"Cash only"--why?

[sockii]

Forgive me if this has been discussed before, or I'm missing a really obvious answer here.

I just really don't understand the logic behind a moderate to high-end restaurant operating as "cash only".

A little pizza or hoagie place where most sales are $5-10? That I can see being cash only, sure.

But a restaurant--as there are several in my neighborhood--where a typical dinner for two can run $100 with tip...? At prices like that, I really don't want to hear the argument that the operators are somehow "keeping their prices down" by avoiding CC fees. Especially when their prices are equivalent to the restaurant across the street offering equally good food. *And* accepting credit cards.

I own a small business where for me, it's absolutely vital to be able to accept credit cards--50 to 75% of my sales are via charge, and I would lose a lot of sales if I couldn't accept them. Yeah, the fees are there, but they've never seen out of line in the scheme of my other operating expenses. But I don't run a restaurant, so maybe someone who does can explain how/why it's so disadvantageous to accept them? Because quite honestly, every time I dine somewhere that doesn't take ccs, the first reason that springs to my mind is that it's easier to play funky bookkeeping that way...

(Personally, I do try to pay cash as much as possible myself, but I've been in some somewhat embarassing situations where a dining companion/date didn't realize a place was cash only and then had to play "find the nearest ATM" to pay his or her part of the bill. And events like that are likely to put a damper on an evening no matter how good the food was...)

[Chris Amirault]

Interesting question. Where do you live? I think that you simply couldn't do this in some communities (NYC springs to mind -- though perhaps you'll prove me wrong!).

I urge research! As a customer interested in such matters, you're a good person to do it! Why don't you pop down the street this weekend and ask the managers at the restaurants in question and post to the list?

[sockii]

I live in Philadelphia, which is a city with a pretty thriving restaurant boom these days. And fortunately a lot of corner ATM for dining "emergencies"...there are at least 3-4 places right around me that are quite happening/busy places that are cash-only and it just confuses me as to the "why?" I mean, for my little retail business I pay about $45/month in equipment/basic processing fees for my charge account, and maybe $50-70 a month more in transaction fees...considering how over a single weekend craft fair or something I could lose at least $500-600 if I didn't take charges, it seems like a perfectly justifiable expense to me. And I'm small potatoes compared to the kind of business these restaurants seem to do on a typical night.

But yeah, maybe I should be nosy and just try to get an answer out of these folks directly

Interesting question. Where do you live? I think that you simply couldn't do this in some communities (NYC springs to mind -- though perhaps you'll prove me wrong!).

I urge research! As a customer interested in such matters, you're a good person to do it! Why don't you pop down the street this weekend and ask the managers at the restaurants in question and post to the list?

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[glenn]

Besides eliminating the credit card fees, some businesses don't take credit cards to facilitate tax avoidance.

I have a 20 seat sandwich shop in NJ. I had no intention of taking credit cards when I opened a short time ago - frankly I didn't think it was necessary figuring the average sale would be under $15. The 2nd day I was opened, I lost 1 sale and another customer didn't buy as much as he would have as a result of not accepting credit cards. So I gave in and decided to take them without making it obvious, like posting the credit card logos or having the machine in view. To my amazement, about 20% of my sales are now credit cards and I have an unanticipated expense. However, I also generate more sales - people buy more as a result and it is more than paying off.

[Thesorus]

Me think it's bad business. Especially if they don't tell you before you order or make a reservation.

[Holly Moore]

Restaurants mostly don't take credit cards because of the fees of maybe three to five percent of the sale. Amex is the highest. Fees not only on the cost of the meal, but the sales tax and the server's gratuity. That adds up. Sales tax and tip add maybe another 25 percent on to the bill, effective raising the establishment's credit card persentage to approimately four to six and a half percent of the actual menu check total. I think some restaurants even back the fees out of the gratuity which has always struck me as cheap though as an a former owner in a business where pennies matter, I understand the sentiment.

At the same time, the restaurant business is all about service. And nowadays accepting credit cards is a service basic. Restaurants that don't take credit cards, like restaurants that don't accept reservations, aren't about hospitality.

[glenn]

Restaurants mostly don't take credit cards because of the fees of maybe three to five percent of the sale.  Amex is the highest. [...]

←

Visa and mastercard raised their rates making their "effective" rate higher than AMEX if the average check is low. In any event, m/vc are in the same ballpark as amex now, but at least amex is upfront about the charges. The quoted rate that credit card processors give for v/mc, usually somewhere around 2.5%, is a myth and this industry should have their nose hairs pulled out for misleading business owners. There's a myriad of other fees, including a transaction fee which brings the real rate - in my case - close to 4%.

Edited April 23, 2005 by glenn (log)

[sockii]

At the same time, the restaurant business is all about service.  And nowadays accepting credit cards is a service basic.  Restaurants that don't take credit cards, like restaurants that don't accept reservations, aren't about hospitality.

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That's exactly my feeling on the matter. To me it's a service basic that, yes, costs the business something, but I feel it costs the business more in the long run if they *don't* offer it.

