In California, menu prices are set to increase once more due to a new law coming into effect during the summer. This comes as a double blow for fast-food chains in the state, who had already raised prices to accommodate the $20 minimum wage mandated by the state last month.
The new law, signed by Governor Gavin Newsom, prohibits “junk fees” in the state starting July 1, forcing restaurant owners to raise prices as it bans restaurant surcharges and fees.
Previously, restaurant owners used surcharges to provide benefits like health care to employees, sometimes making them optional for customers.
However, with the new law in place, restaurant owners are left with no choice but to raise menu prices to comply.
The California attorney general confirmed that restaurant surcharges and fees would be illegal under the new law, posing a challenge for the industry.
Director Laurie Thomas of the Golden Gate Restaurant Association expressed concerns that the law will put restaurants in a difficult position, potentially leading to lower wages for employees or deterring customers with higher prices.
“So, now, do you take their rate down and do you go to an old-fashioned tip model and say to your servers, ‘You have to tip the whole house, but that drops everybody’s salaries’ or do you raise your prices 20%, 25%?” Thomas said. “It might make a lot of customers happier.”
“They might say, ‘We understand why prices went up.’ Let’s hope that happens. But I don’t know if our industry can hope that’s what happens. They’re still struggling. It’s been a tough year.”
According to North Dakota Governor Doug Burgum, the increase in the minimum wage for fast-food workers in California is detrimental to businesses, labeling it as a ‘business killer’.
Governor Burgum highlights that the new minimum wage law in California will impact every food-serving business in the state.
Additionally, food writer Marcia Gagliardi shared with CBS News Bay Area that the implementation of the new law will lead to an escalation in prices for consume
“I see restaurants easily raising prices 5%, 15%. It’s going to be tricky,” she told the outlet. “We’re going to be seeing even higher prices based on this unfortunate interpretation. But not all is lost. … Things could change.”
