Add additional fees to cover your costs? Stop and do these 3 things instead.

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It seems that almost every retail store and restaurant I visit now warns me that they will charge me an additional 3% of the bill if I have the audacity to use a credit card. The nerve of me, right?

Then there was the recent dinner I had where a “service charge” was slipped into the bill causing me to mistakenly double the advice to my server, that it was very good, but not 40% of the bill. Yes, I should have paid more attention and yes, I should have said no to that fourth glass of wine, but come on, doesn’t this seem a bit much and a bit shady?

Related: ‘These fees are getting out of control’: Diner claims he was charged a 5% fee at the restaurant to support employee health care

adding additional fees and charges it’s just a bad pricing strategy. And yet, small businesses across the country continue this practice and suffer backlash both online and in the media.

There is the recent history of the pizzeria in see florida that annoyed customers by adding a 20% charge to “retain workers and offset inflation.” and the restaurants of memphis, richmond, Charleston and cincinnatiwho pulled the same trick with the same consequences.

This is not limited to restaurants. Companies in other industries are annoying their customers by forcing them to give “guilt signals” to employees with additional screens on their point of sale systems. According to a Business Insider report, the owners they have taken to TikTok to argue for a gratuity to be added to the rent, while the former unionized Apple Store in Maryland is fighting for the introduction of a tipping system.

“It’s emotional blackmail,” one customer complained when forced to pay an additional service charge on a retail purchase.

There are better ways to make a profit without angering your customers. Try these three strategies to cover your costs without imposing additional fees and potentially angering your customers.

1. First, you need to spread your overhead costs across all your products

Take the credit card fees. According to the San Francisco Federal Reserve, consumers use cash about 20% of the time. So, if you have a restaurant that grosses $500,000 in a year, it is likely that you will pay $100,000 in cash and the rest ($400,000) will be paid by credit card. Your credit card fees, assuming 3%, would be $12,000 per year or 2.4% of income.

So what is to be done? your added general expenses must be distributed among its products. Using the simple example above, a 2.4 percent increase means that a $30 menu item now costs $30.72. For God’s sake, don’t make a big deal out of this by charging an additional fee. Just keep an eye on your overhead as a percentage of sales and quietly increase the price of your items. Will your customers bang the table, drop their napkins, and throw a glass of wine in your server’s face because of this outrageous increase? Of course not. Because? Because they will hardly notice.

2. Then practice reducing inflation to protect your margins

Shrinkflation is charging the same price but providing slightly less product. If you think that’s immoral, know that the largest companies, from Walmart Consumer Products to Reynolds to Dominos Pizza – They are doing it. So why not you?

Maybe three meatballs instead of four in that pasta dish? Or how about shipping 10 units in a parts box instead of 12? Or offer fewer services with the product? Or spend more freight costs? Is about protecting the margins and your cost of materials is always the largest part of your margin. You have to analyze what you can remove from your offers before simply raising the prices.

Related: A unionized Apple store wants customers to start tipping employees

3. Finally: encourage tipping, but don’t force it

By all means, you should update your POS system and website so that customers are “encouraged” to leave a tip. Most will. Yes. But you have to choose. Don’t just add an arbitrary service fee to your bills. That just makes people upset and feel like they are being ripped off.

Why do this? Because the more your people earn, the happier they’ll be at work, therefore you’ll experience less turnover and may even attract more workers. And the less you have to pay your employees, the happier your accountant will be at the end of the year. Of course, you must be paying a fair wage. But raising wages puts pressure on your profits and will likely cause you to raise prices, which means the customer will have to pay more. Gently pressuring the customer to tip more has much the same effect, without the cash coming from your bank account.

Placing signs that require an additional charge when using a credit card or adding a service fee on top of a bill unnecessarily draws attention to your prices and potentially annoys your customers. You don’t want to do this. You want to keep your profits without drawing attention to how you do it. By spreading your overhead across your products, practicing inflation reduction, and strongly encouraging tipping from your customers, you can accomplish this without becoming negative news.