The Colorado Legislature is currently working on a bill (HB24-1151; Disclose Mandatory Fees in Advertisements) that will change the way businesses disclose, advertise, and display prices, including non-discretionary and mandatory fees such as service charges.
The Colorado Restaurant Association (CRA) worked with the bill sponsors early on in the legislative process to address the restaurant industry’s specific concerns about these fees, and to make sure that restaurants who use service fees as part of their business models wouldn’t be put at a disadvantage once this bill becomes law.
We expect the bill to pass and become law by the end of the legislative session in May. To prepare for the new compliance requirements, we’ve outlined industry best practices for posting and notifying guests about non-discretionary and mandatory fees:
What is a non-discretionary and mandatory fee?
A non-discretionary and mandatory fee is defined as any fee added to a purchase that the customer cannot opt out of, or that is not dependent on the customer’s actions or choices. One example: A four-percent “back-of-house pay” or “happy kitchen” fee added to all transactions in a restaurant would be considered non-discretionary and mandatory, since the fee is added in all situations and the customer cannot avoid paying it. These fees are different from tips, which are non-compulsory. (Read more about tips vs. service charges.)
By contrast, a credit-card surcharge applied to all payments made with a credit card would not be considered non-discretionary and mandatory since the customer has the option to pay with something other than a credit card, ie. cash. Things like delivery fees and mandatory service charges for large parties also fall into this category since each depends on a customer’s decision.
What will the law require my restaurant to do?
As the bill is currently written, any business that holds a retail food establishment license — which all restaurants operate under — will be required to disclose any non-discretionary and mandatory fee at the business’ physical premises, either on the menu or on tabletop or countertop displays, or through signage on the premises as well as on the businesses’ webpage where prices are advertised.
It’s already best practice to notifying customers of any service charges included in their restaurant experience, but once HB24-1151 becomes law, it will be mandatory to do so following the methods listed above. As such, we recommend that restaurants incorporate these fee notifications into their onsite signage and website content as soon as possible.
In addition, even though it will not be required by the new law, we strongly recommend training your staff to inform customers of any non-discretionary and mandatory fee that exists at your business before taking a customer’s order to ensure full transparency and avoid any potentially negative interactions with customers.
As always, please contact the CRA government affairs staff — Colin Larson or Rebekah Hernandez — if you have any questions or concerns.
