Restaurants adding a 4% fee to credit card customers

As reported in The New York Times by Christina Morales, the impact of inflation and the burden of high credit card fees are persistently influencing the financial performance of restaurants. In response to this ongoing challenge, an increasing number of restaurant proprietors are adopting a novel strategy: rather than opting for across-the-board price hikes, they are introducing an additional charge specifically for credit card transactions.

Within the financial structure of restaurants, credit card fees stand as the third most substantial expenditure, trailing only behind the expenses related to food and the costs associated with labor.

A notable approach taken by some restaurant owners involves incorporating a convenience fee of 4 percent onto the bills of patrons who choose to settle their dues via credit card. This innovative tactic serves as a means to offset the mounting credit card processing fees without resorting to an overall menu price adjustment.

In the broader context of the credit card landscape, it’s noteworthy that Visa and Mastercard collectively dominate approximately 80 percent of the market share. This stranglehold on the industry gives them significant influence over the fees associated with their services, which, as indicated, are continuously on the rise.

These escalating fees pose a considerable challenge to businesses, particularly those in the restaurant sector. To maintain profitability and sustain their operations amidst this financial pressure, restaurant owners are compelled to explore alternative methods of coping with these mounting costs. The introduction of a distinct credit card convenience fee underscores the creative approaches that business owners are undertaking to strike a balance between maintaining customer satisfaction and ensuring their establishments remain economically viable.

“No one’s using cash,” said John Horne, the owner of Café L’Europe and several locations of the Anna Maria Oyster Bar in Sarasota, Fla. He said he has paid about $279,000 in credit card fees this year among his six restaurants and is thinking about adding a broader service fee. “It is increasing the cost of doing business in every industry. And the consumer doesn’t realize it.” (nytimes)