As of July 1, 2024, a new law known as the "Honest Pricing Law" or "Hidden Fees Statute" (SB 478) will come into effect in California. This legislation is designed to enhance price transparency for consumers, and it carries significant implications for businesses, including restaurants and bars.
Here’s what you need to know and how you can ensure compliance with the new requirements.
Understanding SB 478
SB 478 makes it illegal for businesses to advertise or list a price for goods or services that does not include all mandatory fees or charges, except for certain government taxes and reasonable shipping costs. This means that any mandatory fees, such as credit card processing fees, must be included in the advertised price.
Impact on Your Restaurant
The implementation of SB 478 will require significant changes in the way you structure your menu pricing and staff compensation. The California Attorney General’s office has officially confirmed that all restaurants and bars must remove mandatory service charges from diners’ bills and incorporate these fees into listed menu prices. This means you will need to rethink how you manage service fees, healthcare costs, and automatic gratuities.
Industry Concerns
The restaurant industry has expressed significant concern over this change. According to the Golden Gate Restaurant Association, the ban on service fees could lead to a wave of price increases as restaurants strive to maintain their revenue and compensate their staff adequately. Laurie Thomas, President of the Golden Gate Restaurant Association, highlighted the potential for businesses to suffer, stating, “It could put people out of business immediately.”
Steps to Comply with SB 478
While we are not responsible for setting your prices, we want to provide you with some guidance on how you can comply with this new law:
Review Your Pricing Structure: Assess your current menu and pricing. Ensure that all advertised prices reflect the total amount your customers will be required to pay, including any mandatory fees.
Update Your Menu: Clearly indicate any additional fees. For example, you can place an asterisk (*) next to each menu item with a note stating, “This price includes an x% credit card fee charged at checkout.” This note should be visible both on physical menus and on your digital ordering systems.
Communicate Changes to Your Customers: Transparency is key. Inform your customers about the changes in pricing and the reasons behind these adjustments. This can be done through signage, digital notifications, and verbal communication from your staff.
Consult Legal and Local Authorities: While we aim to provide helpful guidelines, it is crucial to consult with your local government officials or a legal advisor to ensure full compliance with SB 478. They can offer specific advice tailored to your restaurant's unique situation.
Why This Law Matters
The purpose of SB 478 is to prevent deceptive advertising practices and ensure that consumers see the full price they will pay upfront. This promotes fair competition among businesses and allows consumers to make informed decisions based on accurate price comparisons.
Frequently Asked Questions
Q: What does SB 478 require?
A: The law requires that all advertised prices include all mandatory fees and charges, except for government-imposed taxes and reasonable shipping costs. This means the price your customers see on the menu must be the price they pay.
Q: Are there any exceptions?
A: Optional service fees or charges for optional features do not need to be included in the advertised price. Only mandatory fees must be included.
Q: Does this limit how much I can charge?
A: No, SB 478 is a transparency law, not a price control law. You can charge any amount for your goods or services, but the advertised price must include all mandatory charges.
Q: How should I display mandatory fees?
A: Mandatory fees should be incorporated into the total advertised price. You can also provide a breakdown of the various components that make up the total price, as long as the full amount is clear to the consumer.
Final Thoughts
Ensuring compliance with SB 478 is essential for your restaurant to avoid penalties and maintain transparency with your customers. While we are here to provide guidance, it is ultimately your responsibility to ensure your pricing complies with the new law. We strongly recommend reaching out to your local representatives or legal advisors if you have any questions or need further clarification.
By taking these steps, you can navigate the changes brought by SB 478 and continue to provide a transparent and fair pricing experience for your customers.
If you have any questions or need further assistance, please feel free to reach out to your INFI support team or local representatives - we've also put together a guide in our support portal "How to Make Pricing More Transparent for Your Customers"
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