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Thursday, Mar 28, 2024

Restaurants See Benefit of Debit Card Swipe Fee Limit

A federal crack-down on debit card transaction fees is making some local restaurants chains hopeful about potential savings. The Federal Reserve Board recently capped the maximum fee banks and debit card issuers can charge merchants at 21 cents per transaction. The cap becomes effective Oct. 1. Card issuers on average charge merchants 1 percent to 2 percent of the total transaction, according to the National Retail Federation. The issue is front and center in the restaurant industry, where there is a faster growth rate in debit card usage. Sisley Italian Kitchen, IHOP and Applebee’s Neighborhood Grill and Bar are a few area chains that believe the math will work out in their favor. Industry-wide, however, the impact will likely differ from chain-to-chain, said Rob Green, executive director of the National Council of Chain Restaurants, a division of the National Retail Federation. That’s because restaurants with lower bill averages might already have transaction fee totals that are below 21 cents, he said. “What we’re advising is for companies to look at it individually,” Green said. Sisley Italian Kitchen, which has restaurants in Sherman Oaks and Valencia, expects to see a small savings from the new rate, said Francine Alba, the restaurant’s co-owner. She said her business is currently charged a 2 percent debit transaction fee by Visa/MasterCard and a 2.95 percent fee by American Express. “On a low ticket on $10 … the 21 cents would be a high rate,” she said. “But on $100, the math comes out to be better.” Sisley’s average bill amount is between $17 and $21, Alba said. At that bill amount, the 21 cent cap would be the cheaper option. DineEquity Inc., the Glendale-based parent company of IHOP and Applebee’s, also will benefit from the rate cap, said Patrick Lenow, spokesman for the company. The company plans to pass its savings to customers, he said. “For restaurants that have been under economic pressure from higher commodity costs, this is one way we can help hold the line on costs and keep consumer prices low,” he said. Alba said she plans to use the savings toward restaurant improvements and lowering item costs. Restaurant chains likely will direct the savings toward improving operations by remodeling or boosting productivity, rather than cutting prices, Green said. “The restaurant industry is so competitive that any cost savings are usually used to gain more customers, and the way you gain more customers is through more value,” he said. The Fed previously proposed a 7 cent to 12 cent cap on the debit card transaction fee, which the chain restaurant association supported, Green said. The chain restaurant group and the National Retail Federation publicly announced disappointment with the Fed’s final measure. “We were so engaged in this debate, because the costs for using debit cards were increasing dramatically,” Green said. The Fed is also allowing a charge of five basis points multiplied by the transaction value, or 5 cents for ever $100. Kevin Goldfein, owner of Rosti Tuscan Kitchen in Encino and Santa Monica, said he isn’t sure how the rate will specifically affect his business. But it appears to be a positive move for merchants, he said. “Any cap on fees imposed on restaurants or other business is a step in the right direction for merchants,” Goldfein said. “Without limits, all businesses have their hands tied.”

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