. food supply chain can quickly and efficiently be traced to its source and aid in the rapid response to foodborne illness before it becomes widespread. The Congressional Budget office (August 12, 2010) estimated that FSMA would directly cost taxpayers $1.4 Billion through federal administrative costs. However, attempts to measure the costs imposed on businesses by the legislation were largely ignored until we reported, in a previous study, that expected costs to food processors, wholesalers and grocers was approximately 10% of equity value (Johnson and Lawson 2016). This represented a market value cost of $33 Billion. This previous result encouraged me to consider that others in the food supply chain, end users, such as consumers and restaurants may bear some of these supply chain costs.

The surprising evidence from my current article indicates that restaurants lost approximately 5% of firm value. In this case of restaurants this represents approximately 7.5 billion dollars of lost value. These equity costs represent expected future cash flow and risk effects for the firms studied. These costs, 1.4+33+7.5= $42B, should be weighed against the potential benefits to consumers that the act brings. These benefits may be directly measurable in a potential drop in food borne illness cases over the next 5-10 years as the act is fully implemented.

Previous article:
The Impact of the Food Safety and Modernization Act on Firm Value,” M. Johnson and T. Lawson, Agricultural Finance Review, 2016, 76(2): 233-245.
Current article:
An End User Perspective: The Impact of FSMA on Restaurants,” M. Johnson, Cornell Hospitality Quarterly, Forthcoming

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Kitchen photo attributed to StockSnap. (CC)

Should Restaurants Offer “Early-Bird” or “Night-Owl” Specials?

vine-glass-1208604-mDiners who avoid the dinner rush at restaurants can’t seem to catch a break. In the 90’s, Jerry Seinfield made fun of senior citizens who took advantage of early-bird specials while Jack in the Box’s current late-night meal promotion, “the munchie box,” lampoons college-aged males. But are early-bird and night-owl specials even effective for increasing a restaurant’s revenue? Gary M. Thompson of Cornell University recently explored this topic in his article “Deciding Whether to Offer ‘Early-Bird’ or ‘Night-Owl’ Specials in Restaurants: A Cross-Functional View” from Journal of Service Research.

The abstract:

In a long history of capacity and demand management research in services, it has often been suggested that pricing discounts and specials can increase demand in off-peak periods. We 02JSR13_Covers.inddexamine this issue in the contexts of restaurants, where the practices of offering discounts to restaurant patrons for dining early or dining late—commonly known as “early-bird” and “night-owl” specials, respectively—exist throughout the world. These specials bridge marketing and operations—marketing from the goal of increasing customer demand in the off-peak periods and operations from the perspective of having to serve those customers. The effectiveness of these specials has yet to be examined. While simulation would be an ideal tool for predicting the specials’ net revenue benefits, it might be impractical for many restaurateurs, so we develop three simple “back-of-the-envelope” type calculations. Restaurateurs could use these calculations when deciding whether to offer a special. In the eight large simulation-based experiments we conducted, we find that it is important to estimate revenue cannibalization from full-fare customers. The calculations prove to be far more accurate for night-owl specials than for early-bird specials. This has important implications for decisions about offering the specials and raises a flag regarding a potential marketing-operations conflict.

You can read “Deciding Whether to Offer ‘Early-Bird’ or ‘Night-Owl’ Specials in Restaurants: A Cross-Functional View” by from Journal of Service Research by clicking here. Want to be notified of all the latest research like this from Journal of Service Research? Click here to sign up for e-alerts!

Does Restaurant Success Depend on More Than Location?

washington-dc-on-the-map-3-369938-mWhen choosing where to open a restaurant, many businessmen may recall the adage “location, location, location.” But even a prime location doesn’t always protect against restaurant failure. In “Why Restaurants Fail: Part IV: The Relationship Between Restaurant Failures and Demographic Factors” from Cornell Hospitality Quarterly, the authors illustrate how an area’s demographic characteristics can affect the success of a restaurant.

The abstract:

Although location is a significant factor in a restaurant’s survival chances, contrary to the commonly held belief, the presence of nearby homes did not help in lowering cqx coverfailure rates between 2000 and 2010 for restaurants in Boulder, Colorado. Instead, having a substantial population of apartment dwellers and transient residents (notably, university students) enhanced the restaurants’ success, as did the presence of people aged eighteen to twenty-four, those with higher educational levels, non-household families, and low- to middle-income families. Larger restaurants and those with chain affiliation had a greater probability of success than small, quick-service operations. Among the factors that had little effect on restaurant success or failure were unemployment rates, the nature of nearby residents’ profession, and the geographical presence of families with children under eighteen. The study’s results also support the long-held industry perception regarding avoiding locations where restaurants have already failed. When a location had experienced three ownership turnovers, the study found that the location generally ceased to host restaurants as tenants. As explained further in this article, this is the fourth in a series of examinations of the elements of restaurant success and failure.

Click here to read “Why Restaurants Fail: Part IV: The Relationship Between Restaurant Failures and Demographic Factors” from Cornell Hospitality Quarterly. Want more articles like this sent directly to your inbox? Click here to sign up for e-alerts from Cornell Hospitality Quarterly!