It may not be sexy, but it’s a word that puts fear in the heart of every operator—chargeback. It’s changed the way many of us conduct our business, or should.

Today, Kelly Skillen of Go BEST!, an entertainment, solutions, and technology company, discusses this incendiary topic with Ralph James, a Go BEST! ambassador who’s serviced and supported adult clubs from New York to Las Vegas and everywhere in between.

Skillen: I remember, when I was a bartender, back in the day, we were TRAINED to pour as much liquor down a guest’s throat as humanly possible and take their last dollar before they passed out. Times have changed! In Go BEST!’s SuperStar Leadership program, we teach managers how to create an environment conducive to spending while allowing the guests to make their own choices—and sometimes protect them from BAD ones. How do you employ this in the clubs?

James: You need multiple lines of defense, and your frontline is always your cast. They are the ones who initially deal with your guests and make sales. Your server, bartender or host is the one who discovers what kind of experience a guest is looking for, what his or her spending threshold is, or whether s/he’s become too impaired to make good decisions. In that respect, your cast is more important than you are. The most important aspect of training is to instill in your cast proper credit card procedures from day one, and be consistent. Whether it’s a twenty-dollar transaction or two-hundred-dollar transaction, the steps are the same. That way, when a server is executing a huge sale, they don’t get flustered and skip steps—it’s all second nature.

Skillen: As an accidental expert in this field, what is one chargeback fact that might surprise readers?

James: That sometimes the guest doesn’t need to initiate the dispute—it can be automatically generated by the credit card company. That certain actions on the part of the club, such as swiping a card instead of dipping, or failing to obtain a proper signature, will result in a guaranteed chargeback in the event of a dispute. Also, that disputes can lead to worse things—such as fraud investigations and civil suits—if best practices aren’t followed.

Skillen: Without giving away trade secrets, what are some of the procedures you feel constitute best practices at club level to avoid disputes?

James: We provide a LOT of suggestions, ranging from obvious to aggressive: 

It should go without saying, entertainers should not be handling guests’ credit card, or drinks, or whispering in the guest’s ears while signing for VIP room. 

We suggest a manager approve all transactions over a certain amount—say $250—depending on your club, in person and in writing.

Cast should verify all tips, totals and signatures match. Careful, though—asking a guest to resign his name eighteen times can actually appear to be coercive, even if it’s not, and backfire.

Create a “data file” in advance – compliantly obtained evidence of IDs, credit cards and even surveillance footage. In some clubs, cast members even fill out witness statements for transactions over a $1000. We preserve video, then we file it all away, because when a chargeback happens eight months later, it’s all going to be a blur and the backup will be long gone.

Avoid open dollar buttons in your POS—just trust me on that. Everything you sell should be a preprogrammed menu item.

Consider requiring credit cards to be re-dipped if the guest tips over 20%. Don’t get me wrong, we want our cast to give outrageous service and make big tips! But crazy tips can trigger an automatic dispute by the credit card company on behalf of the guest. So think about that.

One thing we suggest that all clubs do, which we know is controversial, is require the guest to stand up, walk out of the VIP room and sign for everything on camera, in ADVANCE. I know you’re thinking—we’re in New York, or Dallas, or Vegas, and it doesn’t work like that. You want the guest to be comfortable, to remain under the spell of a gorgeous entertainer and luxury atmosphere. We support clubs in all those markets. Get the guests off their asses.

Skillen: Go BEST! is known, in part, as a technology company. How can a savvy club operator use technology to prevent chargebacks?

James: Check the quality of your surveillance and fill in your blind spots! Preservation of footage is important, because a lot of disputes happen months later—if you have a system that overwrites itself every seven days, that’s a problem! Also, a POS with great reporting and the ability to automate—for example, to require a second step if a tip is over 20% or if a tab reaches a certain $$$–is great. 

Skillen: Nightclubs are not necessarily renowned for excellent back of house practices, but in today’s chargeback climate, it really isn’t an option anymore. What advice do you have for a club that doesn’t have an army of bookkeepers, accountants or consultants at its disposal?

James: Your night auditor, admin, or bookkeeper is actually your THIRD line of defense. What everyone needs to understand is by the time they get the paperwork, it’s too late—someone already messed up. But whoever is in your office sending you copies of credit card slips that weren’t signed correctly, that person wasn’t put on earth to torture you! That’s valuable training, because the best way to beat a chargeback is to prevent it in the first place.

Skillen: So what’s the SECOND line of defense?

James: As a manager, YOU are. As a General Manager, I made a point to be involved in high-level transactions. I met the guest, shook his hand, made my own determination as to whether she was making good decisions. I trained my cast to sell, and they sold. I honored our entertainers’ desire and right to make the most money possible. But if I felt the transaction was iffy, the guest was hesitant, the guest had gone crazy or was being taken advantage of, it was my job to exercise restraint. When you are that guy, you won’t be very popular at that moment, but that’s the job. 

The most important thing a manager can do, and I cannot stress this enough, is meet every VIP, give them your card, exchange information. That way, if they have an issue with their bill in the cold light of dawn, they call YOU, not AMEX.

Skillen: Any final thoughts, on behalf of you and Go BEST!?

James: Here’s the thing, it’s all about the guest. Give a s*** about their experience, whether or not they’ll want to come back. Stop selling like there is no tomorrow and think about the lifetime value of a guest. If someone feels like they have a relationship with you and your team, and you’re looking out for them, they will choose you over your competitor. Have pride in what you do, and how you do it. That’s the best defense in the world.

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