Dual Pricing: A Double Win for Restaurants in a Digital Age

dual pricing

Are credit card fees eating into your restaurant’s profits?  You’re not alone. Processing fees can take a significant chunk out of your bottom line. But there’s a solution: dual pricing. 

While dynamic pricing has historically been associated with last-minute sales, dual pricing is now being used differently in the restaurant industry. Essentially, this strategy allows you to offer a slight discount to customers who pay with cash, effectively passing on the credit card processing costs.

It’s important to note that the average credit card processing fee for restaurants typically ranges from 2% to 3.5%, plus a charge per transaction that might go from 0.10 usd to 0.15 usd. These fees can be a significant expense for restaurants, especially considering that 90% of restaurant operators are small businesses competing for every dollar.

Then Partnering with a POS system provider that offers dual pricing can lead to cost reductions and potential revenue boosts. But dual pricing isn’t just about saving money; it can also benefit your customers by providing flexible payment options. 

As you explore new POS solutions, consider those that offer this functionality. In this blog post, we’ll dive deeper into how dual pricing and the right POS system can be a game-changer for your restaurant’s profitability. So, without further ado, let’s jump right into the core.

Dual Pricing vs. Processing Fees: How the right POS System can Make a Difference

In the past, restaurant pricing with a traditional POS system was a straightforward, yet limited setup. You set a single price for each menu item, and that’s what customers paid – regardless of payment method.  This simplicity came with some drawbacks:

  • Upfront Costs: You had to pay an initial investment for the POS system itself.
  • Monthly Fees: On top of that, there were usually ongoing monthly subscription fees to access the software features.
  • Processing Fees: The biggest pain point for many restaurants was the credit card processing fees charged by payment processors. These fees typically range from 2-3.5% of each credit card transaction, eating into your profit margins.

For example, if you had a popular burger on your menu priced at $10, and a customer paid for it with a credit card, the processing fee could be anywhere from $0.20 to $0.35.  This might seem small, but it adds up quickly, especially for restaurants with high credit card transaction volume.

Modern POS systems have introduced a game-changing feature: dual pricing.  This strategy allows you to offer a slight discount to customers who pay with cash compared to those who use credit cards.

How a POS with Dual Pricing Reduces Costs for Your Restaurant

The concept of dual pricing has gained more attention in recent years due to the plenty of benefits that dynamic pricing offers to small businesses. Sharing processing fees with customers can be an effective way for businesses to save money. On average, processing fees account for up to 3.5% of each sale. However, for small restaurants or food trucks, which may sell more than $10,000 per month on average, these fees can quickly add up. 

For instance, let’s take the example of Toast, which charges a processing fee of 2.49% + 15¢ as part of its standard pricing. In an average ticket of 10 USD, this translates to 3.99%. For the current case study of 10,000 USD through transactions of 10 USD, this would result in minimum processing fees of 399 USD.

It would add up to $9,576.00 for a two-year plan. That’s a significant amount of money to spend on processing fees for a small business. 

On the other hand, Clover is known for having some of the lowest processing fees in the industry. For a quick-service restaurant, Clover charges 2.3% + 10¢ for each card transaction, which comes to a total of 3.3% in a 10 USD ticket. In this scenario, the restaurant’s expenses for one month would be minimum $330, which would add up to $7,920.00 over the course of a two-year plan. 

Now, imagine a scenario where all your sales can be distributed between cash and credit card transactions, and cash payments don’t incur any processing fees. This is where a POS system with a dual pricing system comes in handy, such as iPos. 

By partnering with iPos, you not only get a complete point-of-sale system with all the necessary features included in one payment (since software is free), but you also get the added benefit of a dual pricing system that allows you to save on the processing fees discussed earlier.

POS Toast Clover
Processing Fee 2.49% + 15¢ per transaction 2.3% + 10¢ per transaction
Average Ticket $10 USD $10 USD
Effective Processing Fee per Ticket 3.99% 3.3%
Monthly Processing Fees in $10,000 on average $399 USD $330 USD

How Dual Pricing and POS Integration Works

Here’s how it works:

  • You set two prices for each menu item in your POS system – a cash price and a credit card price.
  • The cash price is typically the base price you would like to charge for the item.
  • The credit card price is slightly higher, reflecting the processing fee you would incur for a credit card transaction. This difference is usually a few cents per item.

For instance, your $10 burger might have a cash price of $10.00 and a credit card price of $10.20.  Thus, customer sees both prices displayed on the POS screen at checkout. It give them the option to choose how they pay.

Dynamic Pricing: A Win-Win for Restaurants and Customers

Instead of raising prices to offset credit card processing fees, dual pricing offers a customer-friendly solution. By offering dual pricing, you provide customers with more options and greater transparency. They can choose between the cash price and the credit card price, giving them flexibility in how they pay. 

Dual pricing also eliminates confusion about hidden fees. Customers can clearly see how much they can save by paying with cash. This transparency builds trust and enhances your corporate image. This can be particularly attractive to budget-conscious customers, potentially leading to increased sales and a stronger customer base.

Providing flexibility, discounts, and convenience to customers, is a winning corporate image, and it definitely differentiates you from the rest. Then, this approach can serve as a unique selling proposition and a niche for your marketing efforts. 

The Power of POS Technology: Dual Pricing + Data Analytics

Dashboard and Analityc in Quick Service Restaurant

POS systems with dual pricing features like iPos often come with built-in data analytics tools.  These tools track your sales data, including the breakdown between cash and credit card transactions.  This information is invaluable for:

  • Understanding Customer Behavior: You can analyze which payment method your customers are using the most and adjust your pricing strategy accordingly.
  • Optimizing Discounts: If the data shows a significant number of customers are opting for cash to save money, you can potentially adjust the cash price discount to further incentivize them.
  • Identifying Trends: Over time, you can track how trends in cash vs. credit card use evolve and adapt your pricing strategy accordingly.

Final Considerations

In an increasingly digital world, dual pricing offers a strategic approach to restaurant management. By partnering with a POS system provider that facilitates dual pricing, restaurants can not only offset credit card processing fees but also potentially attract new customers and enhance overall profitability. With transparent communication and seamless implementation, dual pricing can be a win-win for restaurants and savvy diners alike.

So, are you ready to cook up bigger profits with dual pricing? Contact iPos today for a free consultation to see how we can help you implement this game-changing strategy!

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