Starting July 1, California restaurants will not be allowed to add a surcharge to their menu items or services, which experts say will lead to soaring menu prices in San Francisco.
The ban, confirmed by the California Office of the Attorney General on Wednesday, has sent shockwaves through the already suffering restaurant industry.
‘Ending the ability for restaurants to use service charges (even if clearly and legibly listed on their menu) will have a very negative impact on the survival of this still struggling industry,’ the Golden Gate Restaurant Association told the San Francisco Chronicle.
‘Diners will not pay less, instead they will see significant menu price increases, which we believe will further cause them to pull back on dining out. … Not only will restaurants struggle, but workers will lose hours and jobs.’
While consumers expressed their approval of the state’s decision to ban hidden fees and encourage price transparency, restaurant owners in the Bay are worried the price increase will annoy customers who are already cutting back on dining out due to rising costs.
Zuni Cafe diners (pictured), most known for their chicken for two dinner special, stirred up controversy in 2021 when they stopped tips and instead charged a 20% ‘fair wage’ fee that is split between all the employees.
If Zuni Cafe folds their 5% health mandate charge and 20% fair wage charge in the cost of the chicken for two (pictured) , which is currently priced at $75, the price would rise to $94.50
The San Francisco Chronicle looked at three of the city’s most popular dishes and how the restaurants will adjust their prices in accordance to the ban.
Zuni Café diners, most known for their chicken for two dinner special, stirred up controversy in 2021 when they stopped tips and instead charged a 20% ‘fair wage’ fee that is split between all the employees.
On top of that, Zuni Café charges a 5% fee for the city’s health care mandate, which requires employees to set aside money for worker health benefits.
If both charges become included in the cost of the chicken, which is currently priced at $75, the price would rise to $94.50.
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Z&Y Restaurant, located in the heart of San Francisco’s Chinatown, is best known for their fish filet with flaming chili oil.
The restaurant charges a 4% health mandate and an 18% service fee. Folding both charges into the price of the fish filet, which was originally $38.95, would skyrocket the price to $47.79.
Koi Palace, a dim sum restaurant with three different locations throughout the city, is known for their rainbow sampler of Shanghai six dumplings. They charge an 18% service fee and, if included in the total price, will increase the price of dumplings from $12.80 to $15.10.
California Senate Bill 478 cracks down on hidden fees in various industries, including restaurants.
Z&Y Restaurant (pictured), located in the heart of San Francisco’s Chinatown, is best known for their fish filet with flaming chili oil
Folding both the 4% health mandate charge and 18% service fee into the price of the fish filet, which was originally $38.95, would skyrocket the price to $47.79.
Koi Palace (pictured), a dim sum restaurant with three different locations throughout the city, is known for their rainbow sampler of Shanghai six dumplings
If Koi Palace folds an 18% service fee in the total price, it will increase the price of dumplings from $12.80 to $15.10
Under this new law, restaurants must include all mandatory surcharges, like service fees or fees tied to local government mandates, directly in their advertised prices.
Disclosing these fees beforehand or after a customer pays, as commonly seen on menus, booking platforms, or receipts, will not suffice.
The law does not apply to taxes or affect tipping practices.