Does Automatic Gratuity Help or Hurt Servers? An Examination of A Casual Restaurant’s POS Data

Restaurants use automatic gratuities to protect servers from low tips, but these charges may also reduce voluntary tipping. This study examines how selective automatic gratuity is associated with recorded customer payments at a casual dining restaurant in North Carolina. Transaction-level point-of-sale data cover May 14, 2024, to April 30, 2025. Descriptive statistics summarize 14,404 checks, and ordinary least squares models use 14,278 complete observations. The models account for bill size, large-party status, and discounts. Automatic gratuity was associated with a 27-percentage-point lower probability of a recorded voluntary tip and a 5.33-percentage-point lower recorded voluntary-tip percentage. Nevertheless, combined recorded tips and gratuities were 12.69 percentage points of the bill higher on checks with automatic gratuity after adjustment. The restaurant passed all automatic gratuity to servers. A separate zero-tip deletion analysis produced associations in the same direction, although its interpretation depends on assumptions about unrecorded cash tips. The contribution is a comparison of selectively charged and uncharged checks that separates voluntary tips from combined recorded compensation, helping managers evaluate both payment components. Nonrandom application of the charge, incomplete cash-tip measurement, and the single-restaurant setting limit causal interpretations.