SB 478: New Ban on Adding Service Charges at California Restaurants

May 13, 2024

Starting July 1, California restaurants must adhere to a new state law banning undisclosed fees and surcharges. The law requires businesses to include all mandatory fees in advertised prices. Guidelines from Attorney General Rob Bonta clarify that such charges must be incorporated into menu prices. The Golden Gate Restaurant Association criticizes this, fearing increased menu prices and potential job losses. The law applies broadly to all businesses, except for government-imposed taxes or fees and reasonable shipping costs. Handling fees must be included, while separate charges for optional services can be excluded. Late fees and similar charges don’t require advertising. Businesses must not advertise one price and then add fees later. Those uncertain of final costs should wait to display prices. Live Nation Entertainment supports the law, having already implemented all-in pricing at some venues. The Travel Technology Association prefers a national standard for lodging price regulations. Expedia also opposed the bill. Bonta argues that California doesn’t need federal action to ensure consumer transparency, labeling hidden charges as deceptive and unfair. Exemptions for third-party delivery services like DoorDash and Ubereats are in place.


However, the law also presents challenges for the restaurant industry. Restaurants implementing such fees after July 1 could face lawsuits from diners, a potential outcome that disappoints the industry.  The Golden Gate Restaurant Association, a prominent voice in the industry, had hoped for a carve-out in the law. Previously, lawmakers suggested that restaurant service fees would be acceptable if they were clearly disclosed, but this is not the case. The association warns of significant challenges ahead, predicting menu price increases and potential job losses for workers, highlighting the industry’s concerns and uncertainties.


For more detailed information and answers to specific questions, visit California’s Office of the Attorney General for a comprehensive set of FAQs. These cover questions like ‘Do fees for optional services or features need to be included in the advertised price?’ ‘What about tips or gratuities left voluntarily by customers?’ and ‘What if a business doesn’t know how much it will charge a customer?’ This new law may raise many questions, so it is important to learn how it impacts your restaurant.