MCC 5812: Restaurants & Eating Places (Description and Payment Processing Impact)

Merchant category code (MCC) 5812 is given to restaurants and eating places by the merchant’s payment processor or acquirer. From fraud monitoring to credit card rewards, this code plays a major role in your company’s payment processing setup. It can affect your approval rates, processing fees, and dispute patterns. 

To learn more about how MCC 5812 (restaurants) impacts your operations, read on.

TL;DR

• MCC 5812 is for companies that sell prepared food and drinks for immediate consumption.
• This covers diners, pizzerias, cafes, dinner theaters, and other dining establishments.
• However, bars, wholesale bakeries, fast food restaurants, grocery stores, and caterers fall under different codes.
• MCC 5812 merchants generally have a low-to-moderate risk level.
• Card-not-present transactions, tip adjustments, delivery orders, and third-party platforms can increase the likelihood of a dispute.
• Restaurants can reduce the chances of payment-related problems by training staff members on their payment policies, requiring additional authentication for card-not-present transactions, documenting transaction records, monitoring chargebacks for common issues, and offering multiple payment methods.

What Is an MCC? 

A merchant category code (MCC) is a four-digit number that is assigned by card networks to different kinds of businesses. It helps card networks and payment processors to understand the risk level involved. Additionally, the MCC is necessary for calculating credit card rewards and transaction fees.

What Businesses Fall Under MCC 5812?

MCC 5812 (restaurants) is used for a wide variety of dining establishments. If a business prepares foods and beverages for immediate consumption, it falls under the 5812 MCC code. This includes restaurants where customers order delivery, dine-in establishments, or to-go orders.

The following is a basic selection of restaurants in this classification.

• Full-service restaurants
• Cafeterias
• Cafes
• Buffets
• Coffee shops
• Refreshment stands
• Pizzerias
• Sandwich shops
• Snack bars
• Diners
• Concession stands
• Carry-out restaurants
• Dinner theaters
• Ice cream shops
• Commissary restaurants

Real-World Examples of MCC 5812 Companies

To get a better understanding of how merchant category code 5812 works in practice, let’s look at some real-world examples of it.

• A local sub shop that sells to-go orders
• A murder mystery dinner theater
• A pizza franchise that operates a buffet
• A drive-through espresso stand that offers to-go drinks

Which Businesses Aren’t Considered MCC 5812?

While there are other establishments that sell food, they don’t always fall under the 5812 MCC code description. The food must be prepared for immediate consumption. If it is prepackaged, like food at a grocery store, it must use a different code. Similarly, any establishment that makes food for future consumption will require a different MCC code.

It’s also important to note that food trucks may or may not use MCC 5812. In this instance, the processor may classify the food truck as a restaurant, a mobile vendor, or a specialty retail food merchant.

Examples of Near-Miss Businesses

To get a better idea of how this works in practice, let’s dive into some common near-miss businesses. While the following companies might sound like they should use MCC 5812, they are actually classified under different codes.

• Wholesale Bakery: A wholesale bakery would be classified under MCC 5462 for bakeries because it produces baked goods.
• Bars: Taverns, nightclubs, and bars primarily earn money by selling alcoholic beverages, so they are classified under MCC 5813.
• Fast Food Restaurants: When a restaurant is classified as fast food, it uses the code 5814.
• Grocery Stores: While grocery stores sell food, it isn’t prepared. As a result, they are classified under MCC 5411.
• Caterers: Event-based, off-site food falls under MCC 5811 for caterers.

How To Quickly Fix an MCC Misclassification With Your Payment Processor

If you think you’ve been given the merchant category code 5812 in error, there are a few things you can do to be reclassified.

1. First, double-check your MCC to verify that it is 5812. You can typically find this code on your merchant account statement.
2. Then, reach out to the payment processor’s team to ask about reclassifying the code. Explain why you think the classification is in error.
3. Provide documentation to support your case. Common documentation types include your business website, a description of your company’s services, or your product catalog.
4. At this point, the processor will review your business activity, transactions, primary revenue stream, and other information. Depending on the processor, this can take several days or weeks.

