I’m dying 
love how comment sections turn into MST3K
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Ok, so no one agrees on how this law will apply to restaurant menus - the AGs office can’t even agree with itself. And the CA restaurant assn quote is both sad and fitting.
At issue is whether restaurants simply have to disclose their fees on their menus and in advertisements, or whether they have to fold the fees into the prices they charge for food and drinks.
Last year, a spokesperson for Sen. Nancy Skinner (D-Berkeley), who co-authored the bill with Sen. Bill Dodd (D-Napa), told Eater SF that the legislation would permit service fees at restaurants if they were disclosed on menus. Representatives of the attorney general also told the San Francisco Chronicle that the law would not end fees but merely require them to be disclosed.
The attorney general’s office told Eater SF and The Times, however, that disclosing the fees was not enough — they had to be included in the prices on the menu.
Matthew Sutton, senior vice president of government affairs and public policy for the California Restaurant Assn., said in a statement that the law shouldn’t increase menu prices if it’s applied correctly.
“The law on its face does not apply to restaurants that properly disclose charges (nor was it intended to),” Sutton said. “Courts have repeatedly indicated that restaurant menus are not ‘advertisements’ and that restaurants don’t provide ‘goods or services.’”
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Seriously restaurants are not providing “goods or services”? I’d love to see cites for cases where courts have said that.
Restaurant menus are not advertisements but they’re certainly “displaying” and “offering.”
(a) The unfair methods of competition and unfair or deceptive acts or practices listed in this subdivision undertaken by any person in a transaction intended to result or that results in the sale or lease of goods or services to any consumer are unlawful: …
(29) (A) Advertising, displaying, or offering a price for a good or service that does not include all mandatory fees or charges other than either of the following:
(i) Taxes or fees imposed by a government on the transaction.
(ii) Postage or carriage charges that will be reasonably and actually incurred to ship the physical good to the consumer.
https://www.sfchronicle.com/food/restaurants/article/junk-fees-restaurant-surcharges-19430871.php
The California attorney general’s office confirmed on Tuesday that a new California law that bans junk fees will apply to surcharges at restaurants, following months of anxiety and confusion in the food industry.
Earlier this week, the California Attorney General’s office confirmed to the San Francisco Chronicle that the law would prohibit restaurants from tacking on any charges besides taxes to diners’ bills — but the attorney general’s office also said it would release a list of Frequently Asked Questions on Wednesday, May 1, which did not happen. Now, sources say they’re hopeful exceptions could be made that would allow for some fees to remain in place.
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Attorney General says service charges are banned.
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I am very pleased with this news. I know that many restaurateurs are not. If they need to raise menu prices, then so be it - I don’t think minor price increases at a small number of restaurants is going to have much of an impact on consumer behavior. There existed a time before these crazy surcharges, and to there we return. Good riddance.
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Yup, I will not miss the 3-5% “health surcharges” or service fees that maybe don’t go fully to FOH and BOH. I am sympathetic to the fears of restauranteurs, I think having it hit everyone at once is probably the way to have the least impact as there are limited ways to dodge higher menu prices across the board and consumers will have to adapt to the pricing change quicker. Unfortunately if they are saying they’re not focused on enforcement for restaurants right now, that creates a lot more uncertainty and I expect the incentive is for restaurants to avoid this for a long as possible until they start seeing others get hit with lawsuits or enforcement actions. I suspect it will stretch out the painful consumer pricing adjustment longer for restaurants. I also imagine this will make it harder for restaurants to do more equitable service-included models, but hopefully I’m wrong.
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Sugarfish empire in shambles.
but seriously I hope they keep the model and simply raise prices but still have no tip line.
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I"m sure that restaurants that don’t drop surcharges will be hit with lawsuits immediately. There are several firms that specialize in suing restaurants over regulatory mistakes and gray areas.
I’m not sure why banning surcharges should affect business much if at all. Customers are surely aware of our total bills since that’s what we pay. If I go to Chez Panisse (the OG of service charges in California) this month, I know that the 17% service charge on top of the $175 = $204.75. Would I be less likely to go there if they drop the service charge and raise the price 17%?
