Quick Service Restaurant ChargebacksCanceling QSR Disputes Before They Impact Your Bottom Line

August 16, 2023 | 11 min read

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Quick Service Restaurant Chargeback

In a Nutshell

Is your quick-service restaurant seeing frequent chargebacks? If so, it’s time to learn what’s putting your business at risk. This article will explain everything you need to know about QSR chargebacks, including how they happen, their repercussions, and strategies for preventing them altogether.

Our Top 10 Tips to Prevent Quick Service Restaurant Chargebacks

Quick-service restaurant chains have proven pretty nimble in adjusting to changing times.

Many have incorporated delivery and in-store collection as means to provide greater convenience to their customers. However, this convenience has a downside. The same attributes that make it attractive to customers also render it more susceptible to fraud and transaction chargebacks.

The rising trend of fraud and chargebacks within QSR establishments is linked to these new service modalities. It's essential to understand how to reduce associated risks and maintain customer satisfaction. So then, what measures can be implemented to ward off fraud and chargebacks in the QSR sector?

Quick Service Restaurant Chargebacks: At a Glance

The quick service and fast-food sector is enormous, grossing nearly $300 billion in 2023. Some of the industry’s current situation is a response to the covid-19 pandemic, which saw shutdowns and a revived consumer inclination for home dining.

QSR establishments that thrived were the ones which managed to navigate through this crisis by adopting customer-centric measures. For instance, introducing delivery services (either managed in-house or through app-based services like DoorDash or Grubhub), enabling online orders, and facilitating curbside pickups.

These strategies successfully buoyed many QSRs until the easing of pandemic restrictions. However, this also inadvertently opened up new avenues for fraudsters. 

When we talk about quick service restaurant chargebacks, or QSR chargebacks, we’re referring to situations in which a customer disputes a transaction made at a QSR. The customer contacts their card issuer, resulting in the funds being returned to the customer's account. This can occur for various reasons, such as fraudulent card use, dissatisfaction with the product or service, or billing errors. It could also be a result of chargeback abuse, otherwise known as friendly fraud

Practices such as delivery and pickup options probably won’t disappear anytime soon; likewise, fraudsters are here to stay. Therefore, it’s up to QSR operators to determine optimal strategies to shield themselves from fraud, unwarranted disputes, and preventable chargebacks.

Why Do QSR Chargebacks Happen?

Running a quick service restaurant isn't easy, especially when you have to worry about chargebacks. 

Payment disputes can happen for any number of reasons, even when the transaction was completely above board. For example, let's say there's a mix-up with a takeout order or a delivery error; unlike a sit-down meal, you can't just whisk the dish back to the kitchen and make things right on the spot.

To make matters worse, customers aren't always patient. Missed deliveries, order mix-ups, and other frustrations can lead them to dispute the purchase with their bank to get a refund. Plus, there's always a risk of someone swiping a pick-up order or a doorstep delivery. 

It's clear why quick service restaurants can be a hotbed for chargebacks, all things considered. But, to clarify these examples, here are a few factors that explain why QSR chargebacks are so common:

Speed Over Security

QSRs emphasize speed and convenience to provide a seamless customer experience. This often means forgoing additional verification measures (like asking for a signature or a PIN) that could slow down the transaction but might provide extra protection against fraud.

Card-Not-Present Transactions

Many QSRs now offer online ordering, delivery services, and mobile apps for order pick-up, all categorized as card-not-present transactions. These transactions are particularly susceptible to chargebacks because it's harder to verify the identity of the customer.

High Volume, Low-Cost Transactions

QSRs process a large number of transactions, usually of relatively low dollar value. Due to the sheer volume, it can be challenging to monitor all transactions for potential fraudulent activity effectively. Moreover, it's not financially feasible to dispute every chargeback, given the time and resources required.

Friendly Fraud

Also known as chargeback fraud, a consumer makes a purchase with their credit card and then requests a chargeback from the issuing bank after receiving the goods or services. This is done under false pretenses, such as claiming they did not receive the order or that it was unauthorized. Due to the nature of QSR transactions, this type of fraud can be quite common.

Lack of a Robust Verification System

Unlike many other retail establishments, QSRs usually do not have robust systems in place to verify and authenticate transactions. This makes it easier for fraudulent transactions to go unnoticed until a chargeback request is made.

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Remember, chargebacks might not always be malicious, but that hardly makes them easier for merchants to deal with. Chargebacks always come with consequences, no matter who is at fault. 

How Do Chargebacks Impact the Quick Service Restaurant Industry?

QSR disputes hurt the industry as a whole. The more disputes that are filed, the more risky the merchant appears. That leads to higher processing fees, stricter operating limitations, and more.

Chargebacks can lead to:

Reputational Damage

Chargebacks can make your brand appear less trustworthy. Each chargeback signifies a customer's dissatisfaction or dispute, which can tarnish the company’s image in the eyes of potential customers and financial institutions. A high number of chargebacks can create the perception that you’re failing to deliver satisfactory services or honor commitments.

Increased Risk Scrutiny

Frequent chargebacks may attract heightened scrutiny from payment processors, financial institutions, and regulatory bodies. Your company might be subject to additional risk assessments and monitoring, which could lead to stricter regulations, higher processing fees, or even the termination of partnerships with payment processors. This heightened scrutiny can increase operational complexities and costs.

Customer Churn

Chargebacks can contribute to customer attrition or churn. Dissatisfied customers who file chargebacks are more likely to cancel services or seek other options. The loss of loyal customers impacts revenue and erodes customer retention rates, making it more challenging to maintain a stable customer base.

