Starting July 1, restaurants in California will no longer be able to add service charges or other surcharges to your check. But restaurant owners fired back, claiming they will start firing workers.
The bill was signed in October
California Governor Gavin Newsom signed SB 478 into law in October 2023. The law aims to tackle a wide array of fees, often known as junk fees. It makes it illegal to promote a low initial price for a product and add additional compulsory fees in the checkout process.
All businesses are affected
The Consumer Legal Remedies Act: advertisements will ban junk fees on purchases made across California. The bill includes concert tickets, hotel reservations, online shopping, and restaurant surcharges. The law will come into effect on July 1. Still, many restaurant owners were surprised.
Siding with customers
State Attorney General Rob Bonta said that the bill applies to all businesses, including restaurants, and it is about ensuring that customers know how much they are going to pay for goods and services. The bill requires the price to be fully included, without hidden fees.
Different points of view
National Federation of Independent Business California Director John Kabatek complained that for many small businesses, these so-called junk fees were the only way to keep their workers. Kabatek was likely referring to the $20 per hour fast food minimum wage that went into effect on April 1.
Predicted layoffs
Kabatek predicts more layoffs without service fees and that even more businesses will close their doors. He further criticized the state’s AG Bonta, saying he was not considering small businesses and whether they could survive the changes. Kabatek concluded that businesses will close, which will hurt employees and customers.
Many restaurant owners are in a tough spot
Golden Gate Restaurant Association Executive Director Laurie Thomas wondered whether being that honest would make people think twice about dining out. Thomas added that if people started dining out less, it could signal bad news for the industry. Thomas concluded that it might lead to owners laying off people, as Kabatek warned.
Mixed reactions
Some people welcomed the news, with Joseph Chiarucci, a San Francisco resident, telling NBC Bay Area that it feels good to see advertised as the actual price. However, Katie Brown-Davis of Walnut Creek stated that she does not choose a restaurant or a hotel based on price but on experience.
Many are worried about the accurate prices
A food expert, Marcia Gagliardi, said that restaurants without the fees and minimum wage hikes would increase prices to keep the workers. Gagliardi added that while customers may feel some relief by not seeing added charges, they’ll still feel it in their wallets. Gagliardi predicts that raising prices will be tricky.
For some, this is terrifying
Tim Stannard of Bacchus Management Group expressed that the new bill is terrifying because restaurants cannot keep up with the wages without dramatic price increases. Then, they must rely on customers to come inside and order. The Employment Policy Institute agreed with this assessment.
More damage
The Employment Policy Institute issued a press release stating that the state has increased wages since 2017, and restaurants have already suffered losses. The institute believes that removing these fees will cause more damage to the industry. The statement included that fees were necessary, especially following the latest wage hike.
Restaurants will determine their prices
Restaurants in California have just enough time to adjust prices, though they are still struggling to accept the latest minimum wage hike. Gagliardi believes that increases won’t be larger than 5 to 15 percent, but it is all about finding balance. The owners must consider not adversely affecting their businesses while keeping the prices accessible.
Restaurants believed to be exempt
A large number of owners believed that their businesses would be exempt, so they were less prepared. It is unclear how restaurant owners received the news that they would not be included in SB 478.
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