Payment card usage in restaurants continues to grow as the USA transitions to a cashless society. Higher ticket value sales have traditionally been paid for with a bank card, but even this trend is shifting. Today, transactions valued at $10 or more are overwhelmingly paid using a debit or credit card. Transactions over $100 are even less likely, with less than 10% of transactions using cash. Many business owners do not want to offer restaurant credit card processing services because of the additional costs associated with merchant services. At the same time, many of these owners realize their customers prefer using payment cards, justifying the use of restaurant merchant services.
Customers like the convenience factor of not carrying large amounts of cash and being limited to their cash. Merchants do not like that restaurant payment processing services charge fee, but these fees do provide benefits. Customers with a bank card generally spend more than those with a debit card or cash. This can help merchants justify the acceptance of credit cards and their intrinsic fees.
Restaurant Merchant Services
Most restaurant bills will be paid for with credit or debit cards this year, and this trend will only increase. While accepting credit card payments is necessary for restaurants, the cost of card transactions can dig into restaurants’ razor-thin profit margins. Partnering with a credit card processor specializing in restaurant merchant services can help offer equipment and solutions to improve the customer experience while lowering costs.
The competition within the merchant services industry can make it difficult for restaurants to decide which company to contract their payment processing services through. Many merchant services providers offer reduced or free equipment as bonuses to sign-up businesses. These schemes often cost merchants more in the long run with higher-than-average costs. This is why understanding the rates charged by a merchant account can help businesses stay vigilant when signing contracts and keep their costs to a minimum.
Understanding Payment Processing Fees for Restaurants
The most considerable fee charged to merchants is known as interchange. Determined by the customer’s card bank, the fee is assessed to the card association taken from the merchant’s settlements. Debit cards generally charge a much lower fee than credit cards, where interchange fees can start at well over 2%. Finding the best option for merchant services can help businesses lower costs while improving profits.
There are 4 types of payment structures used by business card processors today:
- Tiered
- Interchange Plus
- Blended
- Membership
Pricing models can significantly affect the costs paid by a business. Depending on the size of sales and types, some structures can provide significant savings versus others.
Tiered Restaurant Pricing:
All cards, whether debit or credit, premium rewards or no rewards, will be grouped into a predetermined pricing tier. Depending on the card processor, tiers for merchant services can vary from 3 to many more. The most common tiers are qualified, mid-qualified, and non-qualified, where most debit cards will be qualified, and most rewards cards will be non-qualified.
Payment processors offering tiered pricing usually advertise their qualified tiered rate as a teaser to entice businesses. Unfortunately, few transactions will meet the requirements for the qualified tier and be downgraded to a more expensive level. Since it is hard to determine the actual costs paid, for higher ticket businesses generally accepting credit cards, this can be more expensive.
Interchange Plus Restaurant Pricing:
Widely viewed as the most favorable of the pricing structures, it is generally considered a consistent and fair system. Under this pricing structure, the merchant services processor passes through the card network interchange price and adds their markup to each transaction. This is where the term interchange plus originates, sometimes called cost-plus pricing.
The fees of lower-cost payment cards will be passed through to businesses, preventing the need to qualify for a pricing tier or be charged a flat fee. This scheme has helped businesses receive high levels of debit cards to reduce the cost burden. Merchants will always know the markup charged for every purchase, providing businesses with transparent pricing.
Blended Pricing for Restaurants: This is a standard pricing model used by most wallet and payment service providers operating online today. Charging a single flat fee, all transactions are billed the same, regardless of whether they are credit or debit cards—many businesses like these systems’ simplicity while making payments.
These systems provide businesses with the best examples of transparent pricing but are not always the best solution. The flat rates are generally high and force businesses to pay significant premiums for certain card types. Understanding the option can help businesses make well-informed decisions that can help them reduce costs.
Membership Pricing for Restaurants: One of the newest models for pricing businesses, the membership has taken off by offering businesses a new take on rates. By charging businesses flat yearly or monthly fee, the payment processors allow businesses to access their payment network without additional costs.
Merchants like knowing their one price will handle all these merchant services fees, but this pricing has limitations. Many of these membership payment processors set limits for each of their tiers, charging hefty costs for overages. Similarly, processing under these thresholds can equate to significantly higher costs verse an interchange plus merchant service account.
Taking Payment with Restaurant POS Systems
The restaurant industry has seen a shift in the hardware and software designed for their businesses. Point-of-Sale systems developed for the industry have helped streamline management while helping keep operating costs lower.
Startups or smaller businesses might not want to put the money out to purchase a full POS system. If a business has existing hardware, verify with the new merchant services provider if the existing hardware can be reprogrammed. If so, this can save businesses significantly on startup costs.
Merchants can inquire about a new POS terminal or system if the hardware is not reprogrammable. Today, many restaurant merchant services companies offer free or drastically reduced restaurant POS terminals. When starting, businesses operating on a tight budget can benefit from one of these programs.
