Why your restaurant bill could soon look different in California

A woman in dark clothes speaks to people seated at a table in restaurant
The dining room at Ladyhawk in West Hollywood in January 2024.
(Ron De Angelis / For The Times)

Good morning. It’s Friday, Feb. 16. Here’s what you need to know to start your day.

Your restaurant bill could look different soon

If you enjoy dining out or ordering in from restaurants, you’ll notice some changes to your bills later this year.

This summer, restaurants and bars cannot tack on unadvertised service fees and other additional charges to the check after your meal.


That’s because Gov. Gavin Newsom signed Senate Bill 478, which takes effect July 1. The new law aims to prohibit “junk fees” across an array of industries and will also apply to delivery apps, online ticket sales and hotels.

The law was co-sponsored by Atty. Gen. Rob Bonta, who previously said the “deceptive fees … are bad for consumers and bad for competition.”

As Times food reporter Stephanie Breijo notes, people have an array of opinions about those service fees, but restaurateurs she spoke with consider them vital to providing workers with benefits and financial stability in a largely volatile industry.

“Many owners of restaurants and bars rely on now-ubiquitous surcharges to offer employee benefits such as healthcare and higher wages and often note surcharges on menus,” Stephanie wrote this week. “Some are listed as ‘elective,’ left to the discretion of the diner.”

With the new rules less than five months away, restaurant owners and advocates she spoke to voiced concerns that the changes could “upend” the industry — especially as restaurants in the state contend with lingering pandemic effects, increasing labor costs, high taxes and strict regulations, all while operating on razor-thin margins.

What can diners expect?


Basically, the total on your bill won’t necessarily go down — but you will know what you’re paying for. Service charges can still exist, but must be explicitly displayed in menu prices rather than being added at the end as a percentage of the total price, Bonta’s office said.

The result, as Stephanie explained, could be sticker shock “when a $35 menu item in theory could now be listed at $42.”

But many restaurants will want to continue to pay workers the wages and benefits made possible through those surcharges.

“Rolling surcharges or fees of 1% to 20% or more into menu pricing could also trigger other business costs,” she noted.

A lot of that depends on whether restaurants automatically add charges or leave that choice to diners.

When a diner voluntarily decides to pay the surcharge, it is not taxable. When the surcharge is added to the price of menu items, it becomes taxable income for the business, Stephanie explained, citing the California Restaurant Assn.


Restaurants brace for impact

How customers respond to those price increases could determine the fate of many businesses across the Golden State.

Although signed bills typically become state law Jan. 1, these new restaurant rules were delayed to give businesses more time to prepare for implementation. But many restaurant owners are still unclear on compliance and frustrated by the state’s communication so far.

”It’s not going to drop the price of dining out,” Laurie Thomas, executive director of the Golden Gate Restaurant Assn., told Stephanie. “What it might do is close more restaurants. But maybe people don’t care about that anymore.”

The law also bars the increasingly common 18% service charge added for dining parties of six or more. James Beard Award-winning restaurateur Caroline Styne told Stephanie that would be unfair because larger parties require more labor.

“There are a lot of businesses that will be upended by this,” she said.

You can read more from Stephanie on the new law and how it could affect delivery app ordering this summer.


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Have a great day, from the Essential California team

Ryan Fonseca, reporter
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