As California works to eliminate high fees faced by consumers, the state’s restaurants are in the crosshairs.
This summer, a law banning so-called junk fees is slated to go into effect in the Golden State. While that’s a good thing for people who find themselves paying an arm and a leg on top of the advertised price for hotels and concert tickets, it’s also set to disrupt the restaurant industry, as it may result in a ban on service fees added to checks, Eater San Francisco reported recently.
“I think this was well-intended policy, nobody wants to mislead the consumer,” Laurie Thomas, the executive director of the Golden Gate Restaurant Association, told Eater. “But they didn’t intend this to upend the restaurant industry.”
Senate Bill 478 was signed into law in October, and since then restaurants and bars have been waiting to see how exactly it’ll play out for them. The guidance there isn’t yet clear, though, and the law is supposed to go into effect on July 1. Last week, the California attorney general’s office told Eater that restaurants wouldn’t be able to charge diners for anything extra except taxes, but those in the industry had previously been told that they may be able to retain service fees—and they’re still hopeful that that may be the case.
Restaurants generally add on a service fee as a way to ensure that employees are paid a fair wage, and to cover costs like healthcare and paid time off. It’s also a way of supplementing unpredictable tips without scaring off customers by increasing menu prices. But that may soon be what California restaurants have to do, if they’re no longer able to tack on service fees to bills.
“You can’t pay that high of an hourly rate unless you charge a service charge,” Ryan Cole, an owner of the San Francisco restaurant 7 Adams, among others, told Eater. “You’re basically reverting back … now you’re hustling for tips.”
Cole said that his restaurant group would wait to see how the law plays out before changing any policies. But if service fees are out, higher prices on the menu may be in. Caroline Styne, the restaurateur behind the Lucques Group in Los Angeles, told the L.A. Times the same thing back in February, saying, “At this point, we are going to have to raise our prices a big chunk.”
Still, with two months left before the ban becomes law, guidelines for restaurants may become clearer. And those in the industry are sure hoping that there’s some sort of carve-out for their service fees.
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