These offers are not limited to startup businesses. Existing businesses with older hardware should also seek free or reduced-cost hardware instead of purchasing their own. As PCI Compliance remains one of the most critical security concerns for businesses, maintaining current and updated terminals is very important.
New hardware and software might not only make the business run more efficiently, but it might also lower costs. Whether it is better pricing from another merchant services provider or a perceived lower risk by using a new terminal, POS equipment can help businesses save money. Sometimes it can be worth seeing what other merchant services companies offer, while other times, the costs are prohibited.
Online Restaurant Card Processing Solutions
Another service that has been gaining traction is the popularity of online ordering. Many POS systems now allow merchants to integrate their menu into the online system and take remote customer orders as if they were ordering inside the location from a waiter. These seamless ordering applications have complimented many food delivery services, creating an ever-growing demand for the take-out food industry.
The issue for larger businesses is that using one of these POS/Online payment services is that the flat fees charged are astronomical. These solutions can be ideal for smaller businesses where a few percentage points do not equate to vast amounts. It is the larger businesses that these extra points can cost hundreds of thousands of dollars a year. In contrast, a discount card processor can work out a deal that will reduce overhead without reducing the quality of customer service.
Finding Payment Card Processors for Your Restaurant
Working with a merchant services company familiar with the restaurant industry can help businesses in several ways. By understanding the needs of the industry, payment processors can better prepare merchants for handling their customer’s needs.
As customers continue shifting towards cashless payments, businesses must be prepared. Whether it is supplying new equipment or offering lower rates, a specialized payment processor is essential for businesses to succeed in the future.
Merchants needing help comparing merchant services can speak to Allied Payments. By understanding your business, we can determine the potential savings in card payment fees with the highest level of payment services for your business.
Frequently Asked Questions (FAQ)
What is a restaurant merchant account?
A restaurant merchant account is a type of business bank account that allows restaurants to accept credit card, debit card, and digital wallet payments from customers. It connects your payment processing system to the acquiring bank, making it possible to receive funds from card transactions.
Why does my restaurant need a dedicated merchant account?
Restaurants handle high-volume transactions daily, often with varying ticket sizes and payment methods. A dedicated merchant account ensures secure, fast, and reliable payment processing tailored to the restaurant industry’s specific needs, including tip adjustments, mobile orders, and table-side payments.
How do I apply for a restaurant merchant account?
You can apply by filling out a short application with your business information, such as your restaurant’s legal name, processing history, average transaction size, and monthly sales volume. At Allied Payments, our onboarding process is quick, with approval in as little as 24 hours.
Can I accept contactless payments with a restaurant merchant account?
Yes! Our restaurant merchant account services support modern payment methods, including Apple Pay, Google Pay, EMV chip cards, and contactless NFC payments. This enhances customer convenience and speeds up your checkout process.
What kind of POS systems are compatible with Allied Payments?
We support a wide range of restaurant POS systems, including Clover, Toast, Micros, Lightspeed, and other industry-leading platforms. Whether you run a small café or a multi-location dining franchise, our solutions integrate seamlessly with your existing tech.
Are there different merchant account options for full-service vs. quick-service restaurants?
Yes. Full-service restaurants often require features like tip adjustment, split billing, and table management, while quick-service businesses focus more on speed and efficiency. We tailor your merchant account based on your restaurant type and specific needs.
What are the fees associated with a restaurant merchant account?
Fees vary depending on your processing volume, average ticket size, and card types accepted. We offer transparent, competitive pricing with no hidden charges. Get a custom quote from Allied Payments to find the best plan for your restaurant.
How long does it take to receive funds from credit card sales?
Most restaurant merchants receive their funds within 1-2 business days after a transaction. Allied Payments offers fast funding options so you can maintain healthy cash flow for your business.
Do you offer chargeback protection for restaurants?
Yes, we provide chargeback monitoring and tools to help reduce fraud and disputes. Our system notifies you of potential issues early, giving you a chance to resolve disputes before they impact your bottom line.
Can I manage multiple restaurant locations under one merchant account?
Absolutely. Allied Payments offers multi-location support, allowing you to track transactions, revenue, and reporting for each location—all within one dashboard.
Is it possible to integrate online ordering and delivery with my merchant account?
Yes. Our restaurant merchant services support integrations with online ordering platforms and third-party delivery services, ensuring seamless payment processing across all customer channels—dine-in, takeout, and delivery.
What makes Allied Payments different from other restaurant payment processors?
We specialize in industry-specific solutions with a focus on reliability, security, and personalized support. Our restaurant merchant accounts come with tailored features, fast onboarding, competitive rates, and 24/7 U.S.-based customer service.
They’re a well-run, trustworthy company, and every time I’ve reached out with a question, they’ve been thorough and thoughtful in their responses. You can tell they truly care about supporting their clients.
Our business is often considered “high-risk” by many processors, so finding the right partner can be challenging. These guys made the whole experience smooth, and I feel very confident working with them.
If you’re a business owner looking for a solid, reliable merchant services provider—especially if your needs are a bit more specialized. I highly recommend them.
Thank you Charles