As a merchant, it’s important to monitor your MCC and make sure it is correct. The wrong MCC can lead to higher interchange fees, incorrect credit card rewards for your customers, ineffective fraud monitoring, and reporting issues.

Your Risk Level: How Processors View MCC 5812

Unlike high-risk MCC codes, MCC 5812 (restaurants) is considered fairly stable. This low-to-moderate risk merchant category has predictable transaction patterns and relatively low chargeback rates. Most transactions occur in person with a chip card or contactless card. These transactions also have a low average ticket size and are settled quickly.

While the 5812 MCC code is not considered significantly risky, there are aspects that can increase the risk involved. Large tip adjustments can trigger fraud alerts. Additionally, card-not-present transactions are quite common because of mobile app, online, and phone orders. For delivery orders, there is a risk that customers will have missing items or an order that isn’t received. 

The Practical Impact of MCC 5812 for Merchants and Customers

In the United States, food and drink sales bring in $1.4 trillion each year. When merchants are considered a part of this industry, it can impact their payment operations and customers in a few different ways. 

For Merchants

This MCC typically affects merchants through the following factors.

• Payment Processing Fees: Because this isn’t a particularly risky merchant category code, merchants generally pay the standard retail interchange fees. However, card-not-present transactions often involve higher interchange fees. Because many restaurants have a high volume of low-value transactions, per-transaction fees are fairly common.
• Third-Party Delivery Platforms: Many restaurants rely on third-party delivery platforms to deliver orders. These apps can take a cut of the merchant’s revenue.
• Approval Behavior: These low-to-moderate risk transactions generally have good approval rates, although approvals may be lower with online, phone, and delivery orders.
• Dispute Risk: When it comes to delivery, takeout, and card-not-present transactions, there is a higher likelihood of customers claiming that an order is incorrect or never delivered. Orders placed through a delivery platform can also be significantly more complicated to deal with if there is a dispute.

For Customers

A 5812 MCC code impacts customers in a few important ways.

• Reward Points: Credit card rewards are based on the category type. Many cards will offer extra points or better cashback rates for restaurant purchases. An incorrect classification can cause customers to miss out on these points.
• Bonuses for Dining: Often, credit cards have bonus categories, so restaurant transactions receive a higher reward multiplier.
• Expense Reporting: Accurate classifications also matter because business travelers and employees rely on the classification to automatically sort their restaurant purchases for accounting purposes and expense reimbursement.

Common Processing Challenges in the Restaurant Industry

In the restaurant industry, receiving tips, splitting checks, and refunding incorrect orders are just part of day-to-day business operations. Because of the industry’s unique needs, there are specific challenges merchants and payment processors face. 

• Tips and Adjustments: At most restaurants, the initial charge is authorized first. Then, the total is adjusted after a tip is added. If the tip is especially large, this can cause a red flag with the processor.
• Pre-Authorizations: Pre-authorizations are common with restaurants, bar tabs, and large groups at restaurants. By pre-authorizing the card, the restaurant can ensure that funds are available for the final purchase. Until the transaction is actually finalized, this may appear as a pending charge or temporary hold on the customer’s account.
• Split Checks: Often, customers will dine with their loved ones and split the bill. By getting the right point-of-sale (POS) system, restaurants can avoid calculation errors when splitting bills and prevent chargebacks from happening.
• Refunds and Voids: Voids occur before the transaction has settled, while refunds return the customer’s funds after settlement has taken place. Restaurants should strive to use voids instead of refunds because they have a lower processing cost and are easier for reconciliation.
• Third-Party Platforms: Dining establishments often rely on third-party apps, delivery companies, and reservation systems. If a dispute occurs, it can be hard to tell which party is responsible for resolving the problem or refunding the transaction.

