Chargeback Management Software: Is it a Good Investment for Your Restaurant?

Chargebacks are a common issue that restaurants around the country need help managing. They are becoming increasingly common thanks to the rise of online ordering and food delivery apps and so-called “friendly fraud.” Initially, the chargeback process might seem like nothing but a minor convenience.

But frequent chargebacks can cost your business big! A high chargeback rate is a significant loss of revenue. With profit margins already razor-thin in the restaurant industry, those costs add up.

Fortunately, there's a lot you can do to minimize payment disputes and chargebacks. Chargeback management software is quickly becoming a necessity for retailers, restaurants and any online business. Like any other software for your business, chargeback management solutions are an investment. So, are they worth it for your restaurant?

A Brief Overview

A chargeback is a forced transaction refund that comes from a customer's card issuer. Federal laws require banks and financial institutions to offer chargebacks within 60 days of the transaction.

The bank typically performs an investigation when a customer files a payment dispute with their card issuer. However, because most restaurants don't keep ironclad records of every transaction, they often have little evidence to fight the dispute. As a result, the chargeback occurs, and you lose money!

But it's not just the original transaction amount you lose. Financial institutions also charge additional fees and penalties. With chargeback fees and other expenses, estimates show merchants lose about $3.60 per dollar when a chargeback occurs! Pair all that with reputation damage, payment processor penalties and other issues related to the process, and chargebacks can be a substantial revenue drain.

Customers can request chargebacks for many reasons. Sometimes, they're legitimate responses to theft scenarios and fraudulent transactions. Other times, it could be due to restaurant errors, such as bad customer service or low-quality food. Unfortunately, some people also use chargebacks to perform criminal fraud, something many refer to as friendly fraud.

No matter the reason, chargeback management can help lower chargeback rates. Great software can provide solutions and strategies to help you fight disputes, reduce fraud and save money.

Common Features and Capabilities

Chargeback management is about catching issues at the source, identifying the main reasons for disputes and empowering restaurants like yours to respond to claims. There are many ways software platforms can help in your efforts.

Many platforms automatically respond to claims made to banks, employing efficient integrations with your accountant to provide evidence and support a counterclaim. Other software platforms might use advanced technology like artificial intelligence to detect and deflect fraud attempts.

If you work with a third-party provider for delivery service, chargeback management systems can monitor how apps process orders to maintain accuracy and ensure you're not paying for someone else's mistakes. They can also help reduce restaurant errors that result in chargebacks by improving operational efficiency.

Features and capabilities vary, but some of the best chargeback management solutions offer fraud detection and dispute responses while helping merchants develop strategies to minimize chargebacks as much as possible.

The Role It Plays In Addressing And Preventing Payment Disputes

The right software can play a huge role in preventing payment disputes, acting as a major line of defense once banks get involved. There are tons you can do to reduce chargeback rates on your end. Improving team productivity, catching mistakes before they affect customer experiences and improving the quality of service your staff provide makes all the difference.

However, things still slip through the cracks. Criminal and friendly fraud still runs rampant, and companies that accept debit and credit cards need solutions to minimize those issues. Good software can handle the heavy lifting, supplying you with evidence when working with a bank or a credit card company. They'll also help you identify potential fraud sources, allowing you to take action before fraud leads to major financial trouble for your restaurant.

What are the Benefits of Using Chargeback Management Software?

Every brick-and-mortar and online retailer has to deal with chargebacks at some point. The same goes for restaurants. If you're a merchant that accepts cards and works with a payment processor, you're at risk of chargebacks.

Good chargeback management is the key to combating the growing prevalence of chargeback fraud and payment disputes. The best chargeback management software can help you proactively resolve the issue while providing several additional benefits. Here are just a few.

Reducing Financial Losses

The biggest advantage of chargeback management software is its ability to help you reduce financial loss. Every chargeback is a huge hit to your bottom line. As mentioned earlier, chargeback fees and related expenses make these events expensive. Furthermore, you'll never get back the time and resources spent preparing those orders.

The latest estimates show that chargebacks collectively cost businesses over $117 billion in the United States during 2023!

Chargeback management solutions are a game-changer that can help you prevent revenue loss before it occurs. Instead of simply accepting disputes, you can fight back. With the right strategies, you can take steps to prevent disputes from occurring at all, allowing you to minimize losses, maximize revenue and boost your restaurant's bottom line.

Enhancing Operational Efficiency

Chargeback management is about more than simply responding to disputes and providing evidence. The right software can also help you improve operational efficiency across the board. In addition to changing your entire approach to chargebacks, great software can guide you in the right direction to prevent the main reasons why chargebacks happen.

For example, the best chargeback management software platforms have features that help you catch mistakes in real time. They can alert you to delays, miscommunication with third-party online ordering apps and food preparation errors. Those real-time notifications help you correct problems quickly, giving customers fewer reasons to dispute the transaction.

