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Delivery apps are essential for most restaurants these days. The convenience to customers, highlighted during the pandemic, means apps are here to stay. But restaurant owners know there is a hidden challenge to delivery apps: chargebacks. Chargebacks, which are financial disputes initiated by customers through their ordering app or bank, are quietly chipping away at profits.
As restaurants begin to tackle this new issue, understanding chargebacks and adopting solutions, such as the AI Chargeback Assistant from Orders.co, is key to protecting their business and ensuring continued growth.
What is a Chargeback?
A chargeback occurs when a customer challenges a transaction with their bank, credit card company, or online ordering service. Typically, customers need only to specify their reason for the dispute and, in some cases, provide minimal evidence, like a photo or receipt. The approval process by issuing banks may take several days, whereas third-party delivery apps often issue swift refunds. These platforms prioritize customer protection, frequently deducting the full order amount from the restaurant’s revenue.
This refund process was initially designed to protect consumers against fraud. Still, in online food ordering, it is now commonly used for even minor issues, such as food that arrived cold or was delivered late. “Friendly fraud,” where a consumer disputes a transaction despite goods and services being delivered, has become increasingly common in the restaurant industry, making it essential for owners to understand and address the root causes of these disputes.
Common Reasons for Restaurant Chargebacks
To understand why chargebacks can happen, we should know the reasons customers will submit these disputes.
Here is a list of the top 5 most common reasons for restaurant chargebacks:
- Incorrect Items - The customer claims they received an item they didn’t order.
- Missing Items - The customer claims they are missing something they ordered.
- Quality Issues - The customer is unsatisfied with the food quality they received.
- Undelivered or Late Delivery - The customer claims the food arrived late or never at all.
- Incorrect Preparation - The customer claims their food was not appropriately prepared as requested.
The Financial Toll on Restaurants
The losses restaurants can have from chargebacks are no small matter. Based on Orders.co in-house customer data, restaurants can lose as much as 50 percent of their revenue on a single delivery platform from chargebacks. Factor this in with the commissions restaurants pay to utilize these ordering apps, and it becomes clear that many are losing money when chargebacks become excessive.
Handling these disputes themselves can be even more costly. The process can be complicated and confusing, differing from one company to the next; many banks and credit card issuers require processing fees and threaten penalties for inaccuracies. This often results in restaurants doing nothing or closing their delivery app accounts altogether.
Best Practices for Mitigating Chargebacks
While chargebacks can rarely be avoided entirely, here are some basic steps restaurants can take to help reduce the likelihood of them happening:
- Communication - When a customer orders something that is sold out, contact the customer to inform them of that fact. Allowing them to request a substitution or remove the item from their order is an easy way to avoid a chargeback.
- Quality Control - Have staff verify that all items are prepared correctly before packaging and checking that everything is accounted for. This will help eliminate single-item disputes.
- Proof of Pickup - Require staff to promptly mark orders picked up by drivers and notify the corresponding app of late drivers.
- Quick Dispute Response - Address any open disputes quickly to resolve them before too much time passes. If a chargeback is left open without a restaurant response, it will be automatically refunded to the customer and closed.
Even when you take these steps, chargebacks may still occur. Sometimes they are justified – something went wrong and the customer deserves a refund. However, in a certain percentage of cases, the complaint is unjustified, and restaurants need to dispute these cases quickly and thoroughly.
One way to do that is with a technology solution from Orders.co, the Ai Chargeback Assistant. This tool helps restaurants handle Delivery App disputes with minimal time and effort. This feature collects new customer chargebacks in one list and simplifies the process with three easy steps.
- Select an Open Chargeback
- Start by visiting the "New" tab, listing all open chargebacks awaiting your review.
- Choose a Reason and Submit
- Select the most applicable reason for disputing the chargeback from the options provided and submit your dispute.
- Review Completed Cases
- Once your dispute has been processed, you can track the outcome under the "Completed" tab.
The disputes can be done quickly and easily from the Orders.co dashboard or mobile Manager app (see image below), and the Ai Chargeback Assistant submits the disputes through the proper channels and in the format the delivery apps require. Furthermore, if a dispute is not quickly approved, the Ai Chargeback Assistant has a system that follows up.
The result? Restaurants that use the Ai Chargeback Assistant enjoy a 90 percent success rate for resolving disputes! Imagine how much money your restaurant would save if 90 percent of customer chargebacks disappeared.
The Orders.co Ai Chargeback Assistant comes included in various Orders.co plans and is available as a stand-alone service.
Conclusion
Navigating chargebacks in the digital era is vital to any restaurant’s success. While challenging to manage alone, solutions like the Orders.co Ai Chargeback Assistant offers a straightforward way for any busy restaurant owner to reclaim revenue lost to frustrating chargebacks. This preserves precious online revenue streams and allows restaurants to focus on what they do best: prepare delicious food for their customers.
Interested in a no-obligation demo of the Orders.co system? Click here to schedule one.
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