In this Weekly Wrap, we’re looking at a new type of fraud at restaurants, Chili’s and other chains getting back into TV advertising, what’s happening with ICE raids, and more.
Dine and Dash
The Headline: “Dine and Dash Is Back — But It’s Way Worse Than You Think”
The Source: Eater
What You Need to Know:
Kwak is one of a clutch of Michelin-starred restaurant owners reeling from astounding chargebacks on prepaid reservations made with stolen credit cards. “There comes a point where enough is enough,” says Kwak. “We are a counter restaurant with only 15 seats. Last week four seats were under a stolen credit card. That’s 25 percent of my daily sales, gone.”
The chargeback scheme goes something like this: X buys a prepaid reservation using a stolen credit card number, then sells it to Y at a discount — usually by posting it on Instagram or on the social media platform Red. The restaurant is none the wiser and serves Y dinner, but a few weeks later gets a notice that the reservation was made with a stolen card number and the entire amount is being refunded to the person whose credit card was stolen. Operators contest the chargebacks, but the banks side with the cardholder, leaving the restaurant holding massive losses.
Let’s be clear: Credit card fraud is nothing new. In 2024, consumers lost $12.5 billion to online fraud, a 25 percent increase from the figure reported in 2023, according to a report by the Federal Trade Commission. Chargebacks are mushrooming as well; merchants are expected to incur $28.1 billion in annual losses due to chargeback fraud by 2026; that’s a 40 percent increase from 2023. Operators interviewed for this story say the frequency of chargebacks for prepaid restaurant reservations has skyrocketed over the past six months, particularly at high-end Japanese restaurants with very few seats that need every single one to make ends meet. “It’s just turned into a virus,” says Kwak. “It has spread so quickly.”
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Operators are not just losing income from refunded reservation fees: Many have to replace the lost gratuity, hundreds of dollars per check, despite the fraud. They are also saddled with paying sales tax on a sale that never really happened. Don’t forget the $15 per transaction fee imposed by companies like Stripe, the credit card processor used by many reservation platforms. Operators must also pay Stripe its sales percentage of 2.9 percent per transaction, despite the fact that the sale was actually refunded. Stripe did not respond to multiple queries from Eater for comment on these practices.
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Operators dealing with such rampant fraud are frustrated that reservation platforms can’t do more to weed out scammers. “Reservation platforms are aware, but they haven’t been really dealing with it,” says Chang. “I don’t know where the difficulty is.”
Resy and OpenTable say they are doing everything they can to thwart scams, from investigating patterns of fraudulent reservations to blocking bad users to leveraging added security features. Rather than reservation platforms, banks and credit card processors are in a far better position with tech available to build a dam against the flow of fraud. Stripe, American Express, Mastercard, and Visa did not return requests for comment.
Our Take:
This article may focus on the 1 percent, those high-end restaurants that are cost-prohibitive for most people. But, the reality is, this issue goes far beyond what’s covered here.
Fraudulent charges and chargebacks have long been a menace to all restaurants, but there's a fine line to navigate. On one hand, you don’t want to check IDs on every transaction. It takes time and is also a little awkward, even though nightclubs in Las Vegas have been doing this for years. On the other hand, restaurants can’t keep eating the chargebacks. And the credit card processors aren’t helpful; they are on the side of the cardholder, as they should be, but god forbid they take any responsibility. This leaves restaurant owners in an increasingly precarious situation.
There are two major issues. First and most importantly, the credit card processors. We could spend days talking about the challenges and general dislike most operators have toward credit card processing companies. They are generally reviled and thought of as a necessary evil, unless, of course, you run one of the rare "cash-only" establishments. They don’t really care for businesses, and they’ve made it increasingly easy and enticing to pay only by credit card. It’s a captured market. Any operator who has tried to fight a chargeback, even with proof of the card used, sometimes even a photo of the cardholder, and a copy of the ID, will tell you it’s a hassle and a crapshoot whether the processor will reverse the charge. And if it turns out to be fraud, operators are just left out in the cold.
