Merchant Category Code 5812 covers eating places and restaurants, including full-service dining, casual dining, and fine dining establishments. This category represents one of the highest transaction volumes in payment processing.
Key Information
This guide provides insights into managing merchant relationships in the restaurant industry, where margins are tight and chargebacks can significantly impact profitability.
Typical Business Types
Full-Service Restaurants
#1
Traditional sit-down establishments with table service and complete menus.
Fast Casual Dining
#2
Counter-service restaurants with higher quality food than fast food chains.
Fine Dining
#3
Upscale restaurants with premium pricing, extensive wine lists, and formal service.
Payment Processing Information
Transaction Types
1
In-Person Table Service
Customers pay after dining with cards processed at the table or counter.
2
Online Ordering
Digital orders placed through websites or apps for pickup or delivery.
3
Delivery Platform Transactions
Third-party platforms like DoorDash and Uber Eats processing payments.
4
Split Payments
Multiple payment methods or cards used to settle a single dining bill.
5
Tip Adjustments
Initial authorization adjusted upward after tip is added to the receipt.
Common Payment Methods
Credit and Debit Cards - Primary payment method for most restaurant transactions
Mobile Payments - Apple Pay, Google Pay, and contactless payments
Gift Cards - Restaurant-specific or general-purpose gift cards
Cash - Still common despite declining usage
Third-Party Delivery Apps - Integrated payment processing through delivery platforms
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Chargeback Fraud - Customers disputing legitimate charges after dining
Employee Theft - Staff processing unauthorized refunds or voids
Card Testing - Small transactions to validate stolen card information
Friendly Fraud - Legitimate cardholders falsely claiming non-receipt of service
Tip Fraud - Unauthorized modification of tip amounts after customer departure
Regulatory Challenges
Health Department Compliance - Regular inspections and food safety standards
Liquor License Requirements - Special licensing for alcohol service
Labor Law Compliance - Tip reporting and wage regulations
ADA Compliance - Accessibility requirements for dining areas
PCI Compliance - Payment card data security standards
Common Fraud Signals
Unusually High Tip Percentages
Tips exceeding 30-40% of bill amounts may indicate fraudulent tip adjustments.
Frequent Refunds or Voids
Multiple transaction reversals, especially from the same employee, suggest potential internal fraud.
High-Value Transactions Outside Peak Hours
Large bills during off-peak times without corresponding foot traffic patterns.
Example Scenarios and Red Flags
Sudden Spike in Chargebacks
A restaurant experiences increased disputes claiming poor food quality or service, often targeting high-value bills.
Employee Processing Personal Cards
Staff members caught processing their own payment cards through the restaurant's system for personal benefit.
Inconsistent Tip Patterns
Dramatic variations in average tip percentages that don't align with service quality or customer demographics.
Multiple Failed Authorization Attempts
Repeated declined transactions followed by successful charges, indicating possible card testing activity.
Delivery Platform Discrepancies
Significant differences between reported delivery sales and actual transaction volumes processed.
Common Underwriting Questions
UW Tips Business
Verify business licenses, health permits, and liquor licenses where applicable
Confirm physical location matches business records and appears operational
Check for proper insurance coverage including liquor liability if serving alcohol
UW Tips Financial
Analyze profit margins recognizing typical restaurant margins of 3-5%
Review seasonal variations and peak dining periods
Assess average ticket size and daily transaction volumes
UW Tips Risk
Examine chargeback ratios with particular attention to friendly fraud patterns
Evaluate employee management practices and internal controls
Review tip adjustment procedures and authorization processes
UW Questions Business
What type of restaurant do you operate and what is your typical customer demographic?
Do you offer delivery, takeout, or dine-in only?
What percentage of revenue comes from alcohol sales?
UW Questions Payments
What percentage of transactions are card-present versus delivery platforms?
How do you handle tip adjustments and what controls are in place?
Do you integrate with third-party delivery services and how are payments processed?
UW Questions Fraud
What fraud prevention measures protect against employee theft?
How do you verify large or suspicious transactions?
What training do staff receive on payment security?
UW Questions Compliance
Are you PCI DSS compliant and when was your last assessment?
How do you handle and report employee tips for tax purposes?
Do you have proper licensing for all regulatory requirements?
UW Questions Chargebacks
What is your historical chargeback ratio and primary dispute reasons?
How do you handle customer complaints to prevent chargebacks?
Do you maintain records of customer signatures and receipts?
UW Questions Infrastructure
Are your POS systems integrated with kitchen and inventory management?
How frequently do you update payment processing equipment and software?
Do you have backup systems for payment processing failures?
Ongoing Monitoring
Transaction Monitoring
Monitor for unusual tip adjustment patterns or percentages
Track refund and void transactions by employee and shift
Review transaction timing against business hours and staffing schedules
Compliance Checks
Maintain current health permits and licenses
Ensure ongoing PCI compliance with regular assessments
Stay updated on tip reporting and labor law requirements
Security Updates
Implement EMV chip card readers at all payment terminals
Use encrypted payment processing with tokenization
Deploy point-to-point encryption for card data protection
Risk Assessment
Adjust risk parameters during high-volume periods like holidays
Monitor chargeback trends and address root causes promptly
Evaluate delivery platform relationships and their impact on margins
Merchant Communication
Provide guidance on managing delivery platform relationships and fees. Share best practices for reducing chargebacks through better customer service documentation. Offer support for navigating seasonal fluctuations and cash flow challenges.
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Gratify offers instant merchant application enrichment to get the full picture of your customers in real-time
