I agree but this is not different than anything else.
If the workers don’t like the terms of employment, then they can work somewhere else.
If the patrons don’t like the prices or the service at a particular restaurant, they can dine somewhere else.
I really do not know why people make such a big deal of these things. Free market principles still apply
If free market forces should ever apply, surely having lunch at the diner is one of those places.
Yes, free market principles still apply, but I’d argue that the proposed scenario allows for a more limited set of free market choices. As you say, I would still have the right to refuse to be a patron of this restaurant and indeed that is a free market choice. However, that would be my only choice. With the current tipping system, I can choose to frequent the restaurant and ask for a specific waiter, I can choose to tip, I can choose to walk out if the service is horrible, etc. I have more free market choices now...so I again ask you why a conservative minded individual would willingly agree to limit their choices?