California restaurateurs have received a last-minute reprieve from a new state law that would have banned surcharges on restaurant checks.
San Diego and other state restaurateurs have narrowly avoided a significant change in how they manage pricing, thanks to last-minute legislative intervention. California Governor Gavin Newsom has signed emergency legislation allowing restaurants to continue adding surcharges to diners' bills, just days before a new law banning these fees was set to take effect. The controversial practice of surcharges, typically ranging from 3 to 6 percent, was a focal point of CA Senate Bill 474, aimed at eliminating hidden fees across various industries, including restaurants.
The bill’s co-author, Senator Bill Dodd, had not initially intended to target restaurant surcharges, but guidelines from the Attorney General’s Office clarified that dining venues would be affected unless the fees were included in menu prices. The sudden intervention allows restaurants to continue the practice, provided they clearly disclose any additional fees on menus or other displays.
This exemption comes as a relief to many restaurateurs who had been preparing to rewrite menus and adjust prices to comply with the law. Some, like Brad Wise of Trust Restaurant Group, had already started embedding surcharges into menu items to avoid unpopular conversations with diners. Others, such as Niccolò Angius of Cesarina and Elvira restaurants, are waiting to see public reaction before deciding whether to reinstate the fees.
Chef Travis Swikard's Callie restaurant in San Diego's East Village not only continues to impose a 4% surcharge on all bills, it also includes a 20% service charge on all parties regardless of size. There is also an additional gratuity line once the check is processed. Many San Diego restaurants also include similar surcharges and mandatory service fees.
SB 478 is set to take effect on July 1, but the newly passed Senate Bill 1524 provides an exemption for restaurants, bars and the like: "food or beverage items sold directly to a customer by a restaurant, bar, food concession, grocery store, or grocery delivery service, or by means of a menu or contract for banquet or catering services" would be exempt from the July 1 ban, provided the surcharges or fees are clearly listed. This will likely pave the way for more surcharges and service fees to be added to restaurant pricing models in the future.
While the new legislation provides clarity, it also highlights ongoing concerns about transparency and fairness in restaurant pricing. The practice of adding surcharges, though defended by some as necessary to cover rising costs, often leaves diners feeling misled. The California Restaurant Association supports the new law for its emphasis on transparency, but the persistence of surcharges raises questions about whether restaurants could adopt more straightforward pricing strategies to foster consumer trust.
