As the clock ticks away Until July 1, when California’s new law banning so-called junk fees goes into effect, restaurant and bar owners in the state are still unsure how the law will affect their industry. I still don’t know. Earlier this week, the California Attorney General’s Office Confirmed to san francisco chronicleThe law prohibits restaurants from adding non-tax fees to customers’ bills, but the attorney general’s office also announced it would publish a list of frequently asked questions on Wednesday, May 1. It didn’t happen. Now, officials say they hope there will be an exception that will allow them to keep some fees.
Eater SF reached out to the attorney general’s press office by phone and email, but did not receive an update on when business owners can expect the FAQs to be published.
The surcharge ban would be a turning point for the state’s restaurant industry, which in recent years has relied on mandatory service charges to supplement optional tips and boost employee wages. But under the attorney general’s interpretation of the new law, all non-tax fees would be illegal. The changes will effectively require business owners in the state to rethink their long-standing financial practices in just two months.
Since it was signed by Gov. Gavin Newsom, restaurant and bar owners have been looking forward to industry-specific guidance on how the law will be implemented. Senate Bill 478 However, the government and restaurant industry officials appear unable to agree on how the law should apply to restaurants and bars. In mid-October, Eater SF reported that the new law would likely affect restaurants, catching industry leaders and the likely authors of the bill itself by surprise. A spokesperson for the attorney general’s office confirmed to Eater SF that the law applies to all businesses in the state, including restaurants, but did not directly answer whether service charges would be prohibited. .
The bill, introduced by Bay Area legislators Sen. Nancy Skinner (D-Berkeley) and Sen. Bill Dodd (D-Napa), would protect Californians from junk fees, which are the most expensive for hotels, rental cars, and ticket sales. related extraneous charges). companies.it is The Biden-Harris administration is also working on this issue.. Specifically, California law prohibits “drip pricing,” or “advertising a price lower than the actual price a consumer must pay for a good or service.” Although it doesn’t specifically mention restaurants, all businesses “advertise, display, or offer prices for goods or services that do not include all mandatory fees and charges” other than government taxes, fees, and shipping charges. states that it is prohibited. In October, a spokesperson for Skinner and Dodd told Eater SF that the law was not intended to change restaurants’ ability to charge customers a service fee. In fact, as of last fall, a spokesperson for Skinner told Eater SF that the law would allow restaurants to remain open. You may not charge a service fee unless the fee is clearly disclosed on the menu.
The possibility of not being able to charge service fees is causing disappointment and stress for many California restaurant owners.Ryan Cole, one of three San Francisco owners High Neighbor Hospitality Groupoperates six restaurants in the Bay Area. Three of the restaurants — mom in Auckland, and trestle and 7 Adams listed in the Michelin Guide San Francisco – Offers a prix fixe menu and charges customers a mandatory 20% service fee. These restaurants do not give customers the option to leave a tip. Cole said the ownership group uses service fees to not only pay staff higher hourly wages in lieu of tips, but also to cover the cost of benefits for two people. Weeks of paid vacation and paid sick leave. If restaurants were forced to eliminate service charges and replace them with optional tips, they likely wouldn’t be able to continue paying their staff the hourly rate they currently earn, Cole said. “All that stuff goes away,” Cole said. “Because you can’t pay that high an hourly rate unless you charge a service fee. It’s basically back to normal…Now I’m scrambling for tips.”
Cole said the group will wait to decide on its path forward until it is certain how the law will be enforced. But the company finds itself in a tense situation as the days remaining until the law takes effect are dwindling. If the service charge ban goes into effect, restaurant groups will likely have to raise prices. But Cole said if restaurant groups raise menu prices to fold into the 20% fee, simply walking in the door will increase prices and deter some customers from eating out. I am concerned that this may be the case. “You’ll still pay the same amount,” Cole said. “But people will think, ‘Maybe I need to go eat fast food today because I need to save money.'”
Yuka Iroi Co-owner Cassava A restaurant in North Beach. This restaurant is known for its dedication to achieving pay equity both front and back, as well as offering full medical benefits and his 401k. All of these radically progressive achievements are made possible, in part, by restaurants charging customers a mandatory 20 percent service fee. . Like Cole, Ioloi said that under the service charge ban, the company would consider raising prices to include the service charge, along with a slight increase in menu prices, or reverting to a tip-based pay model for staff. said it was necessary. Ioloi says he will consult his team on both options, but in either case, diners’ potential reaction to higher prices is a cause for concern. “We’re concerned about sticker shock, essentially, whether it’s going to discourage customers,” she says. “Our industry remains in a difficult situation and this also increases uncertainty. I think it will probably have a negative impact on the industry initially. We are very worried.”
Laurie Thomas, executive director of San Francisco’s restaurant industry, lobbied Wednesday morning. golden gate restaurant association, encouraged business owners not to make any changes yet. That’s in part because the group remains hopeful that lawmakers can work with the California Restaurant Association to strike a deal that would allow restaurants to continue using some form of service charge despite the new law. Because she does, she says. But there is only a narrow path to making any changes before July. These must be implemented as part of the state budget, which must be passed by the Legislature by June 15 and signed by the governor no later than July 1, the start of the fiscal year. While the lawmakers supporting SB 478 did not intend it to affect restaurant service fees, Thomas said lawmakers and the attorney general’s office could find a way to narrow its scope or create a carve-out for the industry. I hope you will give it to me. That won’t be the only exception. SB 478 already includes language that would allow third-party delivery apps like Uber Eats and Doordash to charge more than listed menu prices.
“I think this was a well-intentioned policy. Nobody wants to mislead consumers,” Thomas said. “But they didn’t intend for this to completely change the restaurant industry.”
Thomas said the group will provide operational advice to San Francisco restaurateurs once it is certain how the law will be implemented. Without a carve-out agreement for restaurants, she expects most restaurants in San Francisco to typically face tariffs of 5 to 7 percent. Additional fees to cover employee health careThomas is concerned that even a relatively small menu price increase like this could have a devastating impact for some businesses, given the overall health of the restaurant industry. It says that there is. “That could put people out of business quickly,” Thomas said. “That’s a concern.”
This is a developing story. Eater SF will update as new information becomes available.
