Outback, aka OSI Restaurant Partners, takes their hand back out of servers’ pockets

Last week, I tossed OSI Restaurant Partners on the barbie (sorry, that just had to be said) for their new policy of charging their servers for the merchant fee portion of their tips when tips are paid via credit card.

I think I was pretty clear on how bad a decision I felt this was, despite the fact that it was what they deemed yet another “extra cost” in an already tightly budgeted business. Later in the week, I updated that post after finding out that they had arrived at a change of heart.

This morning, Shannon Black from OSI posted a letter (via the blog’s contact page) from Mr Kadow (OSI EVP), which I include for your reference below.

Everyone makes mistakes, and as I noted in another post not too long ago, how you respond tells your customers something. While I think this was an exceptionally short-sighted decision from a big picture point of view, I’m glad to see that OSI/Outback reconsidered it and then decided to do the right thing.

Sure, maybe they wouldn’t have without the publicity in the news and from blogs, but they could have ignored all that and stood by their original decision. They didn’t. Publicly admitting that you goofed in today’s corporate environment isn’t easy.

Here is Mr. Kadow’s letter:

February 1, 2008

For 20 years our success has been built on the spirit and pride of our people and the excellent customer service they provide. OSI Restaurant Partners, LLC and each of our brands, Outback Steakhouse, Carrabbaâ??s Italian Grill, Bonefish Grill, Flemingâ??s Prime Steakhouse & Wine Bar, Royâ??s, Cheeseburger in Paradise, Lee Roy Selmonâ??s and Blue Coral, have been founded on and are dedicated to our Principles and Beliefs. Paramount among these is the belief that if we take care of our people and our customers, the institution of OSI will take care of itself.

It is no secret that all casual dining restaurant companies are facing unprecedented cost increases and substantial declines in profitability. It is our responsibility to adjust to this environment and take appropriate action to protect the business.

The recent decision to ask our servers to share in the cost of processing their credit card tips was made in this environment.

We did not make this decision lightly. We considered this in the context of the total package of benefits we provide our employees. After researching our competitors, we find our health insurance, vacation pay, and restaurant discount/comp policy to be significantly more generous than our competitors.

For example, we offer our hourly employees a variety of health insurance choices with premiums as low as $42.71 a month. We keep health insurance premiums for our hourly employees low by charging a disproportionately higher premium to managers and executives â?? the more you are paid, the higher your premium.

However, upon reflection, we realize this decision is inconsistent with our Principles and Beliefs. Effective immediately no server will be charged for credit card processing fees on their tips. In those areas where we have already implemented this, all credit card processing fees will be returned to the servers.

OSI will continue to fulfill its responsibility to all of its stakeholders, including our people, to operate our business at an acceptable level of profitability. But we will do this consistent with our Principles and Beliefs: we will take care of our people and our customers and the institution of OSI will take care of itself.

Joseph J. Kadow
Executive Vice President
OSI Restaurant Partners, LLC

Pass the bloomin’ onion.