Please consider avoiding these restaurants

Report from The Observer 7 June

Waiters employed by one of the UK's biggest restaurant chains face the sack if they encourage customers to leave tips in cash.

Employees of Tragus - which owns Strada, Café Rouge and Bella Italia - are forbidden to tell diners that the optional service charge is used to subsidise the national minimum wage paid to waiters. Cash tips go directly to staff, but those paid by card go to the company. The company sent a memo last month to all restaurant managers telling them to crack down on staff who appeared to be encouraging customers to leave cash instead of putting the service charge on their card.

The memo, received on 22 May, told them to check the percentage of service charge collected by individual waiters each week. "If you find certain employees have low service charge, you must organise a meeting with the employee to discuss the reports. This may indicate they are fraudulently having the service removed when it was actually paid for by the customer," the memo stated.

The Strada restaurant manager who showed the Observer the memo claims that, of the £6.50 hourly rate that waiters receive, only £2.50 comes from the company, with the rest paid out of tips left by customers.

He says that when staff join Strada they are told not to tell customers about this arrangement and that any who do risk severe consequences. "If I see a waiter telling the customer about what happens to the tips and encouraging them to leave a cash tip instead, I remind them that this is not what they were trained to say. If a waiter consistently tells customers what happens to the service charge they would be disciplined and eventually sacked."

The revelations come only weeks after the government announced plans for a change in regulations to prevent restaurants using tips to make up the minimum wage and for a voluntary code of practice to encourage greater transparency.

But an Observer investigation has uncovered serious doubts about the benefits to either staff or customers of these proposed changes. Under the new rules, due to come into force in October, employers will still be free to hold on to all of the service charge, so long as they pay the minimum wage, and will not be obliged to display their policy on tips.

Companies that currently do not pass on all of the service charge to staff - including Carluccio's and Paramount, which operates Caffè Uno, Bertorelli and Livebait - would not say how their use of tips would change after October.

A spokesperson for Tragus said: "At all of our restaurants we are happy for our customers to pay with either cash or a credit card as best suits them. Concerning the recent communication to our restaurants about service charge, this relates to the tightening of controls around cash processing in our restaurants to ensure that the company protects itself against potential frauds.

"This is standard management discipline and we have taken the opportunity to remind managers of their responsibility and the appropriate procedures in this area. Tragus fully complies with the current law concerning national minimum wage and tips and will ensure it complies with the amended legislation when it comes into effect in October."