Restaurant owners hope for exemption from California's looming "junk fee" law
A new state law banning so-called hidden "junk fees" when quoting prices to consumers takes effect on July 1, but some restaurant operators are facing difficult decisions with a possible exemption that is keeping many in a precarious limbo.
At Tacolicious in San Francisco's Mission District, a cook sears a Niman Ranch grass-fed skirt steak to make a carne asada taco.
"The thought of raising the price more, it just keeps me up at night," said Tacolicious founder Joe Hargrave.
When he founded his small business 14 years ago, he charged $3.50 for a premium taco. Now the price is $7.50, and likely to change soon.
"I think the restaurant sector is very afraid of that sticker shock and what's it's going to look like locally in San Francisco," said Hargrave.
Hargrave is in the process of reprinting menus, and determining how much more to charge if service fees like the 6% surcharge -- which helps him pay for San Francisco's mandate to cover workers' health insurance -- get eliminated.
"They say 'Well, just put it in the bill.' But it's not that simple. We're not being greedy business people. We're trying to find the right solution without jeopardizing our customer base," explained Hargrave.
Reining in hidden fees charged by banks, airlines, hotels and other sectors has grown into a national movement, with 11 other states trying to ban "junk fees."
Recent polls show an overwhelming majority of consumers support these efforts.
"I would love to be able to walk into a store or restaurant and order the price on the menu and pay that price when I get to the register. That would make all of our lives easier," said Finn Higgins.
A new survey by Blueprint examined the popularity of 40 issues that could affect the 2024 campaign. Banning businesses from charging consumers hidden fees ranked first in popularity, with 76% net support.
"Any sort of hidden fee is kind of annoying. Obviously it's nice to be upfront about what the actual cost of something is," said Hannah Gabany.
A drop in patrons, wary of the increasing cost to dine out, would impact not only the operator's bottom line, but also cooks, bussers, and servers like Sammi Garcia.
"I'm a student, so I really rely on my tips," said Garcia.
State lawmakers are scrambling to pass an amendment that would exempt restaurants from the "junk fee" law about to take effect, and essentially force eateries to increase menu prices across the board. Restaurants have been collectively pushing back against the new law.
"You take that away, it's a gut punch to restaurants. And with California dealing with so many closures, this puts more pressure in the $20 minimum wage environment," said Wedbush Securities managing director Daniel Ives.
"If you could dejunk fees, restaurants are the ones that should be excluded. But with hotels and others, there are always bad apples that ruin it. That's what they're really going after," said Ives.
The U.S. Bureau of Labor Statistics show the Consumer Price Index for food purchased at restaurants was up 4% in May from 2023, while food at grocery stores was up 1%.
It's partly why Hargrave is in a balancing act.
"It's a strange little tug-of-war that we're in right now. And I just hope everybody has an empathetic approach to what we're doing and what we're about to endure," said Hargrave.
He's hoping restaurants will soon be exempt, and in the meantime, the price on menus won't scare customers away. In addition to the junk fee law change to take effect, the minimum wage in San Francisco goes up on July 1.
Another survey for the American Economic Liberties Project found that 83 percent of respondents would be more likely to support candidates who back eradicating junk fees.