My business partners and I opened our NoPa restaurant, Che Fico, in 2018. From the start, we included a 4% surcharge to cover the additional costs we faced under the city’s mandated health care coverage plan, which requires restaurants to contribute to a city fund for employees.
San Francisco, CA
Opinion | Restaurateur: New law aimed at transparency will hit SF restaurants hardest
When Che Fico reopened post-pandemic, we were driven by a mission to rectify long-standing industry injustices that disproportionately favored a select few—primarily servers and bartenders—at the expense of other workers who didn’t receive tips and worked long hours in substandard conditions. We instituted a 10% surcharge, increased pay across the board and introduced new benefits, such as a 401(k) plan with a 4% match and profit sharing.
It was not easy. We had to adjust our shared tip pool several times to ensure everyone was included and that it was fair to our entire staff. We also increased hourly wages to compensate for potential tip losses. This model epitomized free-market capitalism, where ownership collaborated with labor to find common ground and consumers had the choice to support a business that resonated with their values. Our menu was always clear that the charge would be added to the final bill.
Now a new law known as the “junk fee” bill, taking effect July 1, aims to reshape California’s dining industry by banning restaurants from adding surcharges or service fees to their bills. Instead they’d have to raise menu prices, baking the surcharge in.
While this may initially appear to benefit consumers, it will disproportionately harm small businesses—the latest move in a pattern of well-meaning yet detrimental policy decisions targeting the restaurant industry. It also obscures the challenge of operating in San Francisco, where voters and officials have repeatedly approved costly additional mandates that operators elsewhere do not face.
We can all agree that hidden fees are frustrating. Nothing is worse than booking a hotel room at an advertised price, enjoying your stay and upon checkout, finding your bill laden with resort charges, Wi-Fi charges, valet parking and other surprise fees and taxes. I fully understand the frustration. I am a consumer myself. But the vast majority of restaurants don’t operate this way. If they charge surcharges or service fees, they post it on menus and let guests know when they book a reservation.
Transparency is the goal, and this is one way for operators to show customers all the things they are paying for, beyond the cost of food. Guests have thousands of restaurants to choose from, especially in San Francisco. They can simply decide a certain restaurant isn’t worth the fee. And no restaurateur who believes in good service and repeat business wants to leave a bad taste in a customer’s mouth upon dropping the check.
But the new law focuses more on appearances than on the operational realities of managing a restaurant in one of the nation’s most expensive urban environments.
Gavin Newsom enacted San Francisco’s Health Care Security Ordinance during his tenure as San Francisco mayor. As governor, he continues to influence policy in ways that strain local enterprises. The health ordinance has been one of the most damaging things to happen to San Francisco small businesses and can be directly linked to the beginning of the surcharge trend here. One of the most pervasive problems with that legislation is that it punishes businesses for growing and hiring more workers, adding a cost of several dollars per hour per employee for businesses with 20 or more workers. But rather than use his post as governor to propose a smart, statewide reform of the health ordinance, this new junk fee bill will throw out all surcharges regardless of their purpose or how they are communicated to consumers.
Advocates of eliminating service charges argue that doing so protects consumers, but that fails to consider the pressure San Francisco restaurants face—challenges beyond typical market fluctuations. They contend with some of the highest insurance premiums in the country, soaring utility rates from providers like Pacific Gas & Electric and a labor market characterized by escalating wages and staffing shortages. Consider:
Labor costs are rising: San Francisco’s minimum wage rose from $10.74 per hour in 2014 to $18.67 in 2024—a 74% increase approved by voters and the Board of Supervisors. Such spikes put a significant burden on labor-intensive sectors like the restaurant industry.
Inflation is increasing utility bills and the cost of goods: The pandemic further intensified supply chain disruptions, pushing the costs of ingredients up by about 15% in San Francisco. Officials have approved numerous rate increases for PG&E, leading to a 60-77% increase in commercial rates in the last decade, even as PG&E rakes in billions in profits.
Rent and property costs are soaring: The city’s commercial real estate market has also surged, with rents increasing by about a third since 2014. Rent or mortgage payments are the third-highest expense for many restaurants, after labor and cost of goods.
Surcharges have enabled small businesses to manage these rising costs without shocking customers with drastic or frequent price increases and allowed them to convey these external cost pressures. Removing them could lead to a sudden spike in dining costs, further deterring customers and pushing restaurants toward insolvency.
