Restaurant owners in California are facing frustration over a new law that bans them from charging “junk fees.” Senate Bill 478, signed by Governor Gavin Newsom, prohibits businesses from charging hidden fees starting July 1. Required fees must now be included in advertised prices, eliminating the practice of adding extra surcharges on top of listed prices, including gratuity payments. California Attorney General Rob Bonta emphasized that the price customers see must be the price they pay to create a fair and level marketplace for businesses and consumers.
The California Restaurant Association (CRA) has strongly disagreed with the Attorney General’s interpretation of the law, stating that it misunderstands the industry’s transparent pricing standards. Many restaurant owners are concerned that the law will drive away customers, particularly in cities like San Francisco where a 5 to 6 percent surcharge is added to comply with local ordinances. Some argue that the law will negatively impact restaurants that charge service fees instead of tips, potentially leading to inequitable pay for workers and jeopardizing job security.
The new law has sparked debate within the industry, with some believing that mandatory service fees can create confusion among diners regarding additional tipping expectations. Critics fear that including all fees in menu prices could result in “sticker shock” for customers and deter them from dining out. Restaurant owners worry about the potential negative impact on an already struggling industry, adding uncertainty and difficulty for businesses trying to navigate changing regulations and consumer preferences.
Industry groups and restaurant owners are exploring options to block the implementation of SB 478 as proposed by the Attorney General’s office, emphasizing the importance of maintaining transparent pricing standards and fair practices within the industry. The enforcement of the law is expected to have significant implications for how restaurants operate in California, potentially reshaping business models and customer expectations. As the July 1 deadline approaches, the industry is bracing for potential challenges and uncertainties as they navigate the changes mandated by the new law.
