An Insider’s Look at Today’s Restaurant Environment

By Ray Rodriguez

As Bob Dylan wrote,
“The times they are a-changing.”

We are witnessing a rapidly changing economy. Housing values have increased dramatically in the past few years. For homeowners, that was great, not so for buyers or young people. Interest rates now soar, along with utilities and insurance costs.

Restaurateurs have struggled since Covid to remain in business, keeping up with rising labor, food, and other costs, often with a lifetime of effort and investment on the line. Sadly, high-profile, long-standing efforts like Aqua, Fleming’s Steak House, Lord Fletcher’s, Roy’s, IHop, and dozens of smaller efforts shut their doors.

Operators hate raising prices. Yet in the past two years, many had multiple price increases. Many restaurants, busier than ever, still struggle for profitability. And now, across the nation, a new charge is being considered or instituted. It seeks to transfer bank fees historically absorbed by operators, to customers. Typically, it’s a 3.5% charge. While perhaps a small number to the customer, it’s a monster number to operators, annually $30,000 for a small mom and pop, up to $400,000 for a large operator. Consider 5-10 years of these charges – it’s a LOT of money. And it all goes to out of town bankers.

In a changing environment where clearly the old rules no longer apply, dozens of local operators have already implemented this CC fee, while most of us ponder the pros and cons. Operators well understand the inequities of life, and no reform legislation is in sight. Customers have long seen this charge at gas stations, or on high-priced purchases. Is it time for retailers to stop subsidizing big banks benefiting from both sides of a transaction, and spread the fees to customers who gain cash back, air miles, accounting and other credit card perks?

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Compared with a hotel “resort fee,” or “parking fee” the charge is small. Parallels also seem to lie in larger country club or hotel “service charges” of 20% or more. Restaurant delivery services often include fees that can double the price of take out. Concerns include:

Will this be perceived as nickel and diming that should be baked into pricing? Can the same point be applied to banks absorbing costs rather than extracting it from retailers? Bank processing costs are small, does this parallel what happened with expensive long-distance calling?

Will mature customers be upset with this “new” charge? Are younger people more conditioned to absorb accompanying charges?

Do most people look at the bill closely? Will anyone care enough to actually pay cash?

Will this stand between customers and their favorite dining spots?

Finally, banks fought this fee for decades, until recent legal setbacks, coupled with the “no cash” direction of society, and perhaps most telling, the fee actually increased their revenue…

Personally, I was recently charged a CC fee on a $30 Uber run that wouldn’t accept cash.

Cheers and Happy Dining!

Ray Rodriguez, Principal for Joshua Tree Voice, has been a successful restaurateur in the desert for over 30 years as well as a lifetime community and civic leader.

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