California restaurants are poised to raise prices even more after the state’s junk fee ban requires restaurants and bars to include mandatory fees in their displayed menu prices.
On Wednesday, the California Attorney General’s Office revealed how the junk fee ban, known as SB 478, will affect restaurant service fees when it goes into effect on July 1.
According to the FAQ document Fees that are currently prohibited by law include service charges (which some facilities use in addition to tips to cover costs such as employee medical expenses), as well as fees that are used by workers as stingy dumpsters. It also includes automatic chips, which have become the industry standard for large organizations to protect against. , Eater San Francisco previously reported.
Restaurant owners have already warned that if the bill passes, prices will soar, making customers even more willing to eat out.
“It could put people out of business immediately,” said Laurie Thomas, president of San Francisco’s restaurant lobby Golden Gate Restaurant Association, according to Eater SF.
“That’s the concern,” Thomas added.
The latest ban on junk fees comes as President Joe Biden leads an effort to crack down on expensive add-ons, which the White House calls “corporate rip-offs.”
California’s restaurant industry is already struggling to offset rising labor costs.
The state started the new year by raising wages by 50 cents to $16 an hour.
And in April, California enacted another pay increase for fast food workers, raising wages to $20 an hour.
This amount is 25% above the state’s general minimum wage and is applicable to limited-service restaurant chains, i.e., eateries with at least 60 locations nationwide, where you pay before you eat, and where there is no or limited table service. Applies to.
As a result, franchisees across the Golden State have raised staggering menu prices, including Jack in the Box owner Shane Paul, who owns seven of the fast-food chain’s locations in San Diego. Ta.
Last month, he said he had raised restaurant prices by 11% over the past six to 12 months in anticipation of higher wages, compared with 4% a year earlier.
Franchisees are concerned that the price differential between fast-food and casual-dining restaurants could narrow, meaning consumers will pay less for a sit-down dining experience with only a few people at a restaurant like McDonald’s or Wendy’s. They feared they would end up choosing fast-casual options like Chili’s or Applebee’s instead. More than a dollar.
But with SB 478, that may not be the case.
The state government said restaurant and bar owners will receive just one reprieve from the law, according to Eater. When the law first takes effect, states will focus on enforcing the ban on adding service charges, rather than on the additional costs associated with automated tips, he said. .
“There are many factors to consider when making an enforcement decision,” the FAQ states.
As of July 1, the AG’s office warned that “companies may be held liable in private lawsuits,” and that customers have filed lawsuits over tips that are automatically added to customers’ bills. I’m talking about the possibility of this happening.
Last year, the restaurant industry fought against the implementation of SB 478, arguing that it deserves a carve-out and should apply only to airlines, hotels, rental car companies and ticketing companies, Eater reported.
According to Eater, restaurants and bars thought their service fees would not be affected as long as they were clearly disclosed to customers, but that was not the case.
The Golden Gate Restaurant Association also stated that the law “will pose significant challenges to the restaurant industry going forward,” specifically stating that menu prices would be significantly increased, rather than customers paying less. He said that it would happen.
“Eliminating the ability for restaurants to use service charges (even if clearly and legibly written on the menu) would be critical to the survival of an industry that is still struggling,” the group said in a statement, according to Eater. It will have a negative impact on the “Not only will restaurants suffer, but workers will lose time and jobs.”
