Cashless Restaurants in America
A few years ago, a post on Visa’s blog asked, “Will 2013 be the year of cashless restaurants?” Although the answer was no, Visa hasn’t given up on the concept. In July 2017, the global payments technology company announced plans to provide $10,000 to 50 small business foodservice operators willing to transition to a card-only policy in an effort it dubbed the Visa Cashless Challenge.
Jack Forestell, Visa’s head of global merchant solutions, said in a press release, “With 70 percent of the world, or more than 5 billion people, connected via mobile device by 2020, we have an incredible opportunity to educate merchants and consumers alike on the effectiveness of going cashless.”
It’s important to note that Visa and other transaction processing companies stand to profit from a cashless business because they charge a fee – usually between 1 and 4 percent – for every transaction. Those can cost restaurants as much as tens of thousands of dollars each year, but restaurants also can’t afford to stop accepting cards since the majority of revenue does not come from cash transactions.
Although cash-only restaurants are still around and may be an attractive option for operators looking to avoid transaction fees, operators are going cashless because of the benefits it can have for their businesses and employees.
Sweetgreen, a salad-centric fast-casual restaurant with locations in seven states and the District of Columbia, switched to a company-wide no-cash policy in 2017, though select locations stopped accepting cash in 2016. Argo Tea, a Chicago-based tea chain, announced in April 2017 that it would become a cashless restaurant at three cafés in Chicago; the company had to scrap plans to do the same at its three Chicago O’Hare locations, at least until the change is approved by airport officials. AlaMar, a fast-casual restaurant in Oakland, Calif., also stopped accepting cash in early 2017.
The restaurant industry isn’t yet being faced with a cashless revolution, but it’s clear the number of operators who consider cash obsolete – or at least not worth the hassle – is on the rise. Many of the operators eager to make the switch have given similar reasons for the decision.
Reduce the threat of theft. Any restaurant that handles cash can be an appealing target for robbers, but being open very late or very early, as fast food and fast causal places usually are, can increase the chances of a location being targeted. Switching to a policy that removes cash from the premises may help deter robberies or, at least, will mean criminals don’t get away with a till’s worth of cash.
Increase employee productivity. When foodservice operations handle cash, employees must spend time balancing cash registers at the end of their shifts, a task that can take hours to complete if there are discrepancies, and routinely take cash deposits to the bank. With a card-only policy, these requirements are eliminated, allowing operators to save on labor costs while employees can turn their attention to other tasks.
Provide faster customer service. No-cash restaurants don’t have to worry about the line being slowed down by an employee having to make change or a customer trying to find bills and coins in his or her wallet. Not accepting cash allows each customer to swipe a card, saving several seconds that can be incredibly valuable during busy dayparts.
Using data collected in 2013, the Federal Deposit Insurance Corporation (FDIC) estimates 7.7 percent of households in the United States are unbanked, or do not include someone with a checking or savings account. It’s also estimated that 20 percent of households with bank accounts are underbanked, meaning they “used nonbank financial services to meet their financial needs.” The FDIC hypothesizes the individuals who live in unbanked and underbanked households may not feel comfortable using a bank, may not trust banks, and may believe that they would not be able to obtain an account with a bank.
According to a 2016 Gallup survey, only 24 percent of Americans use cash for “most” or “all” of their purchases, while 53 percent make “some” or “none” of their purchases with cash. Although the majority of Americans have and consistently use cashless forms of payment, restaurants that don’t accept cash have been criticized for excluding Americans who can’t get a credit card or don’t have a bank account, many of whom may be from low-income and disadvantaged households.
There are millions of Americans who would not be able to purchase meals in cashless restaurants, but some operators who’ve ditched cash are aware that the new policy may be an issue. One proposed solution has been to provide gift card machines, which would allow customers to exchange cash for gift cards to the restaurants.
There are also concerns about how eliminating cash can affect employees who depend on tips, since cash tips allow them to leave their shift with money in their pockets, instead of waiting for their next paychecks.
Still, the United States wouldn’t be the first society to move toward cashless operations. In Australia, Visa’s paywave technology has changed how servers are tipped, and in China’s urban areas, most vendors rely on smartphone payments instead of cash.