Membership Has Its Pitfalls: Some Restaurateurs Dropping American Express
Mar. 27, 1991
BOSTON (AP) _ Fed up with American Express Co. taking a big bite out of their income, some restaurateurs are uniting to drop the plastic altogether.
In Boston, where a depressed economy has hit the restaurant industry especially hard, 50 restaurants say they'll no longer accept the charge card in protest, and are urging customers to leave home without it.
Another 50 eateries may join the protest, organizers say.
''Things are coming down in price across the board, but American Express still acts like it's the heyday of the 1980s,'' said Steve DiFillippo, a Boston restaurateur who has spearheaded the anti-American Express movement.
The problem, restaurateurs say, is that every time a customer charges a meal on American Express, the company earns 3.25 percent to 4 percent of the total bill as commission. Visa and Mastercard's rates hover around 2 percent.
At 4 percent, a restaurant with annual gross sales of $500,000 would pay $20,000 a year in American Express commissions.
''Say you do a million dollars of business in a year. If you can save 2 percentage points, that's $20,000,'' DiFillippo said. ''This isn't 20 bucks a week. We're talking some serious money.''
DiFillippo, owner of Davio's, an Italian restaurant on Boston's fashionable Newbury Street, said he pays more annually in American Express charges than he does for rent. ''We get killed,'' he said.
A restaurateur revolt against American Express could present a sticky public-relations problem for the New York-based financial services giant, which has parlayed its plastic charge card into a highly successful symbol of quality service and consumer affluence.
Patricia Duffy, vice president of restaurant marketing for American Express, said the company was re-evaluating its rates.
''They are my customers, and if they are unhappy with the rates it's certainly something we're listening to,'' Duffy said. ''It's a big issue for us, because the restaurant business for us is enormous. But there's a lot of legwork to be done in looking at the rate structure.''
Duffy said American Express offers benefits others cards don't, like cooperative marketing, direct mail ads to cardholders and customers who spend money even when times are tight.
But Joan Lang, special projects editor for Restaurant Business magazine in New York, said while Boston may be the first city where restaurants have joined to protest American Express rates, many proprietors nationwide are unhappy.
''A lot of them are frustrated, and it's sort of coming to a head now,'' Lang said. ''Things are getting tighter and tighter. It's not surprising this is happening.''
Kenneth Burger, owner of the Franciscan restaurant on San Francisco's Fisherman's Wharf, said practically every restaurateur he knew had considered dropping American Express.
''We've all thought about it,'' Burger said. ''I'm not sure how they justify their higher rates.''
D'Arcy Arpke dropped American Express five years ago when she found it consumed $12,000 of her income in one year alone, at a time when Euphemia Hay, her Sarasota, Fla., eatery, seated only 40 patrons.
''When we were very small, when we really needed a break, their rate was 4 percent,'' Arpke said. ''When we expanded, they came in and dropped the rate. I said, 'where were you when we needed you?' ''
Some restaurant chains may also soon can the card. The 66-outlet Chart House chain, based in Solana Beach, Calif., is mulling whether to drop American Express.
''We've had talks for years with them on their rates, and we really have not been successful in getting the relief we're looking for,'' said William Kuntz, vice president of Chart House Enterprises.
''For years American Express has been reaping the benefits, and now the bite they're taking out of restaurants is increasing,'' Kuntz said. ''They don't seem to be factoring in the competition, and that may catch up with them.''
DiFillippo said Boston restaurant owners were scheduled to meet Friday with American Express officials to discuss their complaints, but he wasn't optimistic.
''We met with them two months ago. We said, 'look guys, we love your product but we've got to save some money here. We've got to negotiate,'' DiFillippo said. ''They said there was no negotiating on the rate. It was unbelievable. I hate to say it, but they were arrogant to the max.''