I’ll actually be more likely to go to Jon & Vinny’s since I’ll no longer be annoyed by their bullshit.
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A lot of people will be less likely to go as they are mainly looking on the “immediate” price (and don’t realize/care/can’t do math that the “final” price will be the same
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Clearly that’s what some restaurant owners are concerned about, but how many people pay so little attention to what they’re spending?
Seems to me there are probably more people who hate surcharges and avoid restaurants that have them.
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They are relying on a well studied human bias Sunk Cost Fallacy/Escalation of Commitment. If people miss the fine print or just focus on the top line price, that gets them in the door easier, once they’re there it is less likely they will leave. They may get an unpleasant surprise at the end of the meal when they get the bill, but it’s too late by that point. Not everyone has the time or inclination to study the menu ahead of time and many restaurants do not make menus available online with prices also to exploit this bias. IMO it’s trading short term gains against long term sustainability, because if I get sticker shock at the end of a meal I’m much less likely to ever return and maybe become a regular. However, if you’re just trying to survive to the end of the week, month, quarter…
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At least based on (obviously a small dataset) talking with colleagues etc. it is surprising how many people react with telling me that as a consequence of the law they believe they will overall pay more in restaurants and thereby will go out less. If you tell them that normally the “final” price of a dish should be the same in both scenarios many believe restaurants will find another way to squeeze out more money from customers, e.g. “pressuring” towards 25 or 30% tips in the future as the new normal (recently I had a first bar/restaurant where on the display for tip they had 22, 25 and 28% (and very small “custom amount”)
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That’s exactly the rationale behind banning “junk fees”: except for sales tax, the price you see is the price you pay.
Plus tips
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Tips are not payment to the restaurant. By California law they must be distributed to employees.
But so, it is not the price you pay beside tax - there is always an additional 18-25% on each price. And as a customer I don’t care ultimately who gets which money - I only care how much will each dish cost me including tax and tip (and that’s why I think a European approach would eliminate a lot of uncertainties - just write down the full price (everything including on the menu)
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At Kato, the No. 1 restaurant on the 2023 L.A. Times 101 List, Bailey said an 18% service charge helps cover an employee benefits package that includes mental, medical, dental and vision services, and to offer a 40-hour workweek. Bailey, who heads Kato’s management operations but also has served as a business consultant to other restaurants, said operators — in an effort to not raise prices — might offset a ban on service charges by cutting staff from 30 to 22, or by requiring more staff contributions for insurance packages. “For us, it’s definitely going to be a challenge,” he said. “I’ve heard certain operators say that it’s going to be very detrimental for the staff, that what they’re offering they might not be able to offer anymore.”
Less expensive / celebrated restaurants might be in a different situation, but Kato is $275 base price plus an 18% surcharge. How many people who are comfortable with that will decide not to go if the price is $325 service included?
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… state senator Bill Dodd, who cosponsored the original bill, said: “My motivation in authoring the bill was to stop deceptive advertising in sectors that have ‘drip pricing’ and hidden fees that appear at time of payment, so menus with clearly disclosed fees weren’t my intended target. Certainly I’d be happy to see that clarified in the law.”
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Closing of the article:
Mr. Mermin, of the consumer coalition, said he believes the legislation as it stands will make consumers happier, and give them a greater sense of control, seeing all costs folded into a menu price. He pointed out that the law applies fairly across several industries, and all restaurants have to do is present transparent prices.
“This applies across the board, and it’s going into effect July 1,” he said. “Why is only one of the dozens of affected industries complaining?”
IMO health care and other charges that are “clearly disclosed” in fine print at the bottom of the menu are exactly what this law should tackle. I am sympathetic to businesses that want to have a service charge replace gratuity and while I would personally prefer to just have it all rolled into the menu price, I understand that sticker shock could hurt their businesses. If they carve out an exception, I hope they do it in a way that is pretty narrow with minimal abuse cases. I would love to see orgs like Independent Hospitality Coalition negotiate something sane.
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