Starting in July, California restaurants and delivery services will be prohibited from collecting service fees from customers. This news struck a nerve for business owners, and famed entrepreneur Jon Taffer spoke out against the new law.
Lots Of Controversy
Critics describe the wage increase,
Making claims that it will bring on the inevitable menu price increases that would inadvertently hurt the business as a whole.
Recent Wage Changes In California
Following the recent announcement that many California fast food employees would soon be earning minimum wage of $20 per hour,
controversy ignited across the entire country.
Proponents Of The Wage Change
Advocates of the minimum wage increase have expressed concern that without the wage increase fast food workers do not earn a living wage,
And are not able to support themselves or their families.
New Legislation On Horizon
Lawmakers have announced another change for businesses in the food industry,
Starting July of this year, so-called “junk fees” are no longer allowed to be added to receipts for restaurants in California.
“The Money Has to Come From Somewhere Else”
Fox Business host Stuart Varney said,
“They’ve been relying on those junk fees to pay employee benefits.” “Now, that money has to come from somewhere else.”
Thoughts From Jon Taffer
Varney welcomed Jon Taffer,
best known for the reality TV show Bar Rescue, and asked him to break down the concept of junk fees and why they are important to businesses.
“We’re Nickel-and-Diming People”
“They’re taking that approach, it’s almost like the airlines, Stuart, with all the little charges that they’re adding,
you know, to fly on a plane today – aisle seat, window seat, baggage, etc – and we’re nickel-and-diming people,” Taffer continued.
Instead Of Menu Price Increases Restaurants Want Higher Service Fees
Taffer explained,
“A lot of restaurants have said, ‘I don’t want to raise menu prices, I’m gonna add some surcharges, if you will, to doing business with us.’” “‘I’m gonna put a $2 surcharge on every item to cover my increased energy or food cost.’”
“This is a Consumer Choice”
“I don’t believe that the state of California should be involved in the way that we go about doing our business,” he said.
“This is a consumer choice.”
What Taffer Thinks Is Best
Taffer explained that he made the decision to increase the prices on the menu
Instead of adding service fees at his restaurant.
Consumers Say Menu Price Increases Are More Transparent
Many restaurant patrons say they would rather have menu price increases over junk fees, they say they are more transparent.
Some people feel deceived when a meal is advertised as $9 and when their bill comes it shows as $11 because of the undisclosed surcharge.
“The $30 Hamburger”
Taffer said, “The consumer is starting, dare I say, to get used to the $30 hamburger.”
“Prices are incredibly high now – a hamburger in some markets costs what a stead used to cost.”
“Someone’s Got to Pay for It”
Wiederhorn said, “Someone’s got to pay for it and the restaurant operators don’t have the margin for that,”
“So, prices are going to go up.”
Other Industry Giants Agree With Taffer’s Concerns
Andrew Wiederhorn, founder of the restaurant group FAT Brands, recently shared concerns he has with the increased minimum wage in California.
Wiederhorn said that restaurant operation costs are increasing, and the difference has to be covered somehow.
Higher Menu Prices
Taffer promoted his approach of increasing menu prices to cover the higher costs,
saying that was a more “honest” way to shift the burden of expense to the customer.
Public Support
A notable amount of Californians endorse the plan to increase the minimum wage for fast food employees and get rid of surprise surcharges,
Their hope is that it will lead to a better overall customer experience because the workers will be well-compensated and the pricing will be transparent.
Consumer Protection vs. Government Control
However, government intervention in business matters is a fairly common occurrence when it comes to matters involving consumer protection. Some argue this ban falls under that umbrella
where others say the additional cost isn’t the issue, the fact that people are not informed of the true cost of dining out is.
Government Overreach
The biggest point of contention with the junk fees ban is that critics feel it is the government overstepping the boundaries,
And many people have a problem with the fact that businesses will be forced to change their practices as a result of the new law.
The Cost To Customers
As restaurant-goers in California brace for how this change in prices could affect their bank accounts, the question remains whether the increased menu prices will reflect the same extra charge as the previous service fees did.
If so, the bottom line for the customer should not change much, if at all.
