What Is A Service Fee?

Many companies use service fees as a vehicle to “offset the costs of service” they provide to consumers. Service fees are a simple way to apportion actual costs based on consumption and use of a service. Service fees are typically based on the value of the goods or products serviced.

Service fees have become mainstream due to the high costs of developing, maintaining, delivering and supporting an online service. Many consumers are surprised to learn that the costs of building what appears to be “simple” services often costs millions of dollars up front to build, and even more to maintain and support on an ongoing basis

How are service fees different than credit card processing fees paid by sellers?

Service fees are paid by the Buyer of a product or service utilized, whereas credit card processing fees are paid by Sellers of that product or service. Credit card processing fees pay for the service of processing (and security) of payments, refunds and / or credits. There are strict legal requirements, federally and the state level, that typically limit or prohibit passing on credit card processing fees to consumers / Buyers.

Credit card fees effectively cover the costs of the card network provider (e.g. AMEX, VISA), the issuing bank (e.g. Bank of America) where the consumer has a debt obligation), and the processor (e.g. First Data, Paypal, Stripe) which facilitates the transaction. The credit card fees also cover fraud, disputes, recovery based on the assigned merchant category classification (e.g. Farm vs. Restaurant vs. Church).

Why do software companies charge a service fee?

Service fees have become mainstream amongst software companies due to the high costs of development, maintenance and support. Increasing requirements and scrutiny regarding data privacy and security, have increased costs for software companies. Today, many Software-as-a-Service (SaaS) companies wrap in service fees (charged to Buyers) to reduce the actual costs of their services to their business customers (Sellers).

What are examples of a service fee?

There are numerous examples of service fees paid by consumers today. For example, you see service fees for purchase of online concert or movie tickets, and vacation rentals like AirBnB (3%). Service fees from software providers occur across industries from hospitality (AirBnB) to movie tickets (Fandango), concert tickets (Ticketmaster), and food delivery (UberEats). In most cases, service fees are in excess of 5%—and sometimes as high as 10%—based on the value of the products and services provided.

Does Barn2Door Charge A Service Fee?

No. Unlike other solution providers who may be struggling to cover their costs, Barn2Door has quickly become one of the largest solution providers dedicated exclusively to Farmers. As a result of our size and scale, Barn2Door can keep costs exceedingly low for Farmers - without passing on any costs to Buyers. Given there are 2.1M Farms in America, our goal is to serve literally tens of thousands of customers and spread the costs, versus charging exorbitant subscription fees to Farmers, high service fees to Buyers, or marking up food costs. 

As you may be aware, other solutions are available to Farms. We recommend you watch for hidden or not-so-hidden fees, fees that impact Farmers’ margins. Watch for: (a) losing a percentage of Farm sales (sometimes as high as 7%); (b) high service fees to Buyers or even Sellers (sometimes as high as 5%), or (c) marking up Farm food prices (often 15-30%). 

At scale, Barn2Door can continue to deliver a cutting-edge solution for Farmers and best-in-class customer service at a low monthly subscription, while offsetting actual costs across a large base of customers across the country.

Summary

We’re delighted to work with Farmers across the country and we aim to keep our subscription fees to Farmers low. We want our software to be accessible, so more Farmers can offer local Buyers a convenient purchasing experience on every channel. Barn2Door works hard to keep actual costs to develop, maintain and support our Farmers low; at scale, we will continue to deliver the best-in-class software and customer service to Farmers at an affordable price.

If you have other questions on topic, don’t hesitate to reach out to Barn2Door directly at info@barn2door.com.