It's like, I could say I won't give customers bags or boxes for their purchases because they cost me money (upwards of a few dollars a sale for a big fancy jewelry box). But someone buying a nice gold chain or fancy necklace isn't going to like me just shoving it in their hands because I'm too cheap to pay the expense of basic packaging supplies.

[sockii]

Me think it's bad business. Especially if they don't tell you before you order or make a reservation.

←

Yep. At the very least it should be prominently displayed on the door/front window where other establishments put their v/mc/amex/etc stickers--and also on the menu or *somewhere* obvious that customers will notice before sitting down and/or ordering.

[raxelita]

I know a few Brooklyn spots that are cash only, and one I know of only takes amex. Very annoying, as I tend to forget each time I visit these places and am stuck searching for an ATM after an otherwise nice meal.

[joiei]

there are a couple of restaurants and markets here that do not except credit cards. It is an inconvience, but because I want their products and services, i put up with it and go on. It isn't the end of the world, that is just how that merchant does business. Oh, and they do have signs stating no credit cards accepted.

[fifi]

From the consumer's perspective, me . . . If you don't take plastic I probably won't go there. We continue to move toward a cashless society here in the US. Yes, I know that there are fees in there. I just expect it to be figured in with the price of the food just like the rent, ingredients, utilities and all other costs of doing business. I remember a few years ago one of the oil companies offered a few cents a gallon less for cash. Then the competitors started with "same low price, cash or credit." The cash discount was about as popular as the "New" Coca Cola.

[TheFoodTutor]

Restaurants that don't take credit cards, like restaurants that don't accept reservations, aren't about hospitality.

←

I'm curious about this statement: Given that many people don't honor their reservations, and so a table will be held for them while walk-ins are turned away, even though the reserving party won't show up, how is it more hospitable to take reservations than to not take them? Sure, it's hospitable to the no show party to take their reservation, but it's the opposite of hospitable to the walk-ins who don't get a seat. So it's kind of a wash, isn't it?

I work at 2 restaurants, one that takes reservations and one that does not, by the way. Both accept credit cards.

Edited April 23, 2005 by TheFoodTutor (log)

[Holly Moore]

I'm not sure what no-show customers have to do with hospitality. But taking reservations has a lot to do with hospitality. It makes it easier for the customer. Less hassles. No worry about a long wait. And no wait about driving to a place only to find that there will be no tables able at all that evening. That's all about hospitality. "We appreciate your chosing our restaurant, from all the reservations in the universe, and we want to have a table ready for you when you arrive.

Walk-ins, those who don't bother to make a reservation, understand the risk that a table won't be ready for them when they arrive.

From a short-term profit point of view, I can see where an "in" ultra-popular restaurant decides not to take reservations. It maximizes turnover and if people don't want to wait, screw em, cause there are plenty more where they came from. Funny how many of those places end up gladly taking reservations a few months down the road.

[rjwong]

Holly, what do you mean by a "no-show customer?" How can one be a customer if s/he doesn't show up in the first place? Does that mean, Customers are always right, even if they don't show up for their reservations and don't call to cancel?

Back to topic, the only cash-only restaurants I recall are local Chinese restaurants in Chinatown (speaking around LA) & long-time restaurants that has had a cash-only policy for decades. Isn't Peter Luger's in NY cash-only? Having a cash-only policy can be an inconvenience to the customer. Mind you, credit card debt is a lot worse (I speak as someone who finally paid off my credit card, thank God!!). As for the restaurants, it sounds like payments by credit card is a "necessary evil," ehh?

[andiesenji]

I know of two very popular restaurants in the west San Fernando Valley that have recently switched to cash only for a particular reason.

They had a problem with patrons having their credit cards charged for more than the original bill as the cards had been swiped twice or swiped through a card reader and cloned.

Several patrons disputed all of the charges as fraudulent and both restaurants lost quite a bit because the servers had falsified the charges, collected the cash or merchandise and skipped.

My boss was one who had this happen to him and he had only been at one of the restaurants on one occasion during the period this occurred but there were 4 charges. I questioned the three additional ones because he was in the hospital at the time these were dated.

The fraudulent charges were refunded but he will not return to the restaurant in spite of receiving a written apology and explanation as well as a notice that they will now accept cash only.

[NulloModo]

I am also in the boat of people who will just not go to establishments that don't accept credit cards. Around here even the $5-$10 sandwhich shops all take them, and I generally always pay with my debit card, it is just much more convenient than having to hold cash all the time.

The food-related type of places that I see often not taking them are the little ethnic grocery stores, especially the Hispanic ones. Then again, the ones that have been around for a while seem to have figured it out and are now accepting them. My favorite Indian grocer will only take them for purchases of over $10, and while that is a pain if I just want to pick up a jar of chutney, I can live with at this place, because it gives me an excuse to justify buying several more jars of chutney...

