New California law will remove restaurant surcharges

NBC 7 Responds shows you the new state push to get rid of these fees

NBC Universal, Inc.

It’s likely happened to most of us. We go out to eat, and the bill comes at the end of the meal, only to find a surcharge we didn’t know about. They’re fees that started popping up during the pandemic, then they stuck around to cover inflation and minimum wage increases.

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They are also fees that two long-lasting friends did not know about. Patricia Sanguinetti and Martha Hayek have cultivated their friendship for more than 40 years and they do so by meeting up at different restaurants in San Diego. 

“We’re like sisters really. And we can talk, we know the same people, talk about things that happened and we have a lot in common,” said Sanguinetti.

They both noticed for the first time the small print we pointed out at the bottom of the menu. It was a 4% surcharge that was going to be added to their bill. 

“To help cover increasing costs and in support of the recent increases to the minimum wage,” said Andre Vargas, assistant manager at Breakfast Republic. He said the surcharge helps with the rising costs of running a restaurant and inflation. 

He mentioned there are certain low-cost food items on their menu, like eggs. “So when it comes to a breakfast establishment like this, I think it’s important to keep a budget-friendly menu,” he said.

Sanguinetti said she is fine paying a surcharge here because of the restaurant’s great vibe, service, and pancakes. “They come warm and nice and fluffy, but if they come cold and they look like a frisbee and we’re paying 4% more, I don’t come back.”

However, in July, you may notice fewer of these restaurant surcharges. That’s when a new state law kicks in, SB-478, banning hidden fees. The California Attorney General’s office said mandatory fees charged by restaurants “must be included in the displayed price.” That means menu prices would have to change.

“They’re trying to make their prices cheaper than they actually are to attract people to their business,” said Jenn Engstrom, director of the California Public Interest Research Group. She said the new law will make sure all restaurants are sitting at the same table when it comes to pricing. “Ten years ago we weren’t really hearing about this problem so we know it’s possible and not that challenging,” she added.

However, the new law is already being challenged. The California Restaurant Association sent a letter to the attorney general, arguing the law should not apply to restaurants. In the letter, they specified menu items are not “goods” or “services” as defined in the state’s civil code.

Todd Camburn owns Barrio Star in Bankers Hill. He said they’re doing away with their 3% surcharge because of the new law. But they won’t be increasing menu prices. He added that he does not think it is fair.

“You can only charge so much for a taco plate. So even though it's homemade, fresh ingredients, there's just so much,” Camburn said.

He expects to take a hit financially but said he doesn’t want the sticker shock of increasing menu prices to drive customers away.

“We've been around for 14 and a half years. So I can't see us going anywhere anytime soon. So we'll just roll with the punches. We made it through COVID-19,” Camburn mentioned.

Meanwhile, Sanguinetti and Hayek said a couple of extra dollars won’t keep them from their catch-ups, especially if the pancakes are nice and fluffy.

“For this kind of fee to be on the top and good service, hey, I'm not concerned about it,” Sanguinetti told us.

Many people also told NBC 7 Responds that surcharges can be confusing when it comes to tipping. They often factor in the surcharge as part of the tip, so food servers at some of these restaurants may not take as much home once their shift is over. 

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