Thanks for this info. So for most processors other than Square, the merchant gets charged differently depending on which card I use? Are the fee tiers indicated on the card or statement? (I see some of my visas say signature, but the mastercards all look the same)
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Visa’s fees increase with Signature and further with Infinite cards. To help restaurants, these days I try to use my Chase Freedom Unlimited (Signature) instead of Sapphire Reserve (Infinite) since they both earn 3% in the category.
Mastercard’s equivalents are World and World Elite.
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My understanding is that fees can and do change w/ the card (which is why a lot of places won’t take AMEX). I presume that, the better the card rewards, the more the fee.
And processors might have different fee schedules for restaurants? Just browsed Square’s website, and it looks as though Square charges additional fees for restaurants…
Yes and yes. The statement will list the amount per each type of card and the additional fees for card not present transaction, etc. as @secretasianman outlined. His explanation is very thorough and matches my understanding.
This is one of the reasons that many restaurants would not accept AmEx–they charge more than VISA/MC.
@secretasianman: so, if you are willing to share, what is your opinion on processing fees? Do you think they are too high? Do you think they should be regulated?
i didn’t get into the ‘tiered’ price structures set by service providers, but they’re all artificial and all designed solely to improve the margin for the service provider. various bogus fees with official sounding names are commonly added to each statement as well for the same purpose. i routinely got those waived for my clients. the best rates are based on a set percentage above the interchange rates. expect a minimum of 15 additional basis points (.15%) and $.05 a transaction just to give service provider their taste the actual rate is negotiated by reps who are generally contractors who are compensated entirely by commission out of a percentage above the operating costs for the service provider in question. in order to pad their compensation, they also often charge monthly fees for equipment that is actually available at no cost as long as they run at least $30 in service charges it’s not uncommon to see clients get charged $25/month for their machine, resulting in an extra $300 a year per client. but the greedier a rep gets with the margin, the easier it is to undercut them.
when it was simply a matter of undercutting the hogs who were tiering their clients with 5-7% fees, it was easy to get business by being able to cut those fees in half (depending on ticket size). the thing is, service vendors like harbortouch have modified their marketing strategy for their credit card processing by bundling it with their POS system much the way cable companies do with their channels, and other vendors have followed suit, so it’s not always so simple to determine if a service vendor is providing value. and there are other considerations. for example, if you’ve got a vendor like say, an auto shop where a substantial percentage of their costs are parts from vendors who want immediate payment, a provider can charge - and get - a larger margin if they can guarantee reimbursement off their charges within 24 hours when the industry standard is closer to 48 hours (yeah, they make money off the float as well). it’s the major reason i got out because the clients who were still getting fleeced were tied into bundled services such as through their bank who might also be funding their line of credit, etc. and i was being impelled towards marketing their POS systems - and cash machines (which i suggested might be a better alternative for restaurants in another thread a while back) instead of the credit card services. cable companies bundle channels together forcing you to pay for channels you don’t want to get the channel that you DO want - or to give you internet service. health insurance bundles your coverages. pac bell used to require you to have a land line to get DSL. as long as companies are allowed to do that in their industries, no one is going to be able to regulate credit card processing fees.
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I thought this, years ago I looked into it more, and I think there’s a bit of a semantic loophole: one cannot charge a surcharge for using a card, but one can offer a discount for using cash. $0.50 surcharge vs. $0.50 cash discount… seems like a tomato/tomato situation, but there you go 
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code is code; it doesn’t have to make sense, it just has to be followed.
3% isn’t too bad, depending on the size of your average ticket, the industry and the cards you take.
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and for folks suggesting taking cash only, imagine what you’ll pay a security guard to accompany you to the bank and/or deter robbers who have a pretty good idea of your daily/weekly cash flow.
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Appreciate all the info you’ve brought to this thread!
And not tryna be the Europe is better guy, but the EU has regulated/capped interchange fees at a much lower rate. As @robert pointed out, are we in the US getting more for our money?
More expensive or more efficient?
