This of course may be unethical for the employee, depending on store policy. My best friend falls for it every time, tipping back up to "full" price. I see it as a type of scam against the employer, though.
That's definitely sometimes true. But it depends - when I was in college I used to go to a bar (Redbones in Somerville, MA) where the owner had a policy of letting the bartenders offer a certain number of free drinks and appetizers to favored customers at their discretion. He did this because he said it meant more loyal customers, which helped both him and his employees. I definitely spent a lot of money in that bar and always tipped heavily because of the great service. Despite all the freebies I got, I'm sure they turned a well-deserved profit off my business.
The owners a couple years ago put a lock down on all the free coffee going out of the place but encouraged the employees to give discounts to their friends.
It actually works out quite well, as the place can't afford to really pay any type of decent wage. The owners recognized that many people (myself included) would simply stop going to said shop everyday if coffee went from free to 1.65 or 1 to 1.65. I would still go sometimes, but it's not like they are going to see an immediate 65% increase on that revenue if people stop giving away the coffee.
At the same time, it allows the workers to get a couple extra bucks an hour and allows them to retain a number of really good employees while paying a wage <$10 an hour.
Most profit comes from simple items: drinks, salads, the most basic pasta dishes, coffee. It's all stuff where the ingredients cost next to nothing and the prep time is negligible. They don't cost much either, but have huge margins.
The waiter's incentive is not to push you to get the $9.95 ziti marinara, but to get the $22 lobster-filled ravioli, or the $25 jumbo shrimp dish, or the $27 steak—the most expensive dishes on the menu. But the lobster or the shrimp or the steak often have the slimmest margins of anything on the menu. Oftentimes something like lobster will serve as a loss-leader to get people into the restaurant.
As a waiter, you're constantly pushed to sell appetizers, salads, drinks, coffee and ice cream. All the stuff that's not just an entree. That's where the margins are, despite not costing very much and not leading to an inflated bill like a steak and bottle of wine would.
So not only is the waiter stealing the profit from the sodas they give you for free, they stand a chance of making the restaurant take a loss on your meal if you order a slim-margin item as an entree and don't order anything else.
But this is a problem you'll never really fix. Waiters are sharecroppers and their incentives will always be (in part) opposed to what's best for the restaurant.
Actually it's a fairly easy fix. Pay waiters a decent wage (so they aren't reliant on tips to pay the rent), plus an annual bonus for everybody who's worked the entire year (so they have an incentive to do their job right and not get fired), and combine this with actively discouraging/forbidding accepting tips and you're basically there. That's how most industries work.
He enjoys tipping. He says that back home, because the Dutch don't have a custom of tipping waiters, the service suffers. There is no incentive for them to provide more service than the minimum required to not get a complaint... Which is quite low when expectations are already low across the board.
Especially if that "discount" is appearing on the bill.
out of the places I go to eat or get coffee, a few are small independent businesses owned by locals. At the ones where I was getting consistently good service, I started tipping 20%+. Within a few weeks of this, I was surprised to notice that they began discounting my food and drinks without mentioning it, and they were more likely to remember my name and what I usually order. The result is that other than the money I spent tipping more initially, this improved service doesn't cost me anything.