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What the heck: Cash only restaurants??? [ Moved from Ontario ]

Am I the only one who's getting increasingly frustrated at how many of Toronto's less pricey establishments (and grocery stores) are cash only? I don't usually carry cash with me and I'd strongly prefer not to. In my neighbourhood alone, I'd say that at least 25% of the dining options within a ten minute walk from my house only accept cash. Hearing "cash only" usually just irritates me and makes me lose my desire to frequent a place.

I was going to go to Ghali Kitchen tonight, but on a whim I phoned them and asked, and yes, cash only. My nearest bank machine is a good 20 minute walk away, too: not worth the effort for dinner for one who doesn't have a car.

If people here think about it, when mentioning a restaurant that's cash only, I think that I and others would greatly appreciate if that fact could be mentioned so that we are not caught unaware. (At least, I know that I'd be very thankful!)

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  1. Bothers me too. I think the cash-only restaurants benefit from a lower rate of taxation.

    1 Reply
    1. re: BarnNB

      Leslie Jones in Lesliville has a $10k espresso machine on the counter but they can't afford the credit card service fees? Please.

    2. "Lower rate of taxation" - as in the owners might not report all the sales. All other methods create a paper trail.....

      1 Reply
      1. re: ghetto_scarlem

        with the recent rise in credit card fraud can you really blame the restaurant owners for going with cash only, at least with cash there are cheaper preventive tools that they can use to detect fake currency but how do you deal with the credit cards.

        I personally was a victim of credit card fraud not too long ago, mind you that i don't have to pay the bogus charges but the restaurant that this criminal dined in just lost $3200 because of the fraudulent use of my card. so who in their right mind would not go teh cash only route especially if you are a small business that can't afford to absorb the loss.

      2. While the "lower taxation/skimming" may be true, I'm thinking that you are underestimating the impact of credit card fees on small biz. Depending on the number of transactions a restaurant does, and the size of those transactions, they really add up. I was a small shop with maybe 20-50 transactions/day, and my CC fees were many thousands of dollars/year.

        I applaud any business that feels that they make it without taking CCs, and without paying the Visa/MC monopoly.

        But if they were smart- they'd get an ATM machine on premise.

        3 Replies
        1. re: cheesemonger

          I personally don't think it's a big deal... for a small business (in a notoriously difficult industry) CC and Interac fees are enough to make the difference between breaking even/making a small profit and losing money. If a small takeout place like the Ghali Kitchen needs to be cash only to survive then so be it. As long as the policy is well communicated then hopefully regulars and people in the 'hood will get the picture. Cash is still legal tender in this country last time I checked... credit cards/interac are a bonus for us consumers and are close to being universal but they are not mandated for all businesses (as much as the banks would love the idea).

          I do agree that a place like Leslie Jones really should accept credit cards though... seems a bit odd given their persona as a hip neighbourhood dining spot. Especially when they are likely interested in upselling as much wine/booze as possible.

          Also, more specific to the issue at hand... isn't there an ATM in the convenience store right at Greenwood & Queen, next door to Ghali Kitchen?

          1. re: Vise

            There may well be a bank machine there; note that I said "my bank machine". While this may make me sound cheap, I would very strongly not prefer to pay $3 in service fees in order to withdraw cash from a generic ATM (note that this is 15% on $20). I have no opposition to losing $3, but I'd rather not do so to the banks. Heck, I'd rather Ghali Kitchen just invest in Interac and then charge me a $3 service fee; at least then I'd be supporting a small business.

          2. re: cheesemonger

            There's a group of beach bar & grills by me that does just that- "We are cash or check only. There's an ATM down the hall if you need it." I've got no idea why they'll still take checks when they won't take plastic, but they've been solidly to hugely profitable for the past ten years, so it's not a matter of worrying about a 2% margin making or breaking it for the business.

            The no credit cards policy has even gotten mentioned as a quirky feature/adding to the Old Florida throwback feel of the restuarant when it got written up for a nationally circulated AP article.