I was talking to Kevin Boehm from the Boka Restaurant group in Chicago. He was in last night. And we both agreed that, having this time to really focus on the way business is run? A lot of things we did in the past were very slow in changing. We added layers and layers and layers. Looking back at them, we don’t necessarily need all those. We can do a lot more simply than we’ve done before. Among other things, we’re having people wear many more hats than they did before, and that’s not a bad thing.
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Not quite: https://oag.ca.gov/consumers/general/credit-cards-surcharges
California isn’t allowed to enforce that statute, assuming the vendor has explained the charges.
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i’m not sure i see anything in that that contradicts what i’ve asserted; you can in fact sue for surcharges that are deemed illegal
Interesting that so much of this thread is caught up in the minutiae of the credit card industry where to me the underlying premise of the posted piece is pretty much undeniable; if people want to see the restaurants they love survive they should be prepared to pay what it costs for them to do so. Yes, the fees are outrageous (especially for delivery), but they’re not going away anytime soon.
I am very sympathetic to where Guisados is coming from in this piece, eg many people expect tacos to be no more than $2 regardless of the quality of ingredients, increasing overhead costs, etc. Salazar just had to raise the price of our carne asada taco to $6 and it’s still not enough to get us to the “standard” target food cost for the quality and quantity of meat we’re serving (and they happen to be our best selling item). Yet people seem to have no such complaints about spending $5.19 for a quarter pounder.
Even with everything else being equal, the overhead costs are not comparable between those of a truck/stand/grocery store and a full service restaurant. This seems like it would be an obvious enough point, and yet we’ve had complaints over serving $6 beer when they could “walk down the street to am/pm and get a six pack for the same price”. People are entitled to stay away if they think it’s not a fair deal, but I don’t want to hear about it on Yelp if they clearly have no idea what they’re talking about.
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when fuel prices go up, plane tickets rise accordingly. grocery items rise and fall… not so at restaurant menu prices–at least in a quick responsive way.
Restaurants are one of the few industries that delivers a good at a set price and the custome pays after it’s consumed. as a proprietor of salazar, how can you change this so that pricing can be more adjustable/transparent? I think this what the restaurant industry as whole and consumers needs to figure out. Research has shown that people are more willing to pay more the more transaparent the pricing structure is.
and totally agree about the $2 taco thing. changing people’s mindsets is a hard thing to do.
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for a fancy tasting menu dining restaurant, i think the future is tock–one week it could be 150 for a tasting menu. another 175 accounting for changes in the price of goods etc
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Why not raise the price to what it should be?
In most industries, the choice between not making a profit (or being on a path to it) and going out of business isn’t considered a choice.
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I think the answer goes back to the original posted column: people are unaccustomed and/or unwilling to pay more for restaurants, for whatever reasons. Sometimes to the point of hostility as with the above mentioned case at Alimento. You could argue Zack was being totally transparent about where the service fees were going, and I think it’s pretty clear he wasn’t trying to screw anybody. But people were still pissed. I’d even argue in this case his transparency hurt him in some ways.
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There’s nothing stopping restaurants from adjusting prices on a weekly basis if they want, in fact if we’re making an argument for efficiency they probably should. But I strongly suspect this would not be well received by the dining public.
And as I point out below, I think transparency can come back to bite you in the ass in some ways, as was the case with Alimento when he added a line for BOH gratuity. This was a move I’d argue was transparent but very poorly received indeed,
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There’s a lot of first-world problems and privilege throughout this thread. It’s much easier said than done to just “raise” prices accordingly when there’s a baked-in expectation of what certain foods “should” cost (this is a much deeper issue re: types of cuisines and their perceived price points). Also to the earlier points, if you’re inconvenienced in any way by said restaurant, then just don’t order from it. This mirrors some of your arguments re: raising prices - if a restaurant sets a certain standard and you don’t agree with it, then you are obviously not obligated to be a patron.
And poor things having more c/c fees, guess who’s paying even more? Restaurants. And folks in the US don’t want a built-in service fee, yet no one tips appropriately. So glad I’m not in the industry anymore…
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