California’s restaurant scene is bracing for another financial hit this summer when a new law is set to change menu prices.
Fox Business reports That yet Recent increase With the state’s minimum wage set to $20, fast food chains have already adjusted their prices. Now, with a new law targeting “unwanted fees” set to take effect on July 1, further price hikes are on the horizon.
The new law, signed by Gov. Gavin Newsom, aims to eliminate surcharges and fees charged by restaurants. Historically, restaurant owners often used these types of surcharges to fund employee benefits such as health care.
While some establishments display these fees transparently on their menus, others leave it to the customer’s discretion.
However, the impending ban on these fees is forcing restaurant owners to rethink their pricing strategies. Since surcharges have become illegal, the only recourse for many establishments is to increase menu prices so they can cover costs that were previously met by surcharges.
California’s attorney general recently told the San Francisco Chronicle that the ban on restaurant surcharges will actually be implemented, dealing a major blow to the industry.
Lori Thomas, director of the Golden Gate Restaurant Association, expressed concerns about the law’s impact, noting that restaurants will face a difficult choice: either cut employee wages or risk alienating customers with higher prices.
“So, do you now lower their price and go to the old tipping model and say to your servers, ‘You have to tip the whole house, but that’s driving everyone’s paychecks down,’ or do you raise your prices 20%, 25%?” “It might make a lot of customers happier,” Thomas told CBS News Bay Area. They might say: “We understand why prices are rising.” Let’s hope that happens. But I don’t know if our industry can hope for this to happen. They are still struggling. “It’s been a tough year.”
As the summer deadline for the new law approaches, California restaurateurs are preparing to make difficult decisions ahead, with the potential for further disruption to an already struggling industry.
Industry experts agree that consumers will see higher prices.
“I see restaurants easily raising prices by 5%, or 15%. It’s going to be tough,” food writer Marcia Gagliardo also told CBS New Bay Area. “We’re going to see higher prices based on this unfortunate interpretation. But all is not lost. …Things can change.”
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