With razor-thin profit margins, every dollar counts in the restaurant business. That’s why operators are often focused on mitigating costs, whether that means streamlining schedules, working with vendors and suppliers to make sure they’re getting the best food prices or implementing technology to simplify processes and services.
But one line item operators might not know they can optimize is credit-card fees. Merchant service fees from major credit card vendors—though they seem small at 2 to 4%—can add up to thousands of dollars a month. And many restaurant owners aren’t aware that they can alleviate the amount of money they spend on them.
By implementing technology that passes on the merchant service fees to the consumer, restaurant operators can save up to 90% of their service fee costs every month, depending on how much of their business is processed with credit cards (versus other payment methods).
It’s all thanks to a 2013 class action lawsuit. That settlement, says David Leppek, founder of Transaction Services and executive payment consultant, involved “a rule change that would allow a merchant to surcharge the cardholder to help cover the costs of accepting credit cards.” Prior to the lawsuit, operators were prohibited from that practice, but now, merchants can surcharge up to 4% on credit card transactions.
The surcharges are simple to pass on to consumers, and best of all, they don’t have to affect diners’ opinion or experience with a restaurant. If they don’t want to pay the surcharge, they have the option to pay with a debit card—as there is no surcharge tacked on with debit cards—or they can pay with cash.
Savings for operators
When using technology that passes credit card fees onto diners, restaurant operators will need to be transparent about that practice to ensure customer satisfaction. However, because diners still have other payment options, it’s not likely to cause issue, which is welcome news for operators who may be worried about how their restaurant will be perceived if this option is used.
As for the benefits for the restaurant and operators, it’s clear—the higher the check average, the bigger the savings. In other words, operators save an average of 50% of their merchant fees, assuming a business is split evenly between debit/cash and credit cards.
“It’s great for the merchant,” Leppek says. One client he referred to that implemented this technology processed $200,000 in sales per month and was paying about $4,000 per month in fees. In the first month they used this surcharging technology, however, their fees were down to just $400.
For restaurant operators looking to trim costs, taking another look at credit card fees can be a great way to do so and can provide cost savings averaging about 50%, every month. Can you afford not to explore this technology?
For more information, contact the experts at Retech Payment Systems today.
This post is sponsored by Retech Payment Systems