Should Your Restaurant Go Cashless?
Cashless restaurants are on the rise, even though the average American still carries cash in her wallet and uses it for nearly one-third of transactions.
Restaurateurs considering going cashless must balance the benefits of operating cost reductions and greater security against the risk of losing customers who prefer, or need, to pay with cash.
What’s a restaurant to do?
Cash is the most commonly used form of payment in the U.S., according to a report from the Federal Reserve Bank of San Francisco. Thirty-two percent of all consumer transactions in 2015 were made with cash, compared with 27 percent for debit cards and 21 percent for credit cards.
Still, non-cash payments continue to grow. The Federal Reserve reports that, taken together, credit and debit card payments totaled $144 billion in 2015, and that number has grown 5.3 percent annually between 2012 and 2015.
The trend will likely continue as demographics shift. Credit card servicing company TSYS reports that 40 percent of Americans prefer to pay with credit, 35 percent with debit, and 11 percent in cash.
However, for those in between the ages of 25 and 34, only 5 percent prefer to pay with cash.
Karen Bremer, CEO of the Georgia Restaurant Association,told WSB-TV that 81 percent of restaurant customers are using debit or credit cards. Bremer claimed that eventually, cash will be a thing of the past.
Spending habits may be shifting, but public opinion is still split on entirely cashless restaurants. There are many pros and cons to keep in mind when considering going cashless at your restaurant.
Cashless Savings and Safety
Many of the benefits of going cashless help a restaurant’s bottom line because cash has hidden costs.
As Evan Kidera, owner of multiple food trucks around San Francisco, tells USA Today, “It’s frustrating when I have valuable employees just counting cash.”
To address daily cash flow, managers either spend valuable hours going to the bank, or restaurants have to pay for a deposit bag pick-up service. This labor adds up; Kidera estimates that dealing with cash takes up more than 40 hours total of his employees’ time every week.
“Going cashless at our storefronts frees our employees from collecting, counting, recording, and depositing transactions,” says Celia Zhang, vice president of business development and operations for Fuku.
An absence of cash on premises also helps stem a common cause of loss: employee theft.
And cashless restaurants are a less attractive target for robberies, increasing restaurant and employee safety. A tragic murder-robbery last year targeted Atlanta-based restaurant Barcelona, and the event prompted Barcelona and other restaurants in the city to try going cashless.
Cashless and Competitive
Cashless payments can give restaurants an edge on the competition. While many fine dining restaurants have been requiring credit cards for reservations for years, USA Today reports that many of the companies now switching to cashless systems are “restaurants with menus and prices more upscale than fast-food chains, but service that aims to be almost as quick as a McDonald’s or Subway.”
Tender Greens, a salad chain on the East and West coasts, found that cashless transactions cut 10 seconds off of an average ordering time. “A customer doesn’t have to wait as long. It makes us competitive,” says President Denyelle Bruno.
Sweetgreen, another national salad chain, reported that their cashless payment system allowed them to process as many as 15% more sales an hour. Sweetgreen claims the cashless policy also encourages customers to use mobile payments through the company’s app, which enables customer participation and allows some data collection.
Cashless transactions can also better integrate with growing cryptocurrency retail trends that are making inroads in the restaurant industry.
Drawbacks to Cashless
Many restaurant owners, however, are hesitant to embrace the cashless trend because, despite the growing number of card transactions, a significant percentage of customers also still pay in cash.
“It’s uber-competitive out there,” says Kimberly Grant, CEO of ThinkFoodGroup.“We don’t want to give anyone a reason not to spend time with us.”
Thomas Nguyen, owner of multiple Peli Peli restaurants in Houston, switched two of his restaurants to cashless systems. However, after he saw customer reactions, he changed his mind.
“It’s too common of an occurrence when [a customer] every day is getting surprised or inconvenienced,” Nguyen says, “you can’t compete if you think you’re going to create a whole set of rules and expect people to follow them.”
Zane Tankel, chief executive of Apple-Metro, which owns more than 30 Applebee’s in metro NYC, adds to that sentiment. “We are a service establishment, and that’s not giving service if someone wants to pay with cash and I say ‘no.’” he told the New York Post.
While cash may cost money, cards also come with fees. Credit card companies generally charge 2-4 percent for each transaction, which can add up for restaurant owners, says J. Craig Shearman, VP of the National Retail Federation.
Visa made headlines in 2016 when the company announced a $10,000 reward for 50 food businesses that start a “journey to cashless.” Restaurateurs were unsurprised that a card company supported the cashless movement, but as many pointed out, that $10,000 would be spent on card fees relatively quickly.
Public Resistance to Cashless Establishments
All business considerations aside, there is a large public resistance to a cashless economy. Many critics say that while most Americans do have bank accounts and cards, cashless policies discriminate against the young and unbanked.
Nationwide, the Washington Post reports, 7 percent of households had no checking or savings accounts in 2015.
According to Eater, “A host of factors — including lack of a permanent address, banks’ minimum balance requirements, and lack of identification — prevent a sizable swath of the population from being able to obtain a credit or debit card.”
Those under the age of 18 also generally don’t have access to cards, leading to “de facto age discrimination” in cashless restaurants.
Many other customers have access to banks but prefer to use cash for personal reasons. The WSJ reports that credit card debt passed “the $1 trillion threshold in the U.S.” in April 2017, which has prompted some individuals to use cash to manage their spending.
Other customers choose to protect their information by keeping their spending private. Researchers from MIT have recently shown just how little spending data is needed to identify a person, noting “we are showing that the privacy we are told that we have [in anonymized card data] isn’t real.”
Some nearly cashless societies, such as Sweden, are beginning to experience greater public resistance to cashless policies. As The Guardian reports, many Swedes confess growing concerns that given the immense IT infrastructure, “digital payments can be vulnerable, just like cash.”
Will Cashless Be Legal?
Beyond customer attitudes, restaurateurs may soon need to navigate public policy about cashless establishments.
Federal law doesn’t require a private business like a restaurant to take U.S. currency, but state lawmakers, civic advocacy groups, and groups like the National Retail Federation and International Currency Association are pushing back against the cashless trend.
Lawmakers in Illinois and D.C. have introduced bills to regulate the cashless movement, and Massachusetts already has one law on the books. Critics cite the U.S. Treasury’s words printed on cash, “This note is legal tender for all debts, public and private.”
“What do poor people do when they don’t have access to credit or debit and can’t use a buck?” asks Chicago Alderman Ed Burke, who introduced an ordinance last fall that prevents restaurants and stores from going cashless.
D.C. Council member David Grosso added to his cashless legislative bill, “By denying the ability to use cash as a payment, businesses are effectively telling lower-income and younger patrons that they are not welcome.”
Some restaurant owners agree. “Not everybody is even in a position where they have a stable bank account to be able to use the debit card,” says Arianne Bennett, owner of Amsterdam Falafelshop. “But they are hungry, too, and have $10 in their pockets and they would like to spend their legal American form of tender, known as cash, with you.”
Does Cashless Fit Your Business?
While advocates claim cashless restaurants may be the model of the future, there remains both institutional and personal resistance to the idea. The success of a cashless system depends on each individual restaurant’s business model, customer mindset, price point, and service ethos.
Keeping all the pros and cons in mind, only you can decide whether a cashless model works for your business.