The Case of the $11 Margarita: Is It Legal to Withhold Menu Prices?

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:

  1. 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.
  2. When servers list the daily specials, they should also disclose prices.
  3. When a patron orders a custom food or beverage, have the server deliver the price information before serving the goods.
  4. 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.

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Tags: UCC, menus, open, price, pricing, restaurants


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Comment by Kyle-Beth Hilfer on May 2, 2012 at 10:46am

Joe, glad this is helpful. The issue requires vetting of menus and training for servers to ensure minimal risk for the restaurants.

Comment by Joe Welsh on May 2, 2012 at 9:35am

Great blog post. As we do menus for our clients we get asked this question all of the time about posting drink prices.

Comment by Kyle-Beth Hilfer on March 28, 2012 at 7:24am

Ivan, thanks for reading. You point out all the good pr reasons not to do this. I hope by clarifying the legal issues, I have shed additional light on the subject.

Comment by Ivan Collins on March 28, 2012 at 7:16am

I'm glad to see someone bring this up.  I find it really annoying that the specials tend to be super expensive and their prices seemingly left off the menu as though you shouldn't be price conscious if you want to order them.  I tend to ignore them, simply because they always leave a bad sense of sticker shock and I can't find the right time to barge in on the waiter's pitch to ask the price for each one.  I know it's an effective upsell technique or restaurants wouldn't be using it.  But it's an bad practice simply because it's not transparent.  Extracting every last dollar out of your customer in whatever way possible is not a model for success.  Embrace their budget and offer specials that help them get the most out of their dollar should be the goal. 

Comment by Kyle-Beth Hilfer on March 28, 2012 at 6:37am

Christopher, thanks for your good marketing sense. You may have seen the article on front page of today's NYT talking about how consumers know if they are getting a fair price and demand it.

Comment by Christopher Wells on March 27, 2012 at 9:21pm

Not only are they possible legal repercussions, restaurant owners need to remember that while they may make a bit more money in the short term with undisclosed prices on their menu, when the guest receives the bill they might be in for a shock.

When that happens they will most likely take their business elsewhere. As human and consumers we don't enjoy being taken for a ride, being tricked. It's not a fun feeling to feel like you've been played.: In most cases the guest will not make a scene for a few dollars, but will walk out feeling negatively about your restaurant, your brand.

Your marketing dollars are spent to bring in guests, send them home happy and ideally create repeat business with these guests. That's marketing and customer loyalty 101. When you trick them to make a few bucks on a drink you are being counterproductive. 

Transparency and honesty are the best way to build relationships with your guests. It is true that most places that don't disclose their drink prices are often hot spots for tourists. So the thinking is we might as well milk them for all we can while they are here. Wrong again. Tourist come back, the word gets around. Especially with social media the word gets around fast and comments stay online for everyone to read in the future. Don't ruin your name for the sake of a quick buck!

Be transparent and forthcoming with guest and you will always win in the end! 




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