Second, the reservation platforms need to step up their efforts in the fight against reservation fraud. They are trying, but few go as far as Tock with its insurance. However, we run into a similar issue, as most reservation platforms are owned or partnered with credit card companies.
The truth is, as it pertains to the credit card companies, until there’s significant pain to their bottom line, little will change. They’ll continue passing the cost of fraud onto small businesses because, well, they can.
Chains Getting Back Into Traditional Television
The Headline: “Casual dining brands shift their marketing focus back to TV”
The Source: Nation’s Restaurant News
What You Need to Know:
Chili’s began running its “3 For Me” TV spots in early 2023, featuring Grammy-nominated R&B singer Brian McKnight playing a waiter who sings a remix of “Back at One” to coincide with the meal deal, priced at $10.99. The ad marked Chili’s return to TV after a three-year hiatus and came at a time when the company was struggling with traffic.
Since then, however, Chili’s performance has been nothing short of remarkable. The chain finished 2023 with 7% same-store sales growth. In 2024, the chain generated a whopping 31.4% increase in same-store sales in the second quarter and a 31.6% increase in the third quarter, reported in late April.
Of course, there’s more to Chili’s recent success than effective advertising (operational improvements have also created quite the tailwind, for example), but as marketing budgets continue to ramp up following a pandemic lull, that television piece has become a bit more intriguing — and important — thanks to Chili’s success.
Perhaps this is why more casual dining concepts are pouncing on the airwaves of late. Applebee’s has been running spots tied to its NFL sponsorship, including a commercial featuring Detroit Lions head coach Dan Campbell, Philadelphia Eagles running back and two-time Pro-Bowler Saquon Barkley, and San Francisco 49ers quarterback Brock Purdy to promote boneless wings deals and more.
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“After essentially eliminating TV ads last year while introducing overlapping and conflicting promotions, Dave & Buster’s has returned to its historically proven marketing strategies with a rebalancing of its media mix and promotional calendar, inclusive of TV ads, simplified messaging, and a resumption of its historical cadence of promotions,
TV doesn’t work for every concept, however. Smaller chains, such as BJ’s Restaurants, which finished 2024 with 218 locations, have a harder time justifying a TV budget.
Our Take:
This one definitely caught me a little off guard. With Gen Z’s reliance on social media and other alternative forms of entertainment, I was initially a bit surprised to see the big chains hopping back into the traditional media space. But the more I thought about it, the more it made sense.
For one, smaller to mid-tier operators (BJ’s is mentioned in the article) don’t have the national footprint to justify the spend that is required for traditional television commercials. Not only are TV spots incredibly expensive to produce, they are also expensive to air on television. This leaves only the big chains.
Another thing to think about is how many of these large chains are received on social media. There are some that have done very well and others that have not fared as well. Several times chains have gone viral not because of their marketing but because someone on TikTok posted something; boom, instant success.
That being said, my feeling is unless you have a national footprint, stay out of TV. Stick to the social media platforms, they're cheaper and arguably more effective for most restaurants.
Scaling Back ICE Efforts at Hotels, Farms, and Restaurants
The Headline: “Trump curbs immigration enforcement at farms, meatpacking plants, hotels and restaurants”
The Source: AP News
What You Need to Know:
The Trump administration directed immigration officers to pause arrests at farms, restaurants and hotels, after President Donald Trump expressed alarm about the impact of aggressive enforcement, an official said Saturday.
The move follows weeks of increased enforcement since Stephen Miller, White House deputy chief of staff and main architect of Trump’s immigration policies, said U.S. Immigration and Customs Enforcement officers would target at least 3,000 arrests a day, up from about 650 a day during the first five months of Trump’s second term.
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The shift suggests Trump’s promise of mass deportations has limits if it threatens industries that rely on workers in the country illegally. Trump posted on his Truth Social site Thursday that he disapproved of how farmers and hotels were being affected.
“Our great Farmers and people in the Hotel and Leisure business have been stating that our very aggressive policy on immigration is taking very good, long time workers away from them, with those jobs being almost impossible to replace,” he wrote. “In many cases the Criminals allowed into our Country by the VERY Stupid Biden Open Borders Policy are applying for those jobs. This is not good. We must protect our Farmers, but get the CRIMINALS OUT OF THE USA. Changes are coming!”
