A within-restaurant analysis of changes in customer satisfaction following the introduction of service inclusive pricing or automatic service charges

Many U.S. restaurants have recently adopted no-tipping policies or are considering doing so. This study examines the effects of such moves away from tipping on restaurant's online customer ratings. The results indicate that (i) restaurants receive lower online customer ratings when they eliminate tipping, (ii) online customer ratings decline more when tipping is replaced with service-charges than when it is replaced with service-inclusive-pricing, and (iii) less expensive restaurants experience greater declines in online customer ratings when replacing tipping with either alternative than do more expensive restaurants. These findings provide a strong argument for the retention of tipping, especially among lower- and mid-tier restaurants.