The Modern Restaurant Dilemma
It’s not the big things breaking your margin; it’s the slow, invisible drip.
While inflation and rising food costs dominate the headlines, a quieter shift is taking a toll behind the scenes: alcohol sales are dropping.
For decades, alcohol was the cushion that kept restaurants afloat. A $9 cocktail with a $2-3 margin helped offset razor-thin profits on entrées. But drinking habits are changing. According to The Economist, nearly 30% of people in their 20s didn’t consume a single alcoholic drink in the past year, a trend that reflects broader lifestyle shifts across North America.
And it’s not just Gen Z. Across all demographics, health trends, economic pressures, and changing social habits are reducing drink orders. When the upsell disappears, so does the restaurant’s safety net.
At the same time, restaurants face rising card fees, climbing ingredient costs, persistent staffing shortages, and guests who still expect exceptional service. The real question isn’t just how do we survive? It’s how do we continue serving well without silently losing money?
What Is Pass-the-Fee, and Why It’s Gaining Ground
A pass the fee program allows businesses to pass the cost of credit card processing, in the form of a 2.4% surcharge in Canada, back to the guest. This is only if they choose to pay with credit. Debit, cash, and gift cards have no additional fees.
To many operators, this is a game-changer. Until recently, most were stuck choosing between two unappealing options:
- Raise menu prices across the board, even for cash or debit-paying guests
- Absorb processing fees on every credit card sale, eating into already thin margins
Neither is sustainable in this industry. With surcharge, you shift the cost to the payment method that causes it, without penalizing your broader customer base. It’s fair, transparent, and margin-friendly.
And yes, it’s fully legal in Canada, so long as you follow a few simple steps: signage at the entrance and point of sale, clear communication to customers, and proper registration with card brands like Visa and Mastercard. (We take care of that for you.) No, it’s not too good to be true; it just took 11 years of CFIB pushing for its legalization.
What matters most isn’t just the presence of a fee; it’s whether the guest feels informed and in control. When communication is clear, many respond with understanding. And if not, our numbers indicate patrons don’t hesitate to return.
The Margin Crisis in 2025
Even in ideal conditions, restaurant margins hover around 3-6%. But today, that cushion is wearing thin.
- Skyrocketing ingredient and supply costs
- Competitive wage pressures
- Guests growing tired of rising prices
- Fewer high-margin alcohol sales
Imagine serving a $22 entrée and watching your profit vanish the moment a credit card is used. For years, that was simply accepted, because in Canada there wasn’t another option. While surcharge programs have been in place across the U.S. as early as 2013, Canadian businesses only gained the legal right to implement them in October 2022. Now, in 2025, more and more restaurants are rethinking that equation.
Many are realizing they need to protect their margins without alienating loyal customers. Surcharge offers a direct and fair path toward that goal, especially as traditional profit centers like alcohol become less reliable.
What Happens When You Reclaim That 2.4%
A restaurant processing $100,000 in monthly credit card sales can save around $2,400 each month through a surcharge program. That money can go a long way toward strengthening core operations, not to mention alleviating stress in the kitchen and on the floor. Even at something like 1.6%, that’s $1,600 a month, 32% of a 5% margin. At 2.4%, it’s $2,400, nearly half. Recovering even 1-2% can shift your numbers meaningfully.
- Cover a weekend server’s pay, so you don’t have to stretch your team thin
- Absorb food cost spikes through additional deliveries or better supplier rates
- Free up budget for training or extra prep time, improving consistency and service
In an industry where margins are razor-thin, this kind of support makes a difference. More than profit, it’s about control. With that flexibility, you can reinvest in the areas that directly impact service and consistency. And if it means an extra pair of hands during peak hours (while there’s no doubt your staff are already incredible) it simply gives them more space to do what they do best.
With the added flexibility, you can also support the less visible parts of service—like the extra minutes staff spend navigating dietary restrictions, guest questions, or special requests. That time matters, and surcharge helps make room for it.
Over time, that consistency shows up where it matters most: in reviews, return visits, and guest loyalty. At its core, surcharge is less about cutting costs, and more about maintaining control in a margin-sensitive business.
How are Quiet Price Hikes Hurting Your Brand
Raising prices across the board might seem like the path of least resistance, but it comes with certain consequences. Customers notice. They compare. And even loyal regulars may begin to reconsider their expectations. Worse, everyone pays more; even those using debit or cash.
Surcharge, on the other hand, keeps your core prices intact. Guests still have the freedom to choose how they pay, and you preserve the integrity of your menu pricing.
Customer Reactions: What Actually Happens
No one loves a fee, but transparency builds trust, even when costs rise. As Forbes outlines, when customers understand the reasoning, they’re more likely to see it as fair, not frustrating.
With a clear sign at the entrance, a quick mention before payment, and an itemized receipt, most people understand, and they appreciate having the choice to avoid the fee by using debit or cash. Some even see it as a way to support small business owners more directly.
That clarity starts with your team. When staff understand the program and feel confident explaining it (Rescue helps with this too), they’re better equipped to handle questions and facilitate a smooth transition.
The Cultural Shift You Can’t Ignore
Today’s diners are driven by value, convenience, and principle.
Millennials and Gen Z pay digitally, drink less, and expect honesty from the businesses they support. They’re not shocked by fees, they’re shocked when things aren’t disclosed.
Surcharge isn’t just a pricing strategy. It’s a cultural alignment with the way modern customers think. It shows them you’re running a business that respects their awareness and gives them options. By meeting these evolving expectations, restaurants can stay relevant, not just profitable. It’s a forward-thinking move that places you in step with where dining culture is headed.
What Surcharge Is Not
- It’s not a cash discount
- It’s not hidden
- It’s not illegal in Canada
It’s a simple way to assign costs where they belong, on the payment method that generates them.
Taking Back Control
Surcharge gives restaurants room to breathe. It helps new venues reach break-even faster and gives established operators the flexibility to reinvest in staff, improve consistency, and protect service standards without cutting corners. For an industry built on tight margins and high expectations, that kind of stability matters.
More than anything, it puts control back in your hands. Debit and cash remain fee-free, while credit comes with a small, clearly disclosed cost. It’s not about charging more, it’s about keeping what you’ve already earned and putting it back into the parts of your business that need it most.
Book a free consultation to see how surcharge could fit into your service model.
