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Consumer Confidential: Should Californians pay an extra fee for their fast food? Pizza Hut thinks so

David Lazarus, Los Angeles Times on

Published in Business News

California is an expensive state for businesses — no one disputes that. One recent study found that we have higher overall business costs (wages, taxes, energy) than every other state.

I'm not here to challenge this, or to make the usual love-it-or-leave-it argument when it comes to whiny complaints from wealthy business leaders (hi, Elon!).

Rather, I want to call attention once again to the growing practice of businesses inflicting price hikes on customers without looking like they're raising prices.

A reader named Dave shared with me a screenshot of his recent online transaction with a Pizza Hut restaurant in the Venice neighborhood of Los Angeles. Attached to his $8.99 order for pasta and breadsticks was a 76-cent "service charge."

Clicking the link for "more info," Dave was informed that "the service fee partially offsets the increased cost of operations in the state of California."

This is separate from Pizza Hut's delivery charge and separate from state and local taxes. It's a fee explicitly passing along part of the restaurant's cost of doing business in California to its California customers.

 

And make no mistake: Pizza Hut and all other companies have every right to do that. First you recover your basic business expenses, then you set prices high enough to earn a fair profit. That's capitalism.

But that's not what's happening here.

This is sheer dishonesty. It's a company — one of many — trying to pull a fast one on customers by imposing a stealth price hike in the form of an added fee, rather than charging a list price that reflects actual business costs.

"It's called 'drip pricing,'" said Joseph K. Goodman, an associate professor of marketing at Ohio State University.

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