‘Bar Rescue’ host Jon Taffer slams California for getting ‘involved’ in the restaurant business — warns of ‘incredibly high’ menu prices. Does he have a point?

This summer, California will follow through on its promise of a new state law banning service fees and other additional costs that are typically added to restaurant meals and delivery services.

Back in October 2023, California Governor Gavin Newsom signed into law Senate Bill 478, which aimed to address the so-called “junk fees” associated with the food and entertainment industry, including hotels, bars and delivery apps.

This legislation will go into effect July 1, 2024.

The law has elicited varied responses from restaurant owners, with some expressing concerns over potentially significant price hikes.

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Jon Taffer, the executive producer and host of “Bar Rescue,” shared insights into why restaurants resort to surcharges during a recent Fox Business interview.

“A lot of restaurants have said, ‘I don’t want to raise menu prices, [so] I’m going to add some surcharges,’” he explained. “[Or], ‘I’m going to put a $2 surcharge on every [menu] item to cover my increased energy or food cost, [or] I’m going to put a $1 surcharge on there to cover my increased employee medical insurance costs.’”

He likened the strategy to what airlines do when imposing fees for seat selection and oversized baggage.

Taffer expressed dissatisfaction with California’s approach to the “junk fee” ban, stating, “I don’t believe that the state of California should be involved in the way that we go about doing our business.”

But does Taffer have a point?

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$30 hamburgers

While Taffer is critical of California’s intervention in restaurant business practices, he said that he doesn’t believe in surcharges.

He argued that, ultimately, this should be a consumer decision, as the consumer will see the check and “speak with their wallet” — meaning they’ll make their preferences known through their spending habits.

“For Taffer’s Tavern, we chose not to go with surcharges, we just dropped it onto the menu charges,” he revealed in the FOX Business interview.

This approach can often result in higher menu prices; a change Taffer believes consumers are beginning to accept, noting, “The consumer is starting, dare I say, to get used to the $30 hamburger.”

Taffer highlighted the inflation in dining out costs, stating, “Prices are incredibly high now — a hamburger in some markets cost what a steak used to cost.”

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Restaurant math

According to Taffer, restaurants face significant financial pressures, with a third of revenue going toward food and beverage costs, another third to labor, and 10% to 15% to administrative and other expenses.

As a result, restaurants simply “don’t have a lot of margin to play with,” he told FOX Business.

This sentiment is echoed by Andrew Wiederhorn, chairman and founder of restaurant operator FAT Brands, who warned that dining out costs would rise in response to minimum wage increases.

“Someone’s got to pay for it and the restaurant operators don’t have the margin for that,” Wiederhorn cautioned. “So, prices are going to go up.”

Taffer concluded by emphasizing the importance of transparently covering costs through menu pricing at his restaurants.

“Let’s do it honestly, let’s just do it through the menu,” he suggested.

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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.