The average profit margin for a restaurant falls between 3% and 9% depending on the type, with fast casual restaurants earning the higher end of the range.
Payment acquiring margins for restaurants doing over $1M in annual processing volume should be south of 20 bps, or 0.2%.
These were well-established rates that persisted for a long time before the verticalized POS companies came in and starting charging 3-4x fair market payment rates while still earning premiums, and billing separately for, the software.
We would like to present to you a tale of a restaurant.
This restaurant has a ~$48 average check, putting it squarely in the full service restaurant segment.
So we can reasonably assume the restaurant earns a 3-4% margin.
This merchant also processes nearly $1.7M annually.
Yet their super-awesome-and-totally-fair-payments-“partner”-Heartland/Global Payments has stuck this restaurant with a 6.8% effective rate.
Looking through the statement, which is below, we see an interchange rate of… 2.2%.
That means Heartland is earning 4.6% in pure EBITDA off the back of this restaurant.
It’s safe to assume that this is probably at least as much as the restaurant earns in profit.
But the restaurant works 90+ hours a week.
The payments company works…. 90 minutes.
Per year.
And if there’s a problem?
The payment bro tells the restaurant to call Oracle, their POS provider.
We know it’s Oracle because there’s an Oracle Payment Interface (OPI) fee on the statement for $50. Poor Oracle.
$78,000 per year.
$52,000 per hour.
That’s how much money the payment bros are earning off this account.
But frankly, it’s not enough.
Payment bros won’t be satisfied until the merchant makes NO profit.
Don’t believe us?
Fortunately we have page 2 of this statement as evidence:
- $254 “infrastructure fee”
- $254 “annual reporting fee”
- $25/mo “non-EMV fee”
- Interchange updates passed through “at cost”
Every good payments bro strives to ride that line juuuuust right: bleed the merchant enough that they earn no money, but not too much that the merchant goes out of business.
Because if you didn’t already know, humanity exists to serve payment bros.
The entirety of US payment processing is just a tax on society.
Every year the US economy loses ~3% of its GPD to the payment tax.
And you know what?
The more unethically you operate, the more wealth you accumulate, and ultimately the more political clout you buy.
Do it well enough and you can even finagle your way into a federal appointment.
If payments proves anything, it’s that having any vestiges of ethics is for suckers.
This particular payments bro is buying a boat every year.
You probably can’t even afford rent, you f*cking loser.
PS the worst abuse we’ve ever seen was a NYC racket club doing $14M in volume at a 9% effective rate. Courtesy of Open Edge, owned by our sincere friends Global Payments.
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