How to Control Credit Card Fees to Improve Profits in your RestaurantAugust 01, 2013
3 ways you can decrease credit card fees for your restaurant.
While credit card processing fees are a necessary cost of doing business these days, restaurants are faced with the daunting task of controlling these costs to preserve profits. As a result of a multibillion-dollar class action settlement last year, businesses can handle customers in different ways when they use credit cards.
Here are a few ideas to consider:
- Discounts for Cash – Many restaurants have decided to offer patrons discounts for using cash instead of credit cards when paying their tabs. Offering consumers this discount may deter some patrons from using credit cards when they have the choice. By avoiding the credit card processing fees altogether, the restaurants are, in turn, sharing some of these savings with their patrons. While retaining a portion of these savings, they have thus, increased their bottom line.
- Tack on a Surcharge – Starting in early 2013, businesses are now allowed to add a surcharge of up to 4% onto the tab of those using credit cards to pay. A US District Court determined that companies were allowed to pass along the cost of credit card interchange fees to the customers (although ten states have laws prohibiting these surcharges). The business must clearly post signage or disclose this surcharge in their menus to comply with consumer awareness rules. Customers can still avoid the surcharge by using a debit card. Given the competitive landscape, many restaurateurs have been hesitant to alienate patrons by charging them extra to use their plastic.
- Negotiate for Lower Credit Card Costs – Independent restaurants have limited buying power or clout, especially with credit card companies, since their volume is not large to get the more favorable rates offered to chain restaurants. Recently, a group of local restaurants in Boston formed a “partnership” with First Data Corporation, a global leader in electronic commerce and payment processing. The partnership extends lower, group-based credit card processing rates to the participating restaurants by leveraging the cost savings that comes with group buying power.
Costs are rising everywhere, including the costs to the restaurateurs of accepting credit cards. The increased costs are eroding their margins. Many have decided to avoid surcharges and just to take the hit and look for savings elsewhere or make up for it by adjusting menu prices. The choice you make will impact your profits, choose wisely!
Whether it is for owner-operated businesses or established franchises, Boston accounting firms can provide valuable financial services to the industry. KLR’s Hospitality Services Group can help companies manage a variety of vital tasks and responsibilities. By working with this team of dedicated experts, hotels and restaurants can take advantage of essential elements such as hospitality accounting, menu pricing and assistance with the state sales tax process.