Operational Disruptions

Handling chargebacks means diverting resources and manpower from core business operations. Your company must invest time and effort into investigating, documenting, and responding to chargeback claims. That means you’re diverting resources from other crucial operations like customer service, fulfillment of services, or product development.

Compliance Challenges

As mentioned above, chargebacks can pose compliance challenges. Your company must adhere to regulatory requirements and industry standards when addressing chargeback disputes. Failure to comply can result in legal consequences or further damage to your reputation.

Chargebacks hurt everyone involved in the process; sometimes even the customers that file them. This is why it’s so important for utility providers to keep ahead of the curve by implementing a few best practices to limit overall industry exposure. 

10 Tips to Prevent Utility Service Chargebacks

Quick-service and fast-food restaurants must proactively address chargeback issues. The keys to this are improved communication, enhanced customer satisfaction measures, and effective dispute resolution when necessary.

Your company needs to embrace a customer-centric approach focused on transparency and satisfaction. This proactive approach fosters trust, prevents misunderstandings, and ensures customers make informed decisions about purchases.

To that end, we recommend 10 chargeback prevention best practices to decrease your overall chargeback issuances:

#1 Communicate Clearly

Ensure that all terms, requirements, and other crucial information are clearly communicated to customers. Using plain language and avoiding industry jargon that may confuse or mislead customers is crucial. Providing comprehensive documentation and offering opportunities for customers to ask questions can enhance their understanding and reduce the likelihood of chargebacks resulting from a misunderstanding.

#2 Educate Customers

Educating customers is essential. You should offer resources like user-friendly guides, online portals, dedicated customer support, etc., to help customers. Regular communication, reminders, and updates about any changes to service or upcoming renewal dates can also minimize confusion and prevent disputes.

#3 Clarify Billing Practices

Accurate billing practices are critical to prevent billing disputes and chargebacks. You should ensure that invoices and statements are error-free, clearly indicating the services provided, associated costs, and any adjustments or refunds. Billing transparency and easy-to-understand itemization can help customers recognize and validate charges, reducing the chances of chargebacks.

#4 Provide Training

Conducting comprehensive training for sales representatives who engage with customers is crucial. This training should emphasize accurate representation of terms and ensure that sales agents thoroughly understand the products and can effectively communicate them to potential customers.

#5 Prioritize Customers

Maintaining strong customer service is vital for addressing customer concerns and resolving issues promptly. By offering accessible channels of communication, such as phone, email, or live chat, you can proactively assist customers, clarify uncertainties, and address complaints before they escalate to chargebacks. Timely and empathetic customer support can go a long way in preventing disputes.

#6 Ensure Compliance

Staying up-to-date with industry regulations and adhering to best practices for data security and privacy can minimize potential compliance issues. Complying with regulatory requirements can reduce the risk of penalties, legal disputes, and subsequent chargebacks.

#7 Automate Reminders

Using automated payment reminders can help customers stay informed about upcoming due dates and avoid missed payments. Sending timely notifications through email, text messages, or mobile apps can prevent accidental lapses in service.

#8 Improve Documentation

You should ensure that any policy documentation is comprehensive, easily accessible, and written in customer-friendly language. Clear and detailed terms, service limitations, exclusions, and procedures can minimize misunderstandings and disputes.

#9 Enhance Verification

Implementing thorough verification processes during a transaction can help confirm your customers’ identities, intentions, and understanding of the service. This can include additional authentication measures or validation checks to mitigate instances of fraudulent or unauthorized transactions.

#10 Seek Feedback 

Regularly seeking customer feedback through surveys, satisfaction ratings, or online reviews can provide valuable insights into which improvement may be necessary. Addressing customer concerns promptly can help prevent frustrations from escalating into chargebacks and demonstrate a commitment to customer satisfaction.

Learn more about chargeback prevention

Chargebacks Require a Better Solution

Any combination of the best practices outlined above can help your business create a solid framework to minimize quick service restaurant chargebacks. You can also enhance customer satisfaction and ensure a smooth and secure experience for customers in the process.

All that said, a piecemeal strategy won’t be effective. True fraud prevention and risk mitigation require a more comprehensive approach. Fortunately, we can help.

Chargebacks911® offers a true end-to-end technology platform that prevents more disputes, wins more reversals, and maximizes your ROI. Contact us today for more information on how to improve customer service to prevent chargebacks.


What is a chargeback in a restaurant?

A chargeback in a restaurant occurs when a customer disputes a transaction, typically made with a credit card, with their bank rather than with the restaurant directly. This could be due to various reasons, like an incorrect order, poor service, or suspected fraud. The bank then reverses the transaction, pulling the funds out of the restaurant's account and refunding the customer.

Can you chargeback for bad food?

Yes. A customer can initiate a chargeback for receiving bad or unsatisfactory food from a restaurant. However, they’re encouraged first to attempt to resolve the issue directly with the restaurant. Chargebacks should be a last resort and only pursued if the restaurant fails to address the concern satisfactorily.

What is the chargeback rate for restaurants?

As of 2018, 28% of food and beverage respondents had a chargeback rate between 0.5 and 1% of transactions. One in ten had a chargeback rate above 1%.

That said, the chargeback rate varies from one establishment to another based on various factors, including security measures, service quality, and customer demographics. A high chargeback rate can indicate potential issues with fraud, customer service, or product quality.

What happens if you dispute a restaurant charge?

When you dispute a restaurant charge, the chargeback process is initiated with your bank or credit card issuer. The bank then investigates the claim, which can include requesting documentation from the restaurant to justify the charge. If the bank sides with you, the amount of the disputed charge is withdrawn from the restaurant's account and refunded to you.

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