General Discussion
In reply to the discussion: Completely f'd up business practice I just found out about [View all]Xithras
(16,191 posts)The problem with the numbers presented above is that the credit card company is going to charge you that extra $1.13 anyway. If someone buys $100 worth of food and pays you with a credit card, leaving NO tip, you'll actually end up with $96.50 after your 3.5% fee is paid. But if someone leaves the waiter an $18 tip, and the restaurant doesn't collect the fee, then the waiter gets the $18, but the restaurant only earns $95.87 on the sale. The larger the tip, the more money the restaurant loses. Presuming a standard 18% tip, it would have the effect of reducing your overall sales revenue by about 1% WITHOUT reducing your expenses to match.
A 1% revenue reduction may sound trivial, but you need to remember that your typical successful restaurant operates at a 2% to 5% profit margin. Through THAT lens, you're suddenly not talking about giving up "dimes", but 20% to 50% of your net profit after the bills are paid. If you're operating at a 2% profit, and you're giving 1% of each sale total away on every sale, you're burning a huge portion of your profits so that your waiters will have higher tips.
THAT is why many restaurant owners charge the fee. They aren't being predatory, but are making a simple business decision. If the tip comes with a 3.5% fee attached, they feel that the person getting the tip should pay the fee. That fee isn't being levied by the business owner, but by the credit card company. Its being applied by the customer who chose to pay the tip using a credit card with those fees attached.
FWIW, I used to write POS systems, including register systems for restaurants, and have asked the same question as your project manager. I'm sympathetic to both sides, and don't think that owners who pass the fee on are necessarily bad people. The real villains are the credit card companies who assess the fees on tips in the first place.