Important Operational Strategies for Optimizing Your Payment Workflow

With merchant category code 5812, there are a few important steps you can take to prevent chargebacks, reduce your processing fees, and optimize your payment workflow.

Train Staff Members on Payment Policies

One of the most important things you can do to avoid refunds, chargebacks, and high processing fees is to train your workers on your payment policies. They need to understand the correct way to adjust tips, fix mistakes, void transactions, deal with declined cards, and handle customer complaints.

Use Added Authentication for Card-Not-Present Orders

By using address verification service (AVS) and CVV codes for online and delivery orders, you can decrease the likelihood of fraudulent transactions. Over time, these authentication measures can improve your approval rates.

Document the Order History

Your transaction-related documents are essential for easy reconciliation. If a dispute does occur, they can help you show that the transaction was legitimate and processed correctly. You should update your payment setup so that you can easily store all of your company’s receipts, delivery information, customer communication, and online order confirmations.

Monitor Chargebacks for Common Patterns

By carefully monitoring your chargeback disputes, you can notice which reason codes appear the most. You may also notice that disputes occur more often at different times of day, on certain payment channels, or with specific transaction sizes. All of this information helps you update your payment processing setup and smart routing rules so that chargebacks are less likely to occur.

Offer a Variety of Payment Methods 

Modern diners use a variety of payment options. Besides ensuring better customer satisfaction, offering multiple payment methods means customers have multiple alternatives if a card is declined.

What Merchants Need To Prepare To Get Their Account Approved

While the fastest merchant account processors can approve and set up accounts in two days or less, traditional processors often take around four to six business days. As a merchant, there are a few things you can do to get your account approved faster.

• Provide your business registration forms, food service permit, business license, and formation paperwork to show that you are legally allowed to operate your company.
• Calculate your estimated transaction volume and average ticket size.
• Deliver your bank statements and routing numbers for verification purposes and to show where your settlement funds will be deposited.
• Demonstrate how your company operates by giving the processor your business website, links to your ordering platform and reservation system, product descriptions, and information about your dining format.
• Explain the POS system and payment methods you plan on using.

How To Negotiate Better Payment Processing Terms

To negotiate better processing rates and terms, it helps to understand your negotiating position. Start by reviewing your chargeback rates, current fees, MCC classification, average transaction size, volume fluctuations, and other metrics. 

With this information, you can talk to your payment processor about lowering the fees or using interchange-plus pricing. Through interchange-plus pricing, you can gain transparency and see each processor’s markup separately. As your business grows, this type of pricing model is effective for comparing competing offers and ensuring predictable pricing. You can also negotiate per-transaction, percentage, gateway, and monthly account fees.

Before you sign a new contract, read the terms carefully. You’ll want to find out if there are any early termination fees, the length of the contract, and any equipment leasing terms. Additionally, you should verify whether the contract automatically renews. If it does, make sure to note when the renewal is and when you are able to switch plans without paying a fee.

Finally, don’t be afraid to shop around. By comparing different providers, you can ensure that you get the best processing terms for your needs.

How PayCompass Supports MCC 5812 Merchants

From tip adjustments to voiding transactions, you need the best POS system and gateway possible. At PayCompass, our team of payment experts can carefully evaluate your processing needs and help you select the ideal payment setup. 

To avoid unnecessary chargebacks and processing fees, you must implement the right dispute prevention practices. Through the chargeback, dispute, and fraud prevention tools at PayCompass, you can maintain high approval rates and low chargeback rates. From real-time analytics to transparent pricing, our team can help restaurants achieve their payment processing goals.

Final Thoughts

MCC 5812 for restaurants is more than just a string of numbers. It affects how payment processors handle your transactions and the processing fees you are charged. As a business classified under this code, your company also faces unique challenges and opportunities. 

To learn more about how to negotiate lower fees and speed up your company’s approval process, reach out to PayCompass today for a full evaluation.