Restaurants Are Resisting the ‘Junk Fee’ Crackdown

Thinking of dining out this fall? Keep an eye on the bill. The Federal Trade Commission (FTC) is expected to release regulations prohibiting businesses, including restaurants, from imposing “hidden or misleading fees”.

The Biden administration has been cracking down on junk fees from ticket processing fees to banking overdraft fees. Additional surcharges on a restaurant bill could also be affected, but restaurants believe they should be excluded from this legislation.

Sudden Surcharges

So what might restaurant surcharges look like? A few percentage points added to the bill to cover health care costs for staff, or to stem the increased cost of labor overall. During the peak of pandemic inflation, diners even saw inflation-specific surcharges on bills.

But Americans are growing increasingly fatigued from paying fees. That’s especially true when dining out, since diners are already expected to tip on top of their meal. A ban on fees could incentivize restaurants to raise menu prices to cover the same costs, which could lead to higher bills for consumers but at least fewer surprises when the check arrives.

But restaurants see it differently. The National Restaurant Association argues that many restaurants are small businesses with razor-thin margins, and can’t easily absorb cost increases or pass them on to customers without losing out to the competition or going out of business. The association also maintains that getting rid of fees would actually decrease transparency, and claims the practice of adding surcharges isn’t widespread.

Future of Fees

This fight over fees will likely play out on the state level. California, for example, has passed state legislation that excludes bars and restaurants from “junk fee” rules, so long as any potential surcharges are made clear upfront.

For Americans planning to eat out, however, it may mean to budget a little more for the bill.

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