While ICE’s presence in Los Angeles has captured public attention and prompted Trump to deploy the California National Guard and Marines, immigration authorities have also been a growing presence at farms and factories across the country.
Farm bureaus in California say raids at packinghouses and fields are threatening businesses that supply much of the country’s food. Dozens of farmworkers were arrested after uniformed agents fanned out on farms northwest of Los Angeles in Ventura County, which is known for growing strawberries, lemons and avocados. Others are skipping work as fear spreads.
Our Take:
I simply can’t believe that targeting migrant workers would wreak havoc on our food supply and the hospitality service sector. That’s crazy talk.
Sorry if my sarcasm isn’t coming through as clearly as I'd like.
Let’s look at the stats. According to a 2022 USDA study on farm labor demographics and statistics, 63 percent of "farm laborers, graders, and sorters" are Hispanic (with 55 percent from Mexico). An interesting note, 44 percent of all farm workers in that category are non-U.S. citizens. Nearly half of the workforce growing and picking our food is migrant labor. What could go wrong?
The damage has already been done. Fear has been instilled. Even for those with legal status, there is still a hesitancy to go to work due to the tactics being employed. And forget about there being any trust among workers when it comes to the administration's assurances that they won’t target their employers. Given the constant back-and-forth on these issues, migrants and businesses alike are skeptical that any reprieve is real.
We won’t know for a few months whether the change is real or not. But one thing we do know for certain is that these industries are feeling the pain of these policies and will be reeling for some time.
ICE Raids Ramping Back Up on Restaurants, Hotels, and Farms
The Headline: “Trump officials reverse guidance exempting farms, hotels from immigration raids”
The Source: The Washington Post
What You Need to Know:
The Department of Homeland Security on Monday told staff that it was reversing guidance issued last week that agents were not to conduct immigration raids at farms, hotels and restaurants — a decision that stood at odds with President Donald Trump’s calls for mass deportations of anyone without legal status.
Officials from Immigration and Customs Enforcement, including its Homeland Security Investigations division, told agency leaders in a call Monday that agents must continue conducting immigration raids at agricultural businesses, hotels and restaurants, according to two people familiar with the call. The new instructions were shared in an 11 a.m. call to representatives from 30 field offices across the country.
ICE and HSI field office supervisors began learning about a likely reversal of the exemption policy Sunday after hearing from DHS leadership that the White House did not support it, according to one person with knowledge of the reversal.
An official from DHS had sent an email Thursday telling agents to “hold on all worksite enforcement investigations/operations on agriculture (including aquaculture and meat packing plants), restaurants and operating hotels.” That message went out hours after Trump suggested he was sympathetic to concerns raised by farmers and hospitality executives about his deportation plan. The Washington Post spoke with four people who confirmed that a call was held Monday with the agency’s leadership.
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ICE has been under significant pressure from White House officials to ramp up arrests in an effort to fulfill Trump’s goal of enacting the largest domestic deportation operation in history. White House Deputy Chief of Staff Stephen Miller said last month that the administration wants ICE to make a minimum of 3,000 arrests a day. In an interview last week, Trump border czar Tom Homan told The Post that arrests had increased to around 2,000 a day.
Our Take:
This article was published a mere two days after my previous entry in this Weekly Wrap. While writing this, I received a text saying ICE had just shown up in unmarked cars with masked men in military gear and stormed in (during service), and had taken people out of several restaurants in Brooklyn. Whether those taken were documented or not is not known at this point. Though I’ve spoken with several operators who said they have had employees taken who had either green cards or citizenship.
The lack of transparency and due diligence is mind boggling and frightening.
Why are restaurants hurting? Why is tourism down? Why are operators having difficulty keeping staff in an already difficult market? Look no further. Until some modicum of normalcy and transparency is introduced by the administration, there is no need to go deeper into it — there just isn’t much more to say. Restaurants will be on edge, customers will be on edge, and foreign tourists will continue to stay away.