The Problem With Cashless Restaurants

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Lovely Mature Couple Enjoying Food in a Restaurant

Here’s why restaurateurs are ditching cash in favor of credit

Daily Provisions is one of a growing number of new restaurants that don’t accept cash. But it’s certainly not the first; some establishments started going cashless nearly a decade ago. “If you don’t have a credit card, you can use a debit card,” Tony Zazula, co-owner of New York City’s Commerce restaurant, told the Wall Street Journal when it stopped accepting cash in 2009. “If you don’t have a debit card, you probably don’t have a checking account. And if you don’t have a checking account, you probably shouldn’t be eating at Commerce to begin with.”

How could the guy who wrote the book on hospitality not accept the most egalitarian system of payment?

Commerce shuttered five years after it opened, but many fine-dining restaurants across the country are already explicitly or effectively cash-free (prepaid reservation systems often require diners use a credit card to prepay in full). And more casual restaurants have been increasingly experimenting with cashless service. Split Bread Sandwich Shop in San Francisco went cash-free in 2012. Other credit-only spots include Oakland’s AlaMar (which nixed cash last year); Chicago-based Epic Burger; Los Angeles’s Petit Trois; chains like Milk Bar and Dig Inn; and salad chains like D.C.-based Sweetgreen and LA-based Tender Greens, the latter of which only recently announced it’s becoming a cash-free establishment. (The LA-based chain received a “significant minority investment” from Meyer in 2015, but owners told Eater that they made the decision to go cashless without his involvement.)

In New York, the Wall Street location of chef David Chang’s fast-casual fried chicken concept, Fuku, went cashless but will occasionally accept cash with a reminder to “bring your card next time.” At the sole credit-only Shake Shack in downtown Manhattan, employees will explain the system to guests who are only carrying cash, and direct them to another nearby location that accepts all forms of payment. A spokesperson for Meyer’s Union Square Hospitality Group, which operates Daily Provisions, told Eater that the company does not have an official “policy on how to serve guests without credit cards” but that management “empowers their team members to take a ‘one-size-fits-one’ approach.”

Meyer obviously isn’t the only restaurateur who’s going cashless, but that all of his newest restaurants in New York City — Martina, Caffe Marchio, and Vini e Fritti — tout that they’re “cash-free” points to the acceleration of restaurants prohibiting the exchange of cash. Where Meyer goes, other restaurateurs follow.

So how could the guy who wrote the book on hospitality not accept legal tender, the most egalitarian system of payment in the U.S.? Though cashless restaurants are on the rise, some argue that going cashless is more than just an inconvenience: 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. Going cashless, then, boxes people out and reinforces the stratification of society, between the young and old, rich and poor, and the legal and undocumented customers in all the diverse corners of the United States.

Why restaurants go cashless

A private business like a restaurant is not legally required to take U.S. currency. Massachusetts is the exception: A 1978 law states that no retailer “shall discriminate against a cash buyer by requiring the use of credit,” the Boston Globe reported.

Otherwise, federal law leaves these payment decisions up to states. In New York City, “there are no city regulations that prohibit a business from not accepting cash,” says Christine Gianakis, the spokesperson for the Department of Consumer Affairs. If a business has any kind of payment restriction, they must clearly post the policy near the register and the front entrance. Gianakis says cash-free restaurants aren’t “something the DCA has received many complaints on.”

Restaurant owners argue going cashless is a more efficient way to do business.

“Going cashless at our storefronts frees our employees from collecting, counting, recording, and depositing transactions,” Celia Zhang, vice president of business development and operations for Fuku, says via email. At AlaMar in Oakland, chef-owner Nelson German says transaction times at the register are about seven seconds shorter since he made the decision to go cashless.

Restaurants also have to consider the distraction and the down-a-person reality of having to send an employee to the bank to get change, or to deposit money several times a day. Or they may have to pay for deposit bag pick-ups, which is one more expense to consider as restaurants try to cut back on labor costs.

