As I work with bar and restaurant owners across the country, I become keenly aware of problems and challenges that we as operators all face daily. For many, creating more efficiency, streamlining processes, and finding ways to pinch every penny can mean the difference between living the dream or facing the nightmare.
It was precisely these observations that led me to investigate the option of creating a more cash-free environment in my restaurants. I wanted to know if accepting cash was a benefit to the business or if it were ultimately stifling sales and growth.
What I have found has ultimately pushed me and many of my clients and partners to a more cash-free model, a trend we are seeing more and more across our industry.
Here are some facts to consider when weighing the option that is best for you and your operation.
THE PROS:
Cash Is Not King (at Least in the Form of Paper Currency)
Every October, the Federal Reserve conducts an annual payment study – the Diary of Consumer Payment Choice. In 2021, the study once again confirmed that cash use is on a steady decline and has been for some time. In fact, cash represented just 19 percent of all payments, down a whopping seven percentage points from 2019. At this rate, it seems that cash use may soon be but a distant memory in a very short time from now. Perhaps COVID-19 has had an effect on these findings, but it certainly seems like the trend has been established even before the pandemic.
Guests Spend More with Credit
Based on an often-cited Dun & Bradstreet study, the average consumer spends an average of 12 to 18 percent more when using credit cards than with cash. In fact, a report from the Federal Reserve Bank of Boston from as far back as 2016, found that the average cash transaction was valued at just $22, compared to $112 for credit transactions, a whopping 406 percent jump.
When studying the psychology of spending, numerous reports suggest that the fact that consumers may not feel the pain of their purchases for a month or more allows them to spend more freely in the moment.
Cash Is Costly
Now wait a minute. Credit card fees are a real thing and can cost the business at least two to four percent or more, and taking cash is free, right? Well, not exactly. While credit card fees can be substantial, consider these hidden costs of cash that may not hit the PNL in the most transparent way but are still very real:
Internal Theft – The No. 1 way for team members to steal from the company is through the till. I will argue that even if you think you have the most trustworthy employees, there is a very good chance that you are losing money to theft. It is quite easy for bartenders to charge for a drink that was never rung and pocket the cash, or to void something that they have already receive cash payment for. Taking away the cash tills removes this possibility and can save your bar or restaurant thousands in lost payments and revenue.
Labor Dollars – When highly paid managers are taking up to an hour or more per shift to count tills, distribute and record tips and balance safes, you are spending premium labor dollars to facilitate those tasks. By eliminating the need to manage cash, bars and restaurants can save a great deal of money and position managers to use more time for activities aimed at growing the business.
Efficiency – When I visit my favorite Starbucks, it is quick and easy for me to order ahead on the app, have my matcha latte with oat milk and no foam waiting for me so that I can get on with my day. This efficiency also benefits the store, allowing them to produce more by eliminating lines and wait times at the register. They have very effectively leveraged the power of mobile payments and thereby, boosting top line sales. In this way, cash becomes a more costly way of doing business.
Less Cash Is Safer for Employees
In many areas, crime is a real threat to businesses, as well as to employees that work there. Some restaurateurs and operators have opted to post signs stating that they do not accept cash as a deterrent to would-be robbers. But does this really work? A 2017 article in the Baltimore Sun features David Hart, owner of the Park Café and Coffee Bar who posted a sign on the door explaining: “Due to the recent robberies and continued crime in the neighborhood we are no longer accepting cash.”
After several robberies in a short period of time, Hart made the decision to protect his business and employees from harm. Hart states: “Going cashless for me was something that I felt forced into,” he said, “and yet now that I've made that decision the feedback from the community has been very positive.”
THE CONS:
Some States Prohibit Cashless Businesses
According to NPR, San Francisco, Philadelphia and the state of New Jersey have passed legislation banning cashless stores. Massachusetts has required businesses to accept cash since 1978. And there are many more states and municipalities proposing similar legislation aimed at protecting minorities and those less likely to have bank accounts or access to electronic payment capabilities.
Some wonder how it is possible to go cashless since coins and bills are legal tender.
The fact is that classifying cash as legal tender simply means that it is legal for cash to be used as payment, but only so long as the creditor accepts this as a tender to begin with.
According to the federal reserve’s website (federalreserve.gov), “private businesses are free to develop their own policies on whether to accept cash unless there is a state law that says otherwise.”
Going Cashless Can Restrict Some Guests
This is where things can get a bit controversial. There are many who believe that by not excepting cash, we are affectively banning certain groups of people from being able to engage your business, a major factor often cited when passing legislation such as described above. I think we can all agree that discrimination is not the effect that we would want to establish and this should be seriously considered before implementing any policy.
Yet some restaurant owners I have spoken to address this issue by simply, well, accepting cash. Huh? In these cases, the business is not strictly “cashless” per se. In fact, what they have done is to remove the cash drawers, pay tips on paychecks and simply keep a small cash reserve for change if needed for guests who insist on paying with cash. I suppose you could say that this is more a credit preferred option than truly cashless and seems to meet the needs of both the business and guests alike.
Nicky Sarkisian of Oscar’s Brewing Company in Temecula, Calif. says that, while OBC’s policy is to not accept cash, they will still accommodate those who have no other means or who prefer to pay with cash. “We understand that some of our guests may be uncomfortable with being asked to pay by credit only or perhaps may not have a bank account at all. In those cases, we will happily accept cash payment so that no one is excluded from our tribe.”
What’s Your Decision?
The pros of going cashless can seem quite attractive to restaurant and bar owners wanting to streamline their operations, take full advantage of the technology available and save some of the often-hidden expense of accepting cash. However, it is not without its challenges and each bar or restaurant owner may want to weigh all options before deciding to make the shift.
Either way, it seems hard to deny that the trend toward dropping the drawers may be here to stay.
Greg Provance is the owner of GP Hospitality Partners LLC, a full-service restaurant and hospitality consulting firm, and the author of Butts in Seats: How to Create Raving Fans Who Come Back Again and Again. In addition to being a consulting partner for Everbowl, Southern California’s fastest growing fast casual chain, Provance owns several restaurants in the San Diego area and serves as a principal consultant and advisor for restaurants across the country. His career has taken him from short-order cook to hosting parties and events for celebrities like Janet Jackson, Madonna, Tom Cruise, Eve, Stevie Wonder and DL Hughley, to name a select few. He’s served food and beverages in atmospheres that range from dive bars to the Oscars, from Suffolk, Virginia, to Beverly Hills, and pretty much everything in between. He lives in San Marcos, Calif. with his wife, two strapping young lads and a cat. And he’s committed his career to serving the bar and restaurant community and businesses of San Diego and beyond. Visit GPHospitalityPartners.com to learn more.
Plan to Attend or Participate in
Bar & Restaurant Expo, March 27-29, 2023
To learn about the latest trends, issues and hot topics, and to experience and taste the best products within the bar, restaurant and hospitality industry, plan to attend Bar & Restaurant Expo, March 27-29, 2023 in Las Vegas. Visit BarandRestaurantExpo.com.
To book your sponsorship or exhibit space at Bar & Restaurant Expo, contact:
Veronica Gonnello
(for companies A to G)
e: [email protected]
p: 212-895-8244
Tim Schultz
(for companies H to Q)
e: [email protected]
p: (917) 258-8589
Fadi Alsayegh
(for companies R to Z)
e: [email protected]
p: 917-258-5174
Also, be sure to follow Bar & Restaurant on Facebook and Instagram for all the latest industry news and trends.