The irony is stark. Policymakers, comfortably dining at San Francisco’s top restaurants, seem oblivious to the adverse effects of their decisions on those serving them. By eliminating the option to communicate cost pressures through surcharges, the law does not support consumers. This will lead to decreased consumer spending, fewer shifts for waitstaff, reduced orders for suppliers and lower tax revenue from a once-thriving industry.
The “junk fee” law misunderstands basic economic principles: Thin operating margins and insufficient profits can lead businesses to close, which affects the entire community—workers, suppliers, service providers and local artisans. In my own restaurants, our surcharge has allowed us to improve pay across the board, offer a 401(k) with a 4% match and create profit-sharing. If Newsom’s intention is to dismantle these programs, then he is certainly being effective.
Hopefully, before the law takes effect, state leaders will have a dose of common sense and will revise the legislation to preserve the rich diversity of San Francisco’s dining scene. Otherwise, they will simply be compounding the issues that began with the initial health ordinance, without acknowledging the benefits workers and restaurant patrons receive surcharges are clearly spelled out.
David Nayfeld is the co-owner of Back Home Hospitality, which includes Che Fico. Find him at @davidnayfeld on X and Instagram.
Few things are more valuable in the Bay Area than real estate. In San Francisco, the median house price is now over $2 million. Last month, at least seven houses in the city sold for $1 million over the asking price, and buyers regularly offer to pay in cash or waive contingencies to stay competitive. Yet there is one thing that remains even more valuable than a house, and possibly more valuable than money itself: stock in Anthropic or OpenAI.
Last week, 160 Noe Street, an Edwardian home in San Francisco’s desirable Duboce Triangle neighborhood, was listed for sale at $2.9 million—or the equivalent amount in Anthropic or OpenAI shares, as based on those companies’ current valuations. Rachel Swann, the listing agent, says she was inspired to set these unusual terms after meeting several Anthropic employees at an open house for a different property. “These people have a lot of paper wealth, but they don’t always have the liquidity to do things they want,” Swann says. Some of these employees were expecting to come into as much as $50 million from their Anthropic shares, and wondered if they could use that as leverage to buy a house, according to Swann. “This kept coming up over and over again.”
Swann’s listing is unconventional, but not singular. In April, an investment banker named Storm Duncan offered to exchange his Mill Valley home and an adjacent parcel of land for Anthropic shares. And in May, Vijay Chattha, who owns an agency that does PR for tech companies, listed his Healdsburg home for $2.5 million, or $2 million in Anthropic stock. “I want to sell my house, and I want to invest in Anthropic,” Chattha says. “Why not combine the two?
Chattha’s house—a three bed, three bath with a pool and a bocce court in a part of Sonoma County that abuts some of the region’s most famous wineries—also comes with coveted short-term rental status, allowing the owner to list it on platforms like Airbnb. Only a handful of properties in Healdsburg come with that status, and only about a dozen come up for sale in a given year.
Chattha is offering a $500,000 discount to Anthropic employees because he believes the value of Anthropic shares will grow faster than any other investment, and his vacation home in wine country is the best bargaining chip he has to try to access them. “If you look at Anthropic’s growth last year, it’s insane,” he says, noting the $380 billion valuation the company claimed in February. “Now they’re raising at $965 billion. That’s three X in like three months.” He added that he was open to exchanging the house for shares in Anthropic, but not OpenAI, because he prefers using Anthropic’s products.
The real estate listings come at a time when investors are salivating at the record-high valuations of Anthropic and OpenAI, and even those considered wealthy by Bay Area standards are feeling FOMO about the affluence that could come from these companies’ debuts on the stock market. (On Monday, Anthropic submitted paperwork for its initial public offering; OpenAI is also reportedly preparing to file in the coming months.) Despite the unprecedented valuations of these companies, many people believe their stock prices will only go up, and that anyone who gets a piece now could win the jackpot.
People are clamoring to buy equity in OpenAI and Anthropic on the secondary market, leading to a frenzy of transactions that may or may not be legitimate. As a result, Anthropic updated its policy around “unauthorized Anthropic stock sales” this spring, which notes that “if someone purports to sell Anthropic shares without proper board approval, that transaction is invalid.” A spokesperson for Anthropic pointed back to this policy when asked about the possibility of exchanging company shares for real estate.
Welcome to our running tally of Election Night results. Or, as this is California, well beyond tonight, as results continue to trickle in.
The first batch of results should arrive at 8:45 p.m., with three more to follow tonight. The Department of Elections has the breakdown.
