Industry News | February 3, 2010

Don't Charge It: Credit Card Use Continues to Fall

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Credit and debit card use at small-business restaurants declined in Q4 of 2009 over the same period of 2008, the sixth consecutive quarter that year-over-year same-store credit sales were down in the segment.

According to the Small Business Credit Sales Report from Capital Access Network Inc.’s (CAN) Data Services Division, same-store credit sales decreased 8.67 percent at small-business restaurants in Q4.

Mark Lorimer, chief marketing officer for CAN, says that the decline in credit card sales reflects the dire state of the economy.

“Banks are cutting credit card limits … or cutting off credit card access to large numbers of customers, so it is consistent with that,” he says.

“A lot of people are budgeting, and by budgeting, they’re often using cash.”

According to the report, cheaper-end restaurants appear to be in better shape than most other small business segments. Restaurants with an average ticket of less than $25 witnessed a decrease in same-store credit sales of only 4.29 percent in Q4, the third consecutive quarter of declines.

“If you’re in a quick-serve, in a quick-serve environment, it’s easier for a customer to pay cash instead of credit,” Lorimer says. He also says there is more of a direct correlation between declining gross sales and declining credit card usage at restaurants with higher average tickets.

The Q4 2009 results do suggest a reversal of trends for credit card use at small-business restaurants, though. While same-store credit sales were down 8.67 percent between Q4 of 2009 and 2008, sales were down 11.06 percent between the third quarters of each year.

“We’re always optimistic,” he says. “We’re eager to get to the point that declining stops. In order for it to stop, it’s going to have to slow, and that’s what we’re seeing now.”

While restaurants wait for the economy—and, in turn, credit card usage—to rebound, Lorimer says the only thing they should do is what they’ve done all along: push for higher sales volumes.

“To the extent that they’re increasing their sales and doing things to increase their sales, they’ll increase their credit card usage,” he says. “For every restaurant category, credit cards form a significant portion of their overall sales volume.”

By Sam Oches

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