After months of confusion and concern among some, service charges at restaurants are here to stay.
California lawmakers gave the green light to Senate Bill 1524 just hours before the state’s ban on “junk fees” went into effect. It clarified that restaurant fees, as long as they are 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 nonsense fees – hotels, concerts, whatever – but what we’re doing is not nonsense fees,” he said.
Chen has a 20% service charge on his menu that replaces the tip. He said most of the money goes to pay his staff.
“Ninety-five percent of that goes to the front and back of the house. The management and the owner don’t take anything,” Chen said. “And we tell our servers to let our guests know that there is a service charge included — there is no need for a tip.”
He said this business model works better for his company and for his employees.
“They’re making at least $3 more an hour — maybe $4 if we’re busy,” he said. “By having that little bit of extra money for them — not for me, not for my management, they’re getting a salary — they’re doing a better job for our guests.”
Chen said margins are thin for most restaurants in San Francisco and he believes a markup at the end of the meal is a better option than raising menu prices right away.
“If you don’t like the service charge, you don’t have to come. It sounds hard, but I have to take care of my people,” Chen said. “We haven’t raised our prices since COVID ended.”
Ask around and almost everyone who eats out has an opinion about restaurant surcharges.
“I think it’s totally fine. I think it’s pretty fair, actually,” said Trung Ly of Millbrae.
“I would rather have what you see is what you get, but more expensive up front,” said Max Aggarwal, who lives in San Francisco.
“It depends on the purpose of it. If it’s a fee to help out the waiters and waitresses, then I’m all for it,” said Leo Clark, who is traveling. “As long as it’s not too outrageous — some of the fees we’ve seen on the road at restaurants and hotels are pretty outrageous.”
“I think it’s fine if they tell you up front that there’s a 20% restaurant fee, but you don’t tip,” said Isis, who lives in San Francisco.
Under the new rules, transparency is paramount so that customers know exactly what they are 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 the service charge on their menu so that it is more clearly displayed.
“We’re going to emphasize that more. Now that this law has passed, I want to be 150 percent transparent,” Chen said. “Transparency is really key, right? You have to let your 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 on the use of service or surcharges on restaurant menus. So many of our members are independent restaurants and rely on these items to provide employee benefits and support wage equity. This clarification is greatly appreciated. We thank all the legislators who realized this and voted unanimously to pass SB 1524.”