San Francisco is voting in three special elections, for District 2 and District 4 supervisors and for a Board of Education member. Both supervisor races are referendums on housing, especially District 2, while the main backdrop of the D4 race is all the hot feelings around the fate of the Sunset Dunes Park (nee Great Highway).
The winners of all three special races will have to compete again in November for their seats.
Keeping it local, SF is also voting on four ballot measures. Prop A is for a bond to pay for an emergency water-system. B is for term limits. C and D are dueling measures related to the “overpaid CEO” tax. (Links go to our reporting on each race or issue; or click here for our Election 2026 page.)
Vote local, think national: Which two candidates will advance to the November election to replace Nancy Pelosi?
Statewide races include the primaries for governor, education superintendent, lieutenant governor, and much more.
Polls close soon. If you haven’t voted yet, find your polling station here.
Tuesday, June 2, 5:40 p.m.
Two and a half hours until our polls close. Before we go down the local rabbit hole, a reminder that other states have primary action today: New Jersey, Iowa, New Mexico, South Dakota, and Montana.
Why does it take so long to get results in California? CalMatters has you covered on that story. We shouldn’t expect a call tonight on the governor’s race.
The last big election was November 5, 2024. (Remember?) Ten days later, there were still races to call in San Francisco.
So if you’re waiting for the pundits (and maybe even us) to tell you What It All Means, you might have to wait a while.
More from The Frisc…
San Francisco, CA
San Francisco voters to decide on dueling measures on Top Executive Pay Tax changes
San Francisco voters weighed in Tuesday on two competing measures that seek to change the Top Executive Pay Tax, with one of the measures also including a change to the Gross Receipts Tax.
Should both measures pass, the one with the most votes will take effect, according to the propositions’ legal text.
Currently, the measures state that most businesses with San Francisco gross receipts up to $5 million are exempt from the Gross Receipts Tax. And businesses that use more than half of their city payroll for in-house administrative and management services pay an Administrative Office Tax instead of a Gross Receipts Tax.
The Top Executive Pay Tax is a tax some large businesses pay if their highest-paid managerial employee earns more than 100 times the median pay of their San Francisco employees. Businesses that have city gross receipts up to $5 million and are not subject to the Administrative Office Tax are exempt.
Proposition C
Proposition C states it would increase the number of businesses that could be exempt from the Gross Receipts Tax and would stop any further increases to the “Top Executive Pay Tax” after a final rate bump.
The proposed measure says it would raise the Gross Receipts Tax exemption ceiling to $7.5 million. The $7.5 million ceiling would also apply to the Top Executive Pay Tax exemption.
As for changes to the Top Executive Pay Tax, Proposition C states it would implement the 2028 tax rate increase in 2027, but then stop any future increases.
Supporting Proposition C are Rodney Fong, CEO of the San Francisco Chamber of Commerce, and Chris Wright, senior vice president of Advance SF, an organization of companies, which includes Bank of America, OpenAI, Waymo, the SF Giants CEO and others.
Fong and Wright, in their argument for the measure, say giving businesses more tax breaks would help keep more employees on payroll and would give companies the ability to “contribute to city services in a predictable and balanced way.”
Critics of Proposition C, such as the San Francisco Tenants Union, slam the measure as “billionaire-backed” and argue it would kill the Top Executive Pay Tax and would hand out more tax breaks to businesses at a time when the city is in a budget deficit and faces cuts to essential services.
Proposition D
Proposition D also seeks to change the Top Executive Pay Tax, which is collected from some large businesses where the highest-paid managerial employee earns more than 100 times the median compensation paid to other employees.
If approved, the measure would change the calculation of the tax using the compensation of all employees, not just employees based in San Francisco. Top Executive Pay Tax rates would also be increased for San Francisco gross receipts and payroll.
Supporters have billed the measure as a way to counteract federal cuts to Medicaid. A report by the City Controller’s Office said the measure could result in $250 million to $300 million in additional revenue.
“Proposition D is the solution to our budget deficit. It asks large corporations — not small businesses, not working families — to contribute a little more,” supporters said in the city’s official voter guide.
The measure has the backing of most of the Board of Supervisors, along with labor unions and Rep. Nancy Pelosi.
Opponents, including Mayor Daniel Lurie and state Sen. Scott Wiener, have argued Proposition D would negatively impact the city’s recovery following the COVID-19 pandemic.
“San Francisco is already one of the most expensive cities in the country to live and do business. Adding extreme and unpredictable tax increases risks driving employers away just as we are trying to bring jobs, workers, and foot traffic back downtown,” said Supervisor Matt Dorsey in the city’s voter guide.
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