A study with MarginEdge and AQN Strategies


At the Mercy of Card Processors

Payment processing is unlike any other expense to your restaurant. Instead of paying invoices that logically show expected costs, you’re stuck paying for a laundry list of non-sense fees. Switching processors can be a pain, especially when it’s unclear if you’ll actually save any money with someone new.

If you’re suspicious you’re overpaying for this commodity-like function and tired of seeing hard earned money get pocketed by giant payment processing companies, you’ve come to the right place.

MarginEdge is all about adding transparency to restaurant costs, so we teamed up with the payments practice at financial consultants AQN Strategies to analyze processing statements from about 200 restaurant locations, from fast-casual to fine-dining…

(Yes, this is such a big issue that firms have whole practice areas that specialize in understanding payment processing, thank goodness.)

The restaurants in our study paid between 1.80% and 5.89%* of their sales to processing companies.

We gave each restaurant we studied a custom report (see a sample) of how their payment processing fees breakdown, how much they’re overpaying and how they stack up against the other restaurants we analyzed.

Here, we’ve pulled their data together to help you better understand this significant cost to your restaurant. You also have the opportunity to get your own custom report.


Luckily this only happened because a restaurant was hacked, but because their processing statements are so cryptic, this restaurant hadn’t noticed they were wrongfully charged.

(Once we let this restaurant know, they were able to contact their processor to get the charges refunded!)

On average, restaurants were overpaying $7,496.79 annually per location for payment processing; that’s about 0.23% of non-cash sales

How do your payment processing fees stack up?

Submit your statement and find out for free.


Payment Processing Fees 101

Before we jump into our findings, we’ll give some background into how payment processing fees break down. Full disclaimer, it’s complicated.

In order to talk about payment processing fees across restaurants consistently, we’ll talk about the monthly fee as a percent of monthly non-cash sales, which is known as the Merchant Discount Rate.

(We also find “discount” to be a little ironic here.)

How Your Fees are Structured

What bad fee
structure looks like

What good fee
structure looks like

What Kind of "Potential Savings"?

Of the restaurants we studied, this was about 0.23% of sales (non-cash) or about $7,500 per year per location.

Can I get lower interchange and network rates?

The amount you pay for interchange fees and network fees (excluding associated overcharges) is based on the types of cards your customers are using. Some cards cost more to process than others.

What types of cards are expensive to process?

Each customer card has a set of attributes that determine interchange and network rates. Network fees are a little more straightforward, they just depend on the network the card is on (Visa, Mastercard, etc) while Interchange depends on some more factors:

Even cards on the same network have different interchange rates:



World Elite


Key Insights

Now that you’re up to speed on how payment processing works, let’s get into what we found. Here are 6 Key Insights from our data set:


Banks tend to offer the lowest rates.

We assume that banks can afford to offer lower rates because they don’t exclusively depend on payment processing for revenue. Instead, they offer other revenue-generating services to clients and are more generous in their rates (see how banks fall to the bottom of the rates analyzed).

Another key insight from this table is: WOW what an opaque industry.

The range here is nuts given this is a commodity-like service (regardless of the rate you pay, you’re getting the exact same service as someone paying lower rates). So without any value proposition, why aren’t processors competing for your business and offering competitively low prices? Why are some restaurants paying 0.74% of their sales for processing while some are paying 0.11%? This should be like buying corn. But it’s not.

With at least 17 options for processing companies, this is not a monopolistic situation. Consumers have lots of choices when it comes to a processing company.

But they don’t have the information they need to make a good decision (meaning, cheapest option!) If people aren’t seeking out the cheapest rates, processor companies have no motivation to charge cheaper rates. They can charge whatever they want! And look here, they are.

What are Processor Fees + Overcharges?

Luckily this only happened because a restaurant was hacked, but because their processing statements are so cryptic, this restaurant hadn’t noticed they were wrongfully charged.


The weighted average Merchant Discount Rate was 2.43%.


Typically, if the rate isn’t labeled in the line item, there are overcharges.

Overcharges, the additional amounts charged above the published rates, can be difficult to detect since they’re lumped into line-items with regular charges. But here’s a potential way to spot them on your statements.

Here is a statement from one of the restaurants in our study.

If this is happening line item after line item, month after month, it’s sure to add up! Plus, sometimes these overcharges happen on a larger scale.


After the $200,000 monthly sales mark, monthly sales does not seem to determine rates.


Number of restaurant units does not influence rates.

While there is some correlation with the restaurant unit monthly gross and the merchant discount rate, there is no significant correlation between overall restaurant group monthly gross and the merchant discount rate.

Put another way, restaurant groups with more units do not get better merchant discount rates from processors (at least in looking at restaurant groups in the 1-30 location range).


Restaurants with lower average tickets do not pay less than restaurants with higher average tickets.

In talking to our restaurant clients, we found a general belief that average check size was a major determinant of processor fees. Yes, lower check size means a bigger portion of that sale is being paid to the processor, since there are multiple fixed components of processor fees.

But restaurants with lower average checks also have an advantage: their customers tend to use cards that are cheaper to process. Customers opting for less expensive meals usually aren’t the big spenders who qualify for the premium cards (that cost more to process).

On the other hand, restaurants with bigger average checks (the more expensive ones) deal with some big spenders, sometimes on business, and get stuck processing more premium cards. Luckily, those fixed fees are a smaller share of these sales.

This all shakes out to mean that average tickets don’t have a big influence on your merchant discount rate.

It’s time to get savvy about payment processing.

Businesses are becoming increasingly reliant on payment technologies as the intermediaries between our customers and our businesses.

MarginEdge restaurants have shown about a 9% increase in card usage just in one year – card-derived revenue makes up an average of 88.09% of sales.

Of those cards used, we’ve also seen an increase in reward-rich credit cards (carrying higher rates to process) and our experts expect the trend to continue.

Suspicious You’re Overpaying For Payment Processing?

Don’t let cryptic payment processing statements keep you in the dark about this perpetual cost to your restaurant. Find out what you’re paying for and how your deal stacks up to others in the industry.

MarginEdge and AQN Strategies will review your monthly statement to prepare a custom report. Simply click below to send us your most recent payment processing statement.

This service is free of charge and, as always, we keep your data confidential.