[bavila]

To answer the original question, my vote is:

1-tax evasion

2-poor business acumen

[glossyp]

After an unfortunate theft problem that happened at a restaurant, I never use my debit card anywhere it isn't in my hands at all times (unless it's in the atm machine of course) - identity theft is growing and I think andiesenji's explanation of why some of their local restaurants have turned to cash only is valid. I had to weigh convenience vs. losing money I couldn't afford to and convenience is not that important.

[markk]

Six words, really:

tax evasion, tax evasion, tax evasion.

Now, I know some people who are not American-born, and who come from a country where things like "on the books" and "scrupulous recordkeeping" are not national traits - I didn't mean that as a slur, I meant that there are lots of outdoor markets, lots of remote, tiny restaurants in microscopic villages, and it's a land where haggling is the norm. And, they're from a generation before credit cards and record keeping existed. (Remember, there was even a time when businesses in the US didn't report what they paid you in wages to the government!)

So these people went into a Brookstone store in one of the big malls, and told the salesperson that they were prepared to buy the $1500 massage chair, in cash, so that he wouldn't have to charge them the sales tax. Needless to say, the salesman just stared at them as if they were from Mars. (And why a person working in a Brookstone would even be tempted by this on the company's behalf, I cannot imagine.) Nonetheless, they were astounded - they just could not believe that their offer was turned down.

But I am sure that the restaurant they own is "cash only".

[Daddy-A]

To answer the original question, my vote is:

1-tax evasion

2-poor business acumen

←

There is a location just up the street from my office that over the past 5 years has gone through at least 3 different incarnations: Chinese » Steak House » Dim Sum » Thai. Each one of these places has been CASH ONLY, which leads me to believe a) it's a tax evasion thing, or b) the business is unable to qualify for credit services.

A.

[nwyles]

It is all about tax avoidance and the fees that go with credit cards and credit card fraud.

Probably running two cash registers and two sets of books.

It is not about what you make, it is about what you take.

The potential profit you could make on credit card guests gets eaten up fairly quickly by the fees.

I pay about $3000 a month in credit card fees and I have a great rate with credit card companies except AMEX - 3%

[srhcb]

[b) the business is unable to qualify for credit services.

I suspect this is most likely the case.

A business has to be somewhat credit worthy in order to obtain an account to accept cards. Perhaps the business' owners had some financial problems in the past?

SB

[Mayhaw Man]

Maybe it depends on where you live, but I am a cash guy. I use real cash more often than not for stuff under $50 or so. If I am traveling, this is still the case. For one thing, I have always like paying for stuff in "gazoonies" (international sailors term for foriegn currency ) as it gives you the chance to interact with the locals in a way that is not possible when you just hand them a card. In fact, my first stumbling attempts at Spanish were probably all intertwined with paying for stuff. The same holds true here at home, cash transactions are generally somthing that can generate some kind of conversation that can lead me to a great barbeque place, a fine plate of tamales, the best bowl of pho, or a papusa and a tamarind drink worthy of any kind of transaction-cash, credit, or washing dishes for an hour. Handing over a credit card does not, for whatever reason, generate the same kind of conversation.

But, the issue here is not cash and travel, but restaurants that don't take credit cards. It seems like the vast majority of places these days takes some kind of credit card, regardless of the size of the business. I will say, however, that as somebody who helps people (small food producers) set up standard and "card not present" accounts, it's not just a simple matter of saying, "Hey! We should take credit cards so that they won't whine about us on eGullet."

Under current law (as part of the Patriot Act-seriously), every credit card account must be personally guaranteed by somebody. Regardless of the size of the business, whether it is a corporation or some woman selling jelly at a farmer's market. I have a very recent example, involving one of the most recognizable names in New Orleans who happens to own a giant spice conglomerate, going through hell trying to get a new account with a company that he had another account with for years. It had nothing to do with credit worthiness, but it did have to do with the fact that these companies now require a social security number to be attached to every account being used (they had, rightfully, some seerious issues with personal info being used to set up a corporate account). There is also the credit aspect and some people, even if or because they have a new business, are too far past "sparkling credit" to get a credit card account.

The implication that some have made here that the reason that people don't take credit cards is because they are planning to not pay taxes, might be true some of the time, but I don't really believe that it is the case all of the time. Many people are down to their last thin dime when they open up and are risking everything they have just to make a go of it-they might even realize that they need to take credit cards-and they just can't get it together to do it. And there probably is something to the fees and percentages required by credit card processors. 4% may not sound like much to some of you, but small restaurants are not places to get rich in the best of circumstances and that 4% might be the difference in between paying the bills and actually having some money at the end of the month.

You don't even want me to get started on how hard this "guarantee" rule has made it for a Canadian company to do business online in the US with an American credit card processor. It's basically impossible.

So I guess what it comes down to, for me, is that if it is good and worth seeking out, I am going to pay for it however the people that prepared it want me to. I am there to eat, not to tell them how to run their business. Besides that, getting a little cash to exchange for a worthy meal seems like a small effort to me. But I guess I'm still stuck in the twentieth century.

[bavila]

Oh Brooks, you're such a populist. You must be from Louisiana...