July 12, 2024
California Senate Bill 1524 was recently passed on July 1, 2024. Let’s talk about what it means for your business.
“Under SB 1524, businesses such as restaurants can exclude mandatory fees from the initially advertised price as long as these fees are clearly and conspicuously disclosed” (California Legislative Information)
Responding to Industry Specific Concerns
California Senate Bill (SB) 1524 was created to address concerns that California SB 478 could negatively impact restaurants, bars, and other foodservice providers. SB 478, which went into effect on July 1, 2024, requires most California businesses to include ALL mandatory fees in the advertised price for each product. Business advocacy groups argued that this law would make it nearly impossible for foodservice businesses to comply with – Menu prices would skyrocket, and restaurants would have to cut down on staff and business spending. Not to mention, it would be a significant investment to update every item’s pricing to account for every possible fee across every menu at every location.
SB 1524 introduced more realistic modifications to SB 478 that will still protect foodservice businesses from miscommunication and consumers from deceptive practices. It mandates that, as a compliant business, you must ensure your customers are fully informed about extra fees, such as gratuities and service charges, before the transaction. Your fee disclosures should be clear and visible to avoid any misunderstanding. Now, let’s dive into some compliance practices you can start to implement.
Stay Compliant with SB 1524
Where should I explain mandatory fees?
You should disclose and clearly explain mandatory fees on anything that shows food or beverage prices: printed menus, menu boards, fliers, ads, ordering platforms, websites, etc. SB 1524’s exception states that costs do not need to be incorporated into every menu item’s advertised price; they just need to be placed somewhere easily seen by customers.
Consider using these explanatory tools:
- Pop-up Windows: If you have an online ordering system, consider including pop-up messages to explain the fees before checkout.
- FAQs: Add detailed explanations in your website’s Frequently Asked Questions section to proactively address potential customer confusion.
- Terms and Conditions: Clearly outline the fees and their purposes in the ads’ terms and conditions of service.
- Separate Fee Section: Dedicate a section to explaining additional fees on printed menus, menu boards, or interactive menus.
- In-Store Signage: Place posters at the register in case customers have missed your other disclosure attempts.
- Verbal Communication: Train your staff to inform customers about fees using scripts and critical points. Make this a standard operating procedure for every transaction.
How can I make my fees more “clear and conspicuous”?
To reiterate the importance of this requirement, customers are often left confused when they receive their checks, as the prices reflected are not the same as the ones they saw. This has not been a good look for businesses. The goal of this requirement is to make it hard for customers to miss or misunderstand the fees.
Consider these practices:
- Marks & Symbols: Use symbols to draw attention to mandatory fees, similar to how you highlight dietary restrictions. Include footnotes with explanations.
- Text Differentiation: Use a larger font than the surrounding text. If you prefer to keep the font size consistent, use a different type or color to differentiate fee explanations.
Summary
SB 1524 aims to ensure that fees are transparent and disclosed upfront, avoiding surprises for customers when they receive their bills. To remain compliant, ensure your explanations are detailed enough to avoid being labeled as misleading. Communicate these fees proactively through staff education, web, or print materials. Most importantly, make it a habit to audit your compliance practices routinely to ensure that your descriptions of fees are not ambiguous or misleading.
Full compliance obviously does not happen overnight; the good news is there’s no need to panic! While SB 1524’s foodservice exception is already in effect, merchants have until July 1, 2025, to comply with the “clearly and conspicuously displayed” fee disclosure requirement. SB 478 has built a general compliance foundation, but a year from now, merchants will likely have a more specific definition to adhere to.
This may seem like a heavy lift initially, but ultimately, clear and consistent communication between merchants and customers will benefit both parties, fostering trust and maintaining profitability.
