Cashless Restaurants in America

In 2019, the Federal Reserve found that American consumers used cash in only 26 percent of transactions, with almost half of those transactions being less than $10.¹ This was down from two years before, when 30 percent of transactions involved cash. Americans are slowly moving away from using cash, and many restaurants are considering moving to only accepting electronic payments to speed up service and cut down the chance of misplacing physical bills. Payment processing companies, including Visa, are encouraging businesses to move away from cash, as well.²

Transaction processing companies stand to profit from a cashless business because they charge a fee – usually between 2 and 3.5 percent – for every transaction. Those fees can cost restaurants tens of thousands of dollars each year,³ but restaurants also can't afford to stop accepting cards since the majority of revenue does not come from cash transactions.

Although cash-only restaurants⁴ are still around and may be an attractive option for operators looking to avoid transaction fees, more are going cashless because of the benefits it can have for their businesses and employees.

Benefits of Cashing Out

Sweetgreen, a salad-centric fast casual restaurant with locations in seven states and the District of Columbia, switched to a company-wide no-cash policy⁵ in 2017, though select locations stopped accepting cash in 2016. Argo Tea, a Chicago-based tea chain, announced in April 2017⁶ that it would become a cashless restaurant at three cafes 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. Some Chick-fil-A, Shake Shack, Taco Bell, and other quick-service brands are encouraging customers to go cashless to improve sanitation and hygiene by cutting out hand-to-money interactions.⁷

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 casual places usually are, can increase the chances of a location being targeted. Switching to a policy that removes cash from the premises could help deter robberies or at least 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, enabling 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 means each customer has to simply swipe a card, saving several seconds that can be incredibly valuable during busy dayparts.

Decreasing common contact points. With infectious diseases coming to the front of the national consciousness, some restaurants are trying to cut down on shared touch points to prevent contagion spread. Restaurants may implement or remove these policies based on the specific risk of COVID-19 variants at any given time, but some may find that a cashless operation works well for them. ⁸

Cashless Criticism

Over 6 percent⁹ of households in the United States are unbanked, which means they do not include someone with a checking or savings account. Additionally, 18.7 percent of households with bank accounts are underbanked, meaning they "used nonbank financial services to meet their financial needs." The FDIC hypothesizes that 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. If you move your business to a cashless model, these potential customers won't be able to purchase your goods.

Only 22 percent of Americans prefer to use cash for their purchases, while 42 percent prefer debit cards and 29 percent prefer credit cards.¹ 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 disadvantaged¹⁰ households.

There are millions of Americans who would not be able to purchase meals in cashless restaurants, and 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 let customers 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 let them to leave their shift with money in their pockets instead of waiting for their next paycheck.

Still, the United States wouldn't be the first society to move toward cashless operations. In Australia, Visa's paywave technology¹¹ has changed how servers are tipped, and in China's urban areas, most vendors rely on smartphone payments¹² instead of cash.

References

1. 2019 Findings from the Diary of Consumer Payment Choice. Federal Reserve Bank of San Francisco. Accessed December 2021.
2. Visa Boldly Ushers in the Cashless Future (Where Everyone Uses Visa). Slate. Accessed December 2021.
3. Credit Cards and Restaurants: Industries Mull 'Cashless' Dining Consequences. Huffington Post. Accessed December 2021.
4. Marketing Sales. Small Business Association. Accessed December 2021.
5. Sweetgreen Is Going Fully Cashless. Fast Company. Accessed December 2021.
6. Arga Tea Scales Back Cashless Plan to Just 3 Locations. Chicago Tribune. Accessed December 2021.
7. These Restaurant Chains Are Going Cashless During the Pandemic. Eat This. Accessed December 2021.
8. Many Businesses May Keep the Cash Free Model. Marketplace. Accessed January 2021.
9. What to Know if You Are Unbanked. Time. Accessed December 2021.
10. Cashless Societies and the Poor. Governing Magazine. Accessed December 2021.
11. Have Cashless Transactions Screwed Aussie Restaurant Workers Out of Hard-Earned Tips?. Vice. Accessed December 2021.
12. In Urban China, Cash Is Rapidly Becoming Obsolete. The New York Times. Accessed December 2021.