Improvements to your day-to-day operations go beyond payment disputes. They can help your team improve order accuracy, performance and time management.

Protecting Your Reputation

Chargebacks can cost you more than money. If the main reason why customers request chargebacks is poor customer service or food quality, your reputation will tank. Chargeback management platforms can identify the cause and help you find solutions, allowing you to craft better customer experiences.

Frequent chargebacks can also ruin your reputation among payment processors. Thresholds for what processors tolerate vary, but many will have clear terms outlining what happens if chargebacks become frequent. They include extreme fines and possible contract termination.

Considerations Before Investing

Investing in chargeback management software is a big step in the right direction. Proper implementation can substantially reduce the frequency of chargebacks, helping you minimize revenue loss.

Every business is different. While all merchants can benefit from chargeback management solutions, you should consider a few things before investing.

Integration with Existing Systems

One of the first things to consider is how a chargeback management software platform will integrate into your existing systems. Restaurants can utilize several forms of technology and software to run. You might have a separate platform for finances, one that acts as your POS, another for managing reviews, etc.

Stand-alone solutions are better than nothing. However, the ideal situation is for your chargeback management software to easily integrate into your existing tech and software infrastructure.

Software needs access to other types of data to perform at its best. It needs to see transaction data, order preparation data and more. Without that integration, you'll miss countless strategies to reduce chargebacks.

The best chargeback management software is part of a larger, all-in-one solution. Comprehensive restaurant management software can handle chargeback tasks while handling other aspects of your business.

Cost and ROI Analysis

New software is a substantial investment on your end. Like any other improvement you make to your business, it's important to consider your potential return on investment (ROI).

Chargeback management software may or may not be necessary. It all depends on your current chargeback rates and how much they cost you. Dedicated software makes sense if you're losing significant revenue on chargebacks. However, it might not be a worthwhile investment if your existing approach and operational efficiency keep chargeback rates low.

Crunch the numbers! Compare the revenue lost due to chargebacks in a given period. You can account for the costs of the food wasted, the fees paid and more. Then, look at the long-term cost of chargeback management software to see if your potential ROI makes the investment worth it.

How to Choose the Right Software for Chargeback Management

There's no shortage of software providers. Every platform you consider will have unique costs, features and capabilities. Narrowing your choices to just one can be tough!

To make things easier, here are a few things to look for in your chargeback management software.

Scalability

Can the software you choose grow with your business? The ultimate goal for any restaurant is growth. You may have a single restaurant now, but what about your plans for the future? Can your chosen software scale to multiple locations?

Choosing a scalable solution will ensure continued success at managing chargeback solutions without switching platforms later.

Customization

All businesses operate differently. Your most frequently cited reasons for chargebacks will differ from a restaurant down the street. Therefore, one-size-fits-all solutions aren't ideal.

You want your software to be customizable to your restaurant's unique needs.

User-Friendly Interface

Of course, user-friendliness is a big factor to consider. Effective chargeback management requires buy-in from your entire team. Changes will occur from the top down. If your software is clunky and difficult to use, your restaurant staff will have difficulty taking full advantage of its features.

Common Challenges Faced

Incorporating new software into your operations comes with many challenges. In addition to encouraging participation with your team, many restaurants will have difficulty integrating a fresh platform into their existing ecosystem.

Chargeback management software can only benefit you if it's integral to your operations. That means it must communicate with other systems to catch problems and help you proactively address them. A great platform will have a low ROI if you can't implement it correctly and strategically.

For that reason, many restaurants opt for all-in-one solutions. Having management features for orders, third-party delivery apps, finances, feedback and chargeback management ensures you get an eagle-eye view of your business and how it can improve.

The Importance of Ongoing Support and Software Updates

The final thing to consider is customer support and updates. It can take time to see the results of adopting chargeback management software. In the meantime, you must learn how to use it and make the most of its features.

There's a learning curve involved, not just for you but also for your employees. Access to a reliable customer support team makes all the difference, ensuring a smooth and effective transition while having a lifeline for any issues.

Updates are important, too. Chargeback fraud and customer needs are ever-changing. The features you get today may not be effective two years from now. Regular updates help your restaurant stay on top of emerging chargeback trends, allowing you to adapt and continue reducing losses.

Get Started With Superorder Today

When you're ready to recover lost revenue and take control of chargebacks for your restaurant, Superorder has you covered. Superorder is a feature-rich, all-in-one restaurant management platform that puts all your operational tasks in one place.

The chargeback management features are robust, helping your staff reduce errors with real-time alerts. It also uses AI to detect fraud, report issues with third-party delivery apps and more. Because Superorder is an all-in-one solution, it's easy to adopt. Use it to improve your operational efficiency and pave the way to more growth than you ever thought possible.

Check out Superorder today to learn how managing chargebacks can help your restaurant business!