How Optimizing Your Payment Processing Strategy Can Mitigate Financial Challenges Facing Restaurateurs

Restaurants and franchises face numerous financial challenges that can hinder their success, however, by optimizing their payment processing strategy, these businesses can overcome some of the major obstacles faced by restaurants in their early start, helping them to achieve greater stability and ultimately profitability. Payment processing pricing structures often used by restaurants allow providers to layer their processing fees on top of other underlying debit and credit card fees. This can significantly impact a business's bottom line. By choosing the best payment provider,  negotiating the best rates and pricing structure, and auditing your monthly merchant statements, businesses can increase their profitability and improve their financial health for long-term success.

Through streamlining and improving the payment process, restaurants and franchises can reduce costs and labor, while increasing revenue in many ways. Payment processing can be complicated, but with the right partner and pricing structure such as flat rate, interchange plus, or tiered, unnecessary costs can be eliminated. The following pricing structures provide restaurants and franchises with specific options that better meet their business needs.

Flat Rate

The flat rate pricing structure is one of the most commonly used pricing structures, in part due to its simplicity and clarity; however, it is not ideal for restaurants. Restaurateurs are sometimes stuck using this pricing structure because it is the only one offered by their point-of-sale (POS) software provider. This should be a crucial element in deciding your business’s POS. With a flat rate pricing structure, restaurants pay a specific, fixed fee percentage for the majority of their debit and credit card processing fees. This pricing structure provides restaurants with the ability to estimate exactly what rate they will pay for their card processing fees. 

Interchange Plus

Interchange Plus is typically the best pricing structure for restaurants in particular, also called cost-plus. With this model, the payment processing provider layers its processing fees on top of general debit and credit card transaction fees. Interchange Plus payment processing fees vary based on card networks, card types, and transaction types with each combination resulting in a different amount of underlying fees. 


The tiered pricing structure enables the payment processing provider to bundle each card’s interchange rate into various buckets or tiers, three-tiered being the most common. Since restaurants have no control over which cards fall into what tier or what cards their customers pay with, restaurants can quickly become locked into a contract with unfavorable, blurred rates. This can result in significant expenses for restaurants with a high volume of daily transactions.

There are several tactics that payment processors will utilize to sell businesses on their payment structures and pricing models. Surcharging has become an increasingly popular ploy for restaurants. A surcharge is a cost tacked onto a bill of a customer designed to cover the costs a restaurant might otherwise absorb itself. While surcharging is sometimes necessary, it can dramatically impact the customer experience and lead to lowered satisfaction rates. 

Understanding the payment pricing structures available for your business is one of the most important strategies in managing the impacts of payment processing on revenue. Restaurateurs need to understand their specific needs and research payment providers that align with these objectives. By researching these pricing structures and negotiating fees with payment processors, restaurateurs can minimize the impact of these fees on their profitability.

However, restaurateurs can also employ several methods and procedures beyond pricing structures, when it comes to optimizing their payment strategy.

Negotiate Fees

Negotiating fees with your current or future payment processor is an incredibly effective way to reduce costs before ever signing the contract. Before beginning negotiations, businesses should obtain multiple quotes from providers that are compatible with their POS. Restaurateurs should never begrudgingly sign a contract they don’t agree with. There is always room for negotiations. The following fees are the most common negotiable fees:

  • Processor Rates

  • Credit Card Transaction Fees

  • Monthly Fees

  • Gateway/software Fees

Conduct Routine Statement Audits

Another important strategy to help optimize your payment processing is to conduct monthly statement audits. Most businesses conduct quarterly statement audits, however, this leaves plenty of room for hidden fees to fall through the cracks. Many businesses are unaware of the various fees that can be added to their processing costs. These fees can include PCI compliance fees, statement fees, monthly minimum fees, and authorization or transaction fees. A merchant statement should never include both an authorization and a transaction fee. By identifying and eliminating these hidden fees, restaurateurs can save thousands of dollars each year.

Fraud Prevention and Protection

For restaurateurs that provide a variety of payment options in particular, implementing fraud protection and prevention measures can also prove to be beneficial in mitigating unnecessary costs. There are several ways businesses can implement fraud prevention, starting with deploying AI or machine learning algorithms. These algorithms can detect unusual behavior patterns often associated with fraudulent charges. Restaurateurs can also automate their routine statement audits with AI platforms. Implementing multifactor authentication for customer accounts for card-not-present transactions can also help minimize this risk. 

The restaurant industry is convoluted and sometimes volatile in and of itself even without the intricacies of payment processing adding to the struggle. With inflationary challenges such as high labor and food costs, mitigating any unnecessary expenses can help change the narrative of existing but especially newly opened restaurants and franchises. By reducing costs and increasing revenue, businesses can improve their financial health and longevity. According to industry benchmarks and studies, the total transaction value of the digital payments market is projected to reach $10.64 trillion in 2024. By leveraging the right payment processor and implementing effective strategies, businesses can tap into this growing market and position themselves for success.

In conclusion, optimizing payment processing is a critical component of overcoming financial challenges for franchise owners and restaurateurs. By leveraging the right payment processor and implementing effective strategies, businesses can streamline their payment process, reduce costs, and improve their financial well-being. With the projected growth of restaurants and the digital payments market, now is the time for businesses to improve their payment processing strategy and position themselves for the future.