People aren't cutting back on tips even as inflation surges

Even as restaurants and fast-food chains hike menu prices, customers aren’t pulling back on tips for wait staffs and cashiers, according to a new report.

Diners tipped an average of 19.6% at full-service restaurants and 16.9% at quick-service eateries during the second quarter, which was roughly in line with a year ago, according to sales data from software provider Toast. In-person diners typically were more generous, tipping an average of 19.7%, according to the report. Delivery or takeout customers tipped an average of 14.5%.

The average tip amount rose by nearly 10% compared with the year-ago period − slightly more than how much restaurant menu prices have climbed over the last year, Toast said. The cost for food away from home rose 7.6% over the 12 months ended in July, according to the Bureau of Labor Statistics.

“Even though there’s some anecdotal feedback about whether inflation is impacting the rate at which people are tipping, we don’t see that in our data,” Toast co-founder and Chief Operating Officer Aman Narang told CNBC.

Other payment software providers have reported that restaurant tips have fallen after climbing earlier in the Covid pandemic. For example, Toast’s rival Square found that the average tip at quick-service restaurants fell from 17.2% to 15.2% from March 2021 to the end of February, according to a report from The Wall Street Journal.

Both Toast’s and Square’s software can be customized to prompt customers to tip at different levels, like 10%, 15% or 20% for a full-service restaurant or $1, $2 or $3 at a coffee shop.

“Certainly our technology is an enabler,” Narang said.

As inflation pressures household budgets, restaurant chains including McDonald’s and Chipotle Mexican Grill have reported seeing lower-income customers spend less money at their locations and higher-income consumers visit more frequently. Others, like Outback Steakhouse owner Bloomin’ Brands, have said diners haven’t changed their spending habits — or that they’ve even shown a willingness to pay for more expensive options.

Toast compiles its quarterly report on restaurant trends by crunching data gathered from the roughly 68,000 restaurants that use its software. Its customers range from independent eateries to midsize regional chains.

The report also said that full-service restaurant sales bounced back to the pre-pandemic levels for the first time in the second quarter. Sit-down eateries were hit hardest by the crisis as consumers cooked more of their meals at home or ordered through fast-food drive-thru lanes instead.