Giving credit its due

In today's society, cash in one's pocket is becoming more and more scarce. It's not that people have less money, but more people are using credit cards and especially ATM and debit cards. As pizza operators, you probably prefer cash because it is easier to count and deposit at the end of the night, but there is no doubt accepting plastic is a requirement. While it may make life easier for the customer, accepting credit cards can be a hassle for the restaurant owner.

Accepting credit cards can increase the cost of a transaction by as much as 80 cents per transaction. Credit card acceptance also requires the purchase and maintenance of more equipment. It can cause extra work at the end of a shift and processing cards during a transaction can confuse new employees as well as older employees. So, why do all the large chains deal with the added expense and hassle of accepting credit cards? If you do not accept credit cards and your competition does, they can steal away your potential customers and increase their sales. While there are some drawbacks, there are some advantages, too.

Increase in average ticket – When people are making purchases with a credit card they tend to spend more. Since the customer's purchase decision is not limited to the amount of cash on hand and the bill won't show up for another month, tickets tend to be 20-25 percent higher on average.

Satisfy customer preference – Credit and debit cards are the preferred payment method for 30 percent of consumers. When a potential customer is making a purchasing decision, he or she either consciously or subconsciously narrows his search based on preference. Who is open? Who delivers? Whose pizza is better? Who has a special? Who takes Visa? The question 'Who takes Visa?' can become the most important question when it is the consumer's only way of making payment that particular day.

When I opened my pub, I knew from personal experience that credit card acceptance would yield more spending and more customers. What I didn't know was how to best make those credit card sales magically show up in my bank account. Since that time, I have gotten out of the bar business and have been offering credit card equipment and processing for the last three years. (If I only knew then what I know now.) I have learned a few tricks of the trade that I have been persuaded to share that may help you. Hang on to this top ten list, you'll need it to protect yourself from salespeople� and whatever you do, don't sign an equipment lease; I could tell you horror stories.

Top 10 Avoidable Mistakes

  1. Leasing Equipment – Most credit card terminals cost less than $400. If you are getting credit card processing service from a company, they should be willing to sell the equipment at just over cost. Typically, some sales people will inflate the equipment's price to the $1,200-$1,800 range. If this appears to be too much out of pocket expense to the sales person's potential customer, he or she will gladly offer a lease.
  2. The Lease
    $39.95 x 48 months = $2,916.50
    $29.95 x 48 months = $1,436.50 After the lease is up you are offered the opportunity to buy the used equipment at near original cost, which is out of warranty. Not a good idea. Remember that you should be able to purchase most equipment for around $400.
  3. Proprietary Equipment – Buying equipment that only works for one particular processor. If you ever become dissatisfied with your service provider you are stuck with a $1,500 paperweight. In most cases you want Hypercom and Verifone equipment. They are industry standards and most processors are compatible. In most cases, POS systems are non-proprietary. Before making a purchase, make sure the system is compatible with your choice of credit card processors or visa-versa.
  4. The Reprogramming Fee – This is an unnecessary or invented fee charged because the sales person didn't get to make money by selling equipment. Hide your wallet.
  5. Buying from your Bank – You know them. They hold your money and have a big brick building, so you can trust them, right? Wrong. Very few banks actually provide credit card processing; they are merely IS0s (independent sales offices) like myself. In most cases the representative from the bank doesn't even work for the bank. When a merchant turns to a bank for processing it is obvious that he is not aware of his options and that sales person will wear him out with high rates, expensive equipment, hidden fees – the works.
  6. Free Stuff – Quite often a merchant will tell me "I get free paper" or "I got a free terminal." These things cost money and the sales person has to profit somewhere. Without fail, the merchant is paying for his or her 'free' stuff with excessive rates and hidden fees.
  7. High Rate – 1.6 percent is good, but in many cases you can get a lower rate with high-volume, established businesses, but 1.6 percent is a fair rate. This leaves the ISO making $110 for every $100,000 in credit card volume.
  8. Creeping Rate – Just because you got a good rate to start with doesn't mean that it is going to stay that way. Check your statements periodically and ask questions.
  9. Statement Fees – The first $5 to $7 dollars goes to the processor for account maintenance, anything above that goes in the pocket of the ISO.
  10. 'Invented' Fees – Application fees, annual fees, customer service fees, I even saw a yearly $55 postage and handling fee. There is no requirement for any of these fees. They are just a salesperson's way of padding the sale.

Remember the independent sales office is in business to turn a profit as well; they need to make $10 to $30 a month per customer in order to make setting up a new merchant worth their effort. If you are concerned about your rates the best thing to do is compare your statement with those of a few other friends that are in small business. For better or worse, credit cards are here to stay and if they help people spend more at your restaurant it's for the better.