“Cash transactions are a big source of loss.”

And “cash transactions are a big source of loss when not monitored regularly against petty cash reconciliations,” according to accountants at Cornwell Jackson. “Cash is the most coveted form of theft, particularly for employees who suddenly experience an outside issue or concern that requires quick payment.” When petty cash — or the cash kept in the safe to make change for larger bills — goes missing, there’s often no way to recoup it.

Safety is also a major factor, says Nicolas Jammet, co-founder of Sweetgreen. In late 2016 when Sweetgreen was still accepting cash, a Manhattan location was held up at gunpoint — after which the gunman hailed a cab and shot the driver. And in Boston, employees at one store were held up at gunpoint last month. “The safety of our employees comes before accepting cash,” Jammet says.

Proponents of cashless restaurants also say they’d rather their workers focus on service, “on creating a better customer experience and environment within the restaurant,” as Zhang puts it. But even if Fuku argues that cashless restaurants lead to a better customer experience, its busiest locations — in Madison Square Garden, Citi Field, and Hard Rock Stadium — still accept cash.

Not all restaurateurs are ready to embrace a credit-only system. For humanitarian chef and restaurateur José Andrés — whose relief group World Central Kitchen made 3 million meals for the people of Puerto Rico following Hurricane Maria — going cashless has never been an option.

“It’s uber-competitive out there,” says Kimberly Grant, CEO of Andrés’s ThinkFoodGroup. “We don’t want to give anyone a reason not to spend time with us.” Grant says they’ve tested more alternative ways for people to pay. “We want what’s convenient for our guests.”

The numbers

It could be argued that going cashless is a response to a trend rather than the trend itself. In 2016, credit card servicing company TSYS found that 40 percent of Americans like to pay with credit, 35 percent with debit, and 11 percent with cash — unless they’re between the ages of 25 and 34; of that group, just 5 percent are paying with cash. And 99 percent of consumers with a household income over $100,000 use credit or debit for purchases, Restaurant Hospitality reported last July.

Sweetgreen’s order-ahead app was one factor in pushing the chain to go cashless, nationwide, in 2017. “When less than 10 percent of customers were using cash,” Jammet says, “that was the tipping point.”

“When less than 10 percent of customers were using cash, that was the tipping point.”

Going cashless has been incentivized by credit card companies like Visa, which, as part of a promotion in July, offered up to “$500,000 to 50 eligible U.S.-based small business food service owners who commit to joining the 100 percent cashless quest,” per its press release.

Companies that opted in got $10,000 from Visa for tech upgrades, a significant incentive when credit card companies can get “2 to 5 percent” of what a small business earns. (A restaurant pulling in $1 million in net sales per year may pay a credit card company up to $50,000 in transaction fees — more than what the average full-time hourly employee makes in a year.)

Though card use is up, cash is still the most widely used form of payment in the U.S., according to the Nilson Report, first published by the Wall Street Journal. At least 32 percent of all transactions in 2015 were made in cash; cash and check transactions were up in 2016 and 2017 compared to previous years. Meanwhile, according to a 2017 Federal Reserve Bank of San Francisco report, survey respondents said they used cash for 60 percent of transactions under $10.

With more places going cashless, more Americans are piling on credit card debt: Last year marked the first time since the 2008 recession that credit card debt joined auto loans and student loans in breaching “the $1 trillion threshold in the U.S.,” the Journal reported in April, noting that credit is “the latest sign of a growing appetite for household debt.”

That would not surprise co-founder of Lynnette Khalfani-Cox, who told the New York Post, “I’d bet good money that these restaurant owners know that the average person will spend a lot more money when using any kind of plastic.”

Cashless restaurants also have to raise prices to make up for credit card fees. “Cash is king and will be for the foreseeable future,” says J. Craig Shearman, vice president of the National Retail Federation. He cites the 2 percent to 4 percent swipe fee for cards, which means the restaurant gets just $96 to $98 for every $100 it makes.

