Many restaurants do not disclose the price of specials or cocktails on menus, hoping the impulse to imbibe will sway the customer. Restaurateurs should be aware that this practice has legal risk.
In February, 2012, the Cheesecake Factory announced that it would begin posting drink prices at its Massachusetts locations. This announcement came after a patron’s attorney threatened to sue under the Massachusetts Consumer Protection Act (MCPA) because the restaurant charged $11 for a margarita. The price for the drink had not been listed on the menu, and the server had not known the price when the patron ordered.
Is there something unique in Massachusetts? No. The MCPA is the state statute adopting the Uniform Commercial Code (UCC), a model code governing the sale of goods and services. All states and the District of Columbia have similar statutes. The UCC applies to the relationship between restaurants and customers and governs restaurants’ sale of goods, namely food and drink. The Code’s open price provisions at section 2-305 dictate what happens when the price of goods is not established upfront. Where a customer and a restaurant have not agreed on a price for a meal or drink, the restaurant is not free to set the price as it pleases, but it must charge a “reasonable price.” A jury would determine what constitutes a “reasonable price” in the event of litigation.
Practically speaking, when patrons are surprised by a bill at the end of the meal, they pay the bill and perhaps tweet their dissatisfaction. While that can cause some public relations problems, rarely, however, do they pursue legal action.
So what was different in the case of the Cheesecake Factory? The patron’s attorney had previously taken issue with pricing disclosure issues at restaurants. In July, 2011, he had started a Facebook page called “PriceMyMenu.” When his friend complained about the $11 margarita, the lawyer threatened to sue. Most likely, the Cheesecake Factory wanted to avoid any risk of a class action lawsuit in Massachusetts. Such a suit might seek double or treble damages plus attorneys’ fees. Jurors might have been outraged by an $11 margarita, especially in today’s economy.
So what lessons are there for restaurants from the case of the $11 margarita? The following preventive steps will avoid public relations and legal hassles:
- Update menus to list prices. This is particularly important in online and mobile applications where there is no opportunity to interact with the server before placing the order.
- When servers list the daily specials, they should also disclose prices.
- When a patron orders a custom food or beverage, have the server deliver the price information before serving the goods.
- Franchisors should set clear policies on pricing disclosure for all its locations and ensure its franchisees are following guidelines.
Copyright Kyle-Beth Hilfer, P.C. 2012. Kyle-Beth Hilfer is an advertising and marketing attorney and regularly advises clients on issues in pricing goods and services as well as other marketing strategies. Ms. Hilfer is of Counsel to Collen IP. To contact Ms. Hilfer, please visit her FohBoh profile or tweet her @kbhilferlaw.