By Lauren Toms
/ CBS San Francisco
Potential ban on service charges at restaurants could lead to price increases
A new California law aimed at banning hidden service fees could eliminate the surcharges some restaurants add to customer bills.
Diners in San Francisco often think twice when they see a common line at the bottom of their menu warning of a mandatory service charge that can run anywhere between 4% to 20%.
While a proposed new law could end up making those notices go away, customers could also be forced to absorb the cost elsewhere.
Food experts like Marcia Gagliardi who authors the 18-year-old food newsletter tablehopper says that isn’t great news for customers or the restaurants where they eat.
“Just when you thought your pork chop was already really expensive, guess what? We’re going to be seeing higher prices, because there’s nowhere else these restaurants can put these fees and higher wages in order to maintain these employees,” Gagliardi told CBS News Bay Area.
The law that takes effect on July 1 bans junk fees commonly seen in ticket sales. But on Tuesday, the state attorney general reportedly confirmed that also applies to restaurant service fees.
“It’s used to create an equitable model for employees. Typically servers make much more money than back-of-house [workers] and dishwashers, so it makes a way for those funds to be distributed equitably,” Gagliardi explained.
The law, co-sponsored by Bay Area senators Sen. Nancy Skinner of Berkeley and Sen. Bill Dodd of Napa, seeks to prohibit “the use of drip pricing, a practice in which companies advertise only a portion of what a customer would actually pay for a certain product or service,” according to a release published by Skinner.
“The law does not ban companies from setting a price, but it does regulate how companies can advertise or display the cost,” the press release added.
Tom Medin has been leading food tours in San Francisco for decades. He’s seen the restaurant price roller coaster of the city and says the change may not be all bad news, shifting attention back to mom-and-pop restaurants.
“The restaurants you go into and you feel like you’re part of, that restaurant it’s kind of secondary,” he said of the added fees. “I want your employees to do well. I think as long as restaurants maintain that of really knowing their customers, I think they’re going to do okay.”
But some fear that the change could make restaurants less equitable for staff. Golden Gate Restaurant Association Director Laurie Thomas says restaurants will be in a bind for how to keep up their wages while also keeping customers coming.
“So now do you take their rate down and do you go to an old-fashioned tip model and say to your servers you have to tip the whole house but that drops everybody’s salaries or do you raise your prices 20%, 25%?” she told CBS News Bay Area. “It might make a lot of customers happier. They might say, ‘We understand why prices went up.’ Let’s hope that happens. But I don’t know if our industry can hope that’s what happens. They’re still struggling it’s been a tough year.”
But for Marcia, she says while customers may feel some relief by not seeing added charges, they’ll still feel it in their wallets.
“I see restaurants easily raising prices 5%, 15%. It’s going to be tricky,” she explained. “We’re going to be seeing even higher price based on this unfortunate interpretation but not all is lost … things could change.”