“Two percent doesn’t sound like a lot, but it adds up,” Shearman says. He calls Visa’s $10,000 incentive “a very bad idea for most merchants, since a business would very quickly exceed that amount in fees and then you’d be tied to the credit card forever.”

Tender Greens explained its reasoning for going cashless in a January 30 blog post, which states that the company is committed to the policy despite what it imagines will be a few initial hiccups.

“If you’re someone who prefers cash,” the owners write in their missive, “may we suggest Visa gift cards that are readily available and easy to purchase using cash at nearby retailers. These can be used instead of personal credit or debit cards, and protect anonymity.”

Indeed, some credit card companies offer cards for those with little, no, or bad credit history, and credit unions can give those who don’t qualify for a traditional bank account a debit card. But access is often limited in other ways.

The argument against cashless service

It’s understandable that the uptick in cashless restaurants is happening in cities where retail rents and labor costs are rising, and competition is cutthroat.

But consider another factor of service: Who is welcome? Cashless restaurants are not illegal in most of the U.S. But when it comes to courting customers, not accepting cash is classist and discriminatory (Massachusetts’s law against refusing legal tender is meant to prevent “discrimination against cash buyers”). And the topic is not being questioned or examined enough by the people who support causes that strive for equality.

On the surface, cashless restaurants may seem to affect only the “unbanked,” a vague term that means those who do not qualify for a bank account (or, more rarely, do not want one): A 2015 survey by the Federal Deposit Insurance Corp. conducted by the U.S. Census Bureau suggested that 7 percent of the U.S. population (roughly 22.4 million people) would be considered unbanked. But that number did not include people with a bank account who have had to resort to check-cashing, money transfers, pawn shops, and payday loans to make ends meet on a day-to-day basis, totaling nearly 20 percent (64 million) of the population, according to the same survey.

“What do people do when they can’t use a buck?”

Some public servants are paying attention. “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. In response to the rise of cashless restaurants, Burke introduced an ordinance last fall that wouldn’t allow restaurants (or stores) to go cashless. The ordinance argues that “a ‘no cash’ sign is a ‘not welcome’ sign for many without ready access to credit, including those who are low or fixed income, homeless, undocumented, young, or victims of identity theft.”

It also argues that given age requirements for credit cards, cashless spots might be implementing “de facto age discrimination” against those under 18, while also unnecessarily “asking customers to forego their privacy.” The ordinance is currently pending in the city’s Committee on License and Consumer Protection.

Other cities are also contending with this publicly — in Boston, a backlash has emerged toward a plan to transition all public transit to credit and digital payments. But some argue that going cashless leaves the consumer with fewer options. “While alternative payments are here to stay,” columnist Robert Reed wrote in the Chicago Tribune, “basic service industries — places where everyday folks can shop for necessities and dine — still have an obligation to be inclusionary and accessible to everyone. Going cashless prevents that from happening, which is why the idea should be voluntarily shelved before any government crackdown gains momentum.”

In general, restaurateurs like Danny Meyer are serving a very specific segment of the population: urban, upper-middle-class diners with disposable income and several credit cards in their wallet. But Meyer has long preached a message of equitable pay for staff, and led the way in eliminating tipping (a notoriously discriminatory practice). So it was a surprise when Shake Shack, Meyer’s entree into fast food, announced its cashless location in Manhattan. Fast-food restaurants are the most democratic dining rooms in America. For better or (more often) for worse, fast food is ubiquitous and (perceived as) a good value, and a majority of the population can afford it. And most fast-food restaurants accept every type of legal tender, including cash and coins.

It’s true that going out to restaurants isn’t a right. But in an era when an increasing number of restaurants no longer accept legal tender, it’s useful to think about who this system benefits most: the businesses and banks, at the expense of consumers.

Source:, 2-15-18

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