Restaurants fees allowed to remain with transparency being key focus
After months of confusion, and concern for some, restaurant service fees are here to stay.
California lawmakers green lit Senate Bill 1524, just hours before the state's "junk fee" ban went into effect. It clarified restaurant surcharges, as long as they're clearly presented, are not considered "junk fees."
George Chen, the chef and owner of China Live in San Francisco, is grateful for the decision.
"I'm all for getting rid of junk fees – hotels, concerts, whatever – but what we do is not a junk fee," he said.
Chen has a 20% service charge listed on his menu that replaces tipping. He said the majority of the money helps pay his staff.
"Ninety-five% of it goes to the front and back of the house. Management and ownership does not take any," Chen said. "And we tell our servers to let our guests know that a service charge is included – no tip is necessary."
He said this business model works better for his operation and for his staff.
"They will make at least $3 more an hour – maybe $4 when we're busy," he said. "Having that little bit of extra money for them – not for me, not for my management, they're on salary – they do a better job for our guests."
Chen said margins are thin for most restaurants in San Francisco, and he believes having a surcharge at the end of the meal is a better option than raising menu prices upfront.
"If you don't like the service charge, you don't have to come. That sounds tough – but I have to take care of my people," Chen said. "We didn't raise our prices since the end of COVID."
Ask around and just about everyone who dines out has an opinion about restaurant surcharges.
"I think it's completely fine. I think it's actually pretty fair," said Trung Ly, from Millbrae.
"I'd rather have, what you see is what you get, but more expensive on the front end," said Max Aggarwal, who lives in San Francisco.
"It depends on the objective of this. If it's a fee that's to help the waiters and waitresses, then I'm all for it," said Leo Clark, who's traveling. "As long as it's not way outrageous — Some of the fee's we've seen on the road at restaurants and hotels are pretty outrageous."
"I think it's OK if they tell you up front there is a restaurant fee, it's 20%, but there's no tipping," said Isis, who lives in San Francisco.
Under the new rules, transparency will be paramount so that customers know exactly what they're paying for.
Aggarwal agrees with that element of the change.
"I think transparency is key," he said.
Chen said they plan to change the display of their service charge on their menu to make it even more pronounced.
"We're going to highlight that more. Now with the passage of this law, I want to be 150% transparent," Chen said. "Transparency is really the key, right. You have to let you customers know what you're doing."
The Golden Gate Restaurant Association applauded the legislature's decision.
"After nine months of stress and uncertainty, we are relieved to have clarity as to the use of service or surcharges on restaurant menus. So many of our members are independent restaurants and rely on these line item charges to provide employee benefits and support pay equity. This clarification is much appreciated. We thank all the lawmakers who realized this and voted unanimously to approve the passage of SB 1524."