Restaurant owners warn new California law will make menu prices skyrocket: ‘Crippling to everybody’

A new California law signed by Democratic Gov. Gavin Newsom last October will ban “junk fees” across a variety of businesses, but some warn that customers and restaurants will be shocked at the rise in prices. 

California Attorney General Rob Bonta’s office touted Senate Bill 478 in a press release the day it was signed, warning that “deceptive price advertising is a significant problem facing consumers that appears to be proliferating in more and more sectors of the economy.” 

The press release continued, “Hidden required fees are now charged for a variety of goods and services, such as lodging, tickets for live events, and restaurants and food delivery. These fees, when mandatory, are a deceptive way of hiding the true price of a good or service.”

The law is scheduled to take effect on July 1. 

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Restaurant owners have often relied on surcharges to provide their employees benefits like healthcare. Some businesses would note surcharges on menus and others would have them be optional, with the decision left to the customer. However, the new law is causing restaurant owners to hike the prices on their menus in order to comply with the new law. 

“At this point, we are going to have to raise our prices a big chunk,” award-winning restaurateur and wine director Caroline Styne told the LA Times. Styne claimed an item previously listed for $39 would rise up to $49. 

“Restaurants are in a very tough spot right now,” she noted. “We’ve really been under tremendous pressure … most restaurants are hemorrhaging money.”

Styne also reportedly lamented the increasing cost of labor, tight regulations, and high taxes alongside thin profit margins make California a difficult place for restaurants to survive. 

“There are a lot of businesses that will be upended by this,” she predicted. 

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Laurie Thomas, executive director of the Golden Gate Restaurant Association representing approximately 800 San Francisco restaurants, made similar comments to the LA Times.

“I think that in areas like San Francisco that have higher mandated laws that put costs on small restaurants — the extra healthcare spend, the extra sick pay, the extra paid family leave — all the stuff we pay for that people aren’t even aware of, it’s gonna have to make us put prices higher,” she said.

“A lot of people are reaching out for clarity,” she continued, noting the confusion as to how restaurants should move forward. “There’s a lot of frustration. It’s not going to drop the price of dining out. What it might do is close more restaurants. But maybe people don’t care about that anymore.”

While service fees are sometimes a source of conflict among restaurant owners and staff, some like Kato restaurateur Ryan Bailey warn that removing them would be “would be really crippling to everybody.”