Should You Implement a COVID-19 Surcharge?

As businesses across the country are reopening amid the COVID-19 pandemic, most are taking measures to sanitize and implement protocols to slow the spread of the novel coronavirus. That might include offering masks or gloves, hand sanitizer stations, temperature checks, or undergoing more frequent cleanings.

In May, a popular restaurant in Chicago drew attention after adding a staggering 26% “COVID-19 surcharge” to customers’ checks to offset the rising costs of food supplies brought on by shortages and supply chain disruption.

Meanwhile, restaurant owners in Florida, Las Vegas, and Missouri are also charging extra COVID fees, ranging anywhere from 3 to 4%. While some customers are willing to pay a little extra to support a local business during difficult times, many others may balk and likely respond negatively.

Ultimately, implementing a COVID surcharge can force business owners to pay a steep price: the loss of customers.

If you’re located in a wealthier community where most of your customers are still employed, they might not mind paying a little extra to support a local business. But if you’re in an area that has experienced significant job losses and your customers are struggling, implementing a surcharge probably won’t go over well.

Also, take a close look at what your competitors are doing. Are they implementing a COVID surcharge, and has there been a backlash? Keep in mind that you probably don’t want to be the first business in town to require a surcharge, either.

Three Alternatives to a COVID Surcharge

If you’re looking for other ways to boost profit margins, consider offering cash discounts, modifying your menu or inventory, or raising your prices.

Cash Discounts

A cash discount is offering a discount for customers who pay with cash instead of a credit card. It’s important to make your customers aware of the policy—that means posting signs at your store’s entrance, inside your store, and at the register that clearly state your policy. Not only does the signage make it clear for consumers, they are also required by law. Be sure your signage clearly explains the payment options associated with the discount program.

There are also some interesting "cash discount alternatives" you may wish to research, such as the Edge program through Sekure, which allows you to save up to 100% of your credit card processing costs

The Edge is not a surcharge or a cash discount program; it’s a price increase at the item level. Instead of applying to all your customers, it is only applied to those who pay by credit card. The Edge is similar to the “gas station model”: if you pay with cash, you pay one price, and if you pay by credit card, you pay a different price. 

What’s more, there are no added fees, no basic monthly fees and no PCI compliance fees when using free Payanywhere smart equipment. The same flat rate is applied to every transaction and the terminal automatically adjusts the price.

Modify Your Menu or Inventory

Does your restaurant sell a popular dish, or does your store offer items that tend to be best sellers with your customers? If you run a restaurant, shift your menu selection to highlight popular items with a high per-item profit margin. With this shift, you can increase your incoming revenue and lower your overall ingredient costs at the same time.

If you run a store—be it a clothing boutique, hardware store, or office supply shop—you can also focus on selling items to boost your profit margin. Also, offer items that are in-demand right now, such as face masks, hand sanitizer, comfortable work-from-home attire, and toilet paper.

Raise Prices

If cash discounts or changing inventory or your menu aren’t cost effective, you might consider raising your prices to pay for increased inventory or raw ingredient costs due to supply chain problems.

If you go this route, you can either implement targeted price increases that are focused on high-demand items or goods, or raise your prices across the board.

Don’t get too aggressive with increasing prices, though. Check your state’s anti-price gouging laws to stay compliant. In New York, for example, Attorney General Letitia James’ team has fielded more than 7,000 such complaints statewide. James took action when Quality King Distributors Inc., increased the price of a 19-ounce Lysol spray can from $4.25 to $9.15, despite not incurring any increased costs for the disinfectant, according to a lawsuit filed by her office.

After Weighing Your Options, Do You Go with a COVID Surcharge?

If you decide to opt for a COVID surcharge, try to implement an across-the-board percentage-based surcharge rather than a flat convenience fee. A flat fee can affect low ticket sizes and deter customers from buying anything at all.

Your credit card processing account provider can help you reprogram your processing equipment to apply the surcharge automatically. In the end, it’s important that you communicate with your customers before you start adding a surcharge to their bills, and be sure to discontinue this extra fee as soon as possible.

Learn how Sekure can help your business. Visit our COVID-19 Merchant Resources page to help you stay open and #Staysekure.

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