The Pros and Cons of Cashless Restaurants and a Cashless Society

By: AJ Beltis

8 Minute Read

May 08, 2018

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cashless society

Are restaurants approaching a future where cash transactions are a thing of the past?

Earlier this summer, I walked into Sweetgreen for lunch, and noticed a sign saying that payment would only be accepted with card or app. That's right - the restaurant decided to go completely cashless.

This was a phenomenon to me. Cashless restaurants? A cashless society? A ton of questions ran through my head as I tried to make sense of this idea.

  • Don't restaurants legally have to take cash?
  • Won't restaurants have to pay more in credit card fees if they're exclusively a card-accepting business?
  • If so, does that mean I have to pay more for my lunch?
  • What happens if someone doesn't have a credit card or a mobile payment app? Do they get a free lunch or no lunch?
  • Does this mean we're officially on our way to a cashless society?

That day, I got a salad without any answers. Since then, I've done some digging to find out the benefits of going cashless in a restaurant, as well as some potential deterrents and possible downsides. Here's what I found.

The Pros: Why Restaurants Should Embrace Cashless Society

cashless society

1) Quicker Transactions

Particularly for quick-service restaurants, going cashless speeds up the line during packed lunch rushes and diminishes the wait for your customers. Why make patrons stand in line behind someone fiddling through their purse or pocket looking for those two pennies? Sweetgreen reported seeing up to 15% more transactions with their cashless model. Swipe the card or scan the phone - done deal.

In general, a cashless society means less change counting and more productivity. The very idea of paper money has been debated since its inception. Perhaps the jump to a cashless society is just a natural next step in humanity.

2) Safety

Fortunately, the restaurant I worked at was never robbed. Unfortunately, the same can't be said for all restaurants. Whether it's a hooded thief or a restaurant staff member skimming from the register, no one will be able to empty the cash register is there's no cash in there. A mugger may be able to coerce strongly enough to get a fountain drink, but isn't that a risk you're willing to take?

3) Data Collection

It's difficult to understand an individual's buying patterns or reward them for their loyalty when they always pay with cash. If they use the same card every time, your machines will remember them. The same is true if customers pay with their smartphone using an app like LevelUp, which also helps them accumulate rewards points (plus, mobile payments are forecasted to grow to $142 billion by 2019). You'll gain a better understanding of your individual customers with this data, which will drive your business insights.

4) A Stable Pricing Model

Most restaurants offer both cash and credit card payment options. When this is the case, your bottom line is dependent on the rates and the amount of credit card transactions. A few cents are lost each card swipe, which adds up as the days, weeks, and months go by.

This would be easy to plan for if you knew that on any given day, 40% of your transactions would be credit and 60% cash. But this number can change at any moment. When you declare that all transactions are card based, you'll be able to plan for that percentage and more accurately forecast what your monthly and yearly credit card fees will be.

5) More Efficient Employees

Imagine, if you will, that it's 7:00 on a Friday night. Customers are waiting to cash out, your phones are off the hook, and out of the corner of your eye, you see one of your employees unraveling a roll of quarters because the register is out.

Now clearly you aren't mad at that employee, you're just frustrated at the situation.

This would not happen in a cashless society.

Daily bank runs to make change and refilling a register with change and singles take up your employees' valuable time, especially when some restaurants see up to 90% of their transactions take place with no cash involved. So why not just bypass this and simplify everything with a card swipe? You can even take it a step further and take a patron's credit card payment at the table with handheld tablets for full-service restaurants.

The Cons: Why Restaurants Should Not Embrace Cashless Society

cashless society

1) People Still Pay With Cash

Some people choose not to carry a card because the urge to overspend is too great, and instead prefer to use cash so they can limit themselves. You'll put that customer in a very awkward position if they've customized a great lunch or placed their order, only to discover they can't pay for it. The fact is some people still like to pay with cash - we're not in a society where everyone has gone completely cashless yet. Therefore, to cut yourself off entirely could damage your business.

Update 5/8/2018: A cashless Shake Shack in New York has apparently reversed decision because people miss paying with cash and had heavy complaints with the "automated" payment system.

2) The Young & The Unbanked

Children can't get credit cards, and some people are not in a position where they can own a credit or debit card. Are you willing to turn away an entire group of people in the name of efficiency, considering this is not yet a cashless society?

If you're a classier, high-end restaurant that's not aimed towards kids, this may not affect your business. But if you're used to a group of students coming to your quick-service restaurant for a sandwich or a pizza after school, or if you own a restaurant in a less affluent area, this could end your business.

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3) Higher Costs

Someone needs to pay the credit card companies for their processing fees. If you want to keep prices lower, you'll have to accept a cut to your profit on every single cashless transaction. If you don't want your bottom line affected, you'll have to price items slightly higher, which customers could take notice of. Your guests - particularly those who would be willing to pay cash for a lower price - may not take too kindly to this. In either scenario, somebody loses out here. Cash payments are usually a sigh of relief for restaurateurs, who don't immediately have to sign away a percentage with a card swipe. In a cashless society, everyone loses (except banks and credit card companies!).

4) Tips are Impacted

Servers tend to prefer cash tips to credit tips. Not only can cash be used immediately, none of their tip is lost to credit card processing fees. There's also the tip jars that high-school and college students working in cafés, ice cream shops, and QRSs live off of. In a cashless society, both of these revenue sources are affected. This could impact the morale of your employees and ultimately hinder their performance.

5) It Might Not Be Legal

The Federal Government has made this matter abundantly clear - private companies may choose their own guidelines when it comes to accepting coins or cash. That is - unless - your state says it's illegal to do so. It just so happens that Massachusetts is one of those states, with the law being "no retail establishment...shall discriminate against a cash buyer by requiring the use of credit by a buyer in order to purchase such goods and services."

So much for a cashless society.

When The Boston Globe asked Sweetgreen about the issue, the healthy-eating chain started accepting cash in their five Massachusetts locations. It appears that most (if not all) of the other 49 states allow the option of going cashless. Some Massachusetts restaurants, like Amsterdam Falafelshop in Kenmore Square, are ignoring the law despite its clarity. Owner Matt D’Alessio switched to cashless in December 2015 upon seeing 85% of sales were made without cash. He went on record saying "I think it’s not fully legal what we’re doing. But it’s something not really enforced, either.” Reportedly, both D'Alessio's business and Sweetgreen have seen minimal complaints upon going cashless.

The Verdict: It's Up to You!

Ultimately, the decision of whether or not to go completely cashless is totally your call (so long as you're not in Massachusetts). Depending on your business model, your clientele, and your location, there may still be benefits for rejecting a cashless society, keeping cash around for the foreseeable future, and maybe even going cash-only.

But that's a debate for another day.

What do you think? Is an industry of cashless transactions an unavoidable future? Will we ever see a cashless society? Share your thoughts with us below!

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