Close the drapes, lock the door and send any children out of the room, because we’re talking rebellion, people. A foot has been on the restaurant industry’s throat for too long, and it’s time to resist. A good place to start is by replacing whatever Help Wanted sign is in your windows with a placard shouting, “Cash, please.”
If you want to shoot banks and credit card companies a raised middle finger while you’re doing it, so much the better. They, after all, are the ones driving a wedge between you and your customers.
They’ve hiked the fees you’re charged for credit card transactions to the highest levels in the world, with little fear of pushback. How can you walk away from that opportunism when there are few if any alternative routes for getting reimbursed for card charges? Big financial concerns control the pipeline, despite decades of effort by merchants to mix a little competition into the processing field.
Walk along any restaurant row and you’ll see the decidedly imperfect solution operators have cooked up to protect margins. Seemingly overnight, a noticeable portion of the industry has chosen to charge customers paying by card an extra 3.5% of their total bill to cover the swipe fee.
The practice might thwart a big bite from being taken out of the bottom line, but the effect on sales remains to be seen. Still, how can it be good? Traffic has been significantly down for the business, a problem usually blamed on sky-high menu prices.
Menu inflation slowed last year to 5.5%, according to federal data, a level that would have left operators sobbing a decade ago. But it was a welcomed trend after the nearly 9% gait of 2022.
Add 3.5 points to the current 5.5% pace and we’re back in the grimmest of days, at least from customers’ perspective.
In my neighborhood, a bedroom community outside of New York City, you’d be hard-pressed to find a restaurant or deli that isn’t levying the 3.5% credit card surcharge. But a majority are also trying a Plan B to combat high swipe fees. Pay by cash, and you’ll get a 10% discount.
Our household almost always does, even for delivery. And we probably order from restaurants about 10 times per week.
It’s a significant switch for us, but the practice signals a sea change for restaurants. The business has traditionally courted deal-hunters by mixing low-priced choices into the menu. Now many operators are allowing price-sensitive patrons to economize through the way they place and pay for orders. Order delivery or takeout digitally, or without taking up an employee’s time, and you’ll often get a discount.
The homegrown solutions are imperfect at best. Who’s going to carry around several hundred dollars in cash just to avoid credit-card surcharges? It’s an inconvenience in an age when convenience is king.
Plus, it comes at a time when the industry is increasingly pointing to violent crime as a rising issue of concern. The two trends are contradictory.
A far better solution would be to force competition into the card-charge processing business. A bill pending in Congress would do exactly that. The Credit Card Competition Act would require large banks that issue MasterCard or Visa credit cards to permit processors other than those giants to move funds from customer to merchant. The theory is that the competition would at least delay future hikes in swipe fees, if not roll the charges back.
Advocates for the restaurant industry have set swipe fee reform as a priority. They note that the processing charges are now a typical restaurant’s third-highest expense, behind food and labor costs.
But they note that the lobbying fight promises to be a fierce one, given how much might the banking industry has traditionally wielded in Congress. It argues that smaller processors can’t provide the data security that a MasterCard or Visa can.
It also contends that consumers wouldn’t benefit from a rollback in fees because retailers would just pocket the savings instead of reducing prices.
“Interchange is the cost of doing business,” Jim Nussle, CEO of the banking business’ Credit Union Association, said in a statement last year. (Interchange is the technical name for swipe fees.)
We ink-stained wretches can use columns like this one to sound off on the charges. Now any operator (or consumer, for that matter) can raise their voice, courtesy of the National Restaurant Association. It’s set up a pipeline to channel operators’ thoughts on swipe fees to their Congressional representatives.
We strongly encourage you to use it. And may the revolt prevail.