Do You Know Your POS and Payment Processing Costs?
How to Reclaim as much as 2% Of Costs to Improve Your Profitability
Few restaurant operators understand the details of the full costs associated with their point-of-sale and payment processing systems. With ever-tightening profit margins, restaurant operators that can eke out an extra 1 or 2 percent of operating costs can make a world of difference to their bottom lines.Let’s just start with credit card payment processing.
Did you know that a typical hospitality operator is paying their credit card processor an average of 3.5 to 3.6 percent every time a consumer swipes their card at POS? For an average $100 check, that’s $3.50 – $3.60. That doesn’t sound like much. But multiply that 200 orders on a given day and that’s almost up to $720 in processing fees. These costs add up faster than you think. And it’s important that operators have the knowledge they need to negotiate on a level playing field with their payment processors.
Reforming Retail, a business publication covering the point of sale and merchant services space, shares a revealing look at Toast’s payment margins, by way of example.
Let’s move to POS system costs. This is a particularly challenging area for operators because most of these costs are fixed, monthly costs. Which means the operator has to pay them regardless of how much business they actually transact. Add to the high fixed costs the fact that most restaurant operators aren’t buying technology on a regular basis. As a result, they tend to make decisions based on referrals and word-of-mouth. These are great ways to put together an evaluation set. But if they are not comparing apples to apples, operators can find themselves with inordinately high monthly fixed costs, with no real improvement to their guest experience or their bottom lines.
So how can you tell if you’re spending too much?
Look at your start-up and implementation costs. These can range anywhere from the low $100s to $1,000s of dollars depending on the scale of your operation.
Hardware costs can also add up. Spending anywhere from $300 – $1,200 for a single mobile payment terminal isn’t uncommon. Yes, that’s right. Hundreds of thousands of dollars of fixed and monthly costs for the benefit of receiving an order and processing a payment. And because these costs are often buried in fine print, and paid for on credit, it’s easy to see how operators might overlook them.
When we engage with new operators, we find a shocking lack of awareness of how much these fixed costs impact their operations and what they’re actually getting in return. GoTab is different. We don’t make any money on the hardware needed to run our systems. In fact, operators can oftentimes re-use their old hardware with GoTab. We also don’t require any long-term contracts. Our processing fees are some of the lowest in the industry.
We like to say that we make money when our operators make money, because it’s true.