Coming Soon: New Surcharges at Restaurants in Pasadena?

In a story that may foreshadow imminent developments in Pasadena, a San Diego newspaper has reported some Southern California restaurants have recently begun applying “secret” surcharges to diners’ bills, or telling diners that the new surcharges are mandated by the government, which is not true.

While some charges can be imposed legally and some restaurants in the city have done so, San Diego City Attorney Mara Elliott called the practice “false advertising” and has been sending warning letters to restaurants accused of the practice, demanding that they stop such surcharges or face legal action.

In San Diego, the charges— about 3% — are meant to offset the effects of an increased minimum wage in the city, similar to Pasadena’s new minimum wage ordinance, which went into effect in July.

“To adapt to wage increases, restaurants around the state have either raised menu prices, reduced employees’ hours, reduced their own hours of operation, or adopted a surcharge or, in some cases, eliminated tipping and are now using a service charge. San Diego is not alone in this challenge and restaurants are not the first business to use a surcharge—many hotels and transportation providers also use a surcharge, the California Restaurant Association (CRA) said in a statement Friday.

Could this happen in Pasadena? According to at least one industry expert, restaurants in Pasadena could begin to apply surcharges to diners’ checks, and it could happen soon.

“If you’re not already seeing it in Pasadena yet, you will soon,” said Sharokina Shams of the California Restaurant Association (CRA). According to Shams, Pasadena residents may see one or all of three things in the near future.

“You’ll see restaurants either using a surcharge,” she explained, “or a service charge, which can be as high as 18% or so, which typically eliminates tipping, or you may see menu prices go up.”

“Many businesses all over California have been scrambling to find ways to adapt to the rising minimum wage,” the CRA statement added. “In a restaurant, labor costs often account for a very large portion of overall operating expenses, in an industry with remarkably low profit margins and high failure rates,” the statement continued “This is why, when you hear about the minimum wage, you often hear about how it impacts restaurants.”

“Its an unprecedented time of change in the restaurant industry, partly because of rising labor costs,” Shams added, saying that “the rising minimum wage has been the tipping point for restaurants.”

“But even before that,” said Shams, “restaurants are dealing with skyrocketing rents, in most metro areas of the state. And they are also dealing with higher state and local taxes, and well as higher Workers Compensation costs.”

While much of the discussion surrounding the higher minimum wage in Pasadena has centered around enforcement, Pasadena Chamber of Commerce President Ishmael Trone also recently lamented the high costs of restaurant operations in the city, but the surcharge discussion has apparently not taken place in Pasadena. Yet.