By sean

Today I had lunch at Jerry’s, in my opinion, one of the best sandwich joints in Chicago (I get the Milton Friedman).  I wonder how much they pay in credit card fees when I order one of their sandwiches (which are a little pricey at about $7 / per, but well worth it).

According to entrepreneur magazine, the average quick service (fast food) restaurant took in about $2.1M in revenue in 2007.  That number sounds a little high for our sandwich shop and perhaps includes larger restaurants with big seating areas and assembly-line food preparation.  Jimmy John’s, another excellent sandwich place, in my opinion, is reported to have about $850,000 in revenue per store, which sounds more appropriate.

The 2008 Hitachi Consulting Study of Consumer Payment Preferences reports that fast food restaurants collect 27% of revenue from credit and debit cards.

The average interchange rate that we expect such a restaurant would face is around $0.1255 + 1.56% for transactions greater than $15 and about $0.04 + 1.60% on transactions less than $15.  If we assume that 50% of this restaurants transactions are < $15 that the average size for such a small transaction is $7.50 while the average size of a transaction > $15 is $20 (which means that this restaurants overall ticket size is about $14) then the average interchange rate for this restaurant is about 2.16%.

In our experience at TransFS, where our software has automatically examined and analyzed hundreds of customer bills, we have found that the average restaurant pays about a 0.75% + $0.20 markup over interchange, in other words, about 2.2% given an $14 sale (0.20 / 14 + 0.75%).

If we apply the overall rate of 4.36% (2.16% + 2.2%) to the 27% of this restaurant’s $850,000 in sales we can calculate that this restaurant will pay $10,006 per year in credit card processing fees.

← Back to blog index