          3. I agree that restaurants and others businesses are free to insist on cash payment, even though it is less convenient to the consummer. I also like the idea that the Bank is cut out of the picture that way.

            However, it is easy for small business owners to see the money they lose each month in credit card fees. It is more difficult to see the money lost when customers pass by the restuarant because they don't have cash on them and it is a hassle to walk to a bank machine. I suspect that, given the margins, they loose more money to the latter; they just don't see it.

            Also, the fact that they do not use credit cards does not mean they they are avoiding taxes. When they use a little calculator next to the cash register to calculate you bill, then that pretty much means they are avoiding taxes. One of my favourite restaurants does just that - they keep and plastic pill container in the front well of the till to prevent it from closing and use a calculator to calculate the bill. PLUS THEY CHARGE ME GST!!!! I'd report them, but the food is too good.

            1 Reply
            1. re: BarnNB

              There is another issue that you have not thought about.. in some cases maybe they could not get a credit card machine. I know of a place that took 2 months to get a credit card machine for a new location even though they have another location that does a huge volume of credit card transactions (thousands of dollars per day). No explaination from the bank they just said it would take that long..

              Also if they have been the victim of fraud or have no credit card history it is getting hard for them to get a machine. Some banks want a large deposit up front to insure any losses.

            2. I have no way of knowing the specifics of CC operations in Canada, but here in the US I can get half a dozen places to set me up with fees of under 2% and per transaction of way under a dollar. Most of these offers come with little of no restrictions/minimums, other than having a legitimate bank account, proper tax IDs, and no negatives in credit history. Some of the processors are quicker to place the funds into my account, but none of these have terms worse than any of my suppliers.

              The convenience to my customers is HUGE, it saves me a ton of time and hassle in dealing with checks and/or large sums of cash.

              As to the "cut" to my margins, I think that this is not an issue, as the number of folks that would otherwise just cut their spend based on what cash they had on hand/in the bank is far greater.

              I suspect lack of sophistication/familiarity with the various offerings is the biggest obstacle -- most medium sized banks that have a sales staff to recruit small businesses offer the WORST rates, but once you see how the system works you quickly find that there are specialists who love to process credit cards. If the small banks can't match their rates I just have to deal with another layer, but I don't know if Canada can force "bundled" service...

              1 Reply
              1. re: renov8r

                Add minimum sales volume to the restrictions. Below a certain volume the rates go up. When I was a small rest owner the rates & charges averaged out to $.03 on the dollar.
                Also location plays a very important roll.
                Accepting CC/debit did not increase sales volume for me (small town/limited customer base). All that happened was the regulars switched from cash to card, so prices went up to cover the cost to me.

              2. Plastic is how people pay today and business that don't accept it are being short-sighted. Any number of studies show that people will choose another establishment or buy less so the bottom line is affected far more than the cost of the credit/debit card fees, even the float on cards like American Express, or charges for internet sales. For charitable contributions, it means the difference between someone giving and not giving.
                Long and short of it: credit/debit cards are a tool that increases your gross.
                Everybody fears CC fraud and identity theft but there are ways to secure your cards. Statistically, considering the volume of use, the problem isn't as large as it's portrayed in the media.
                Fortunately, where I live, most places accept plastic and the ethnic places seem to love it. They're accepted at farmers' market and flea market stalls. It just takes some people a little longer to catch on.

                5 Replies
                1. re: MakingSense

                  My $0.02:

                  As a former restaurant owner, I can tell you that the 1.5-3.5% credit card transaction fee and $0.10-0.12 interac fee can really bite into your profit. This is especially true in this industry, where average net profit is a mere 3%. Moreover, in an operation with small check average, the impact is amplified.

                  Another fact is that credit card and interac transactions take about 50% more time at the till than a cash transaction. For restaurants that depend on heavy lunch volume and don't want to keep customers waiting, I can understand foregoing electronic transactions.

                  That being said, I agree that the restauranteur could lose business by making this choice. However, it is usually cheap, smaller, ethnic, chowish places that aren't offering these services. What's the big deal? Just carry a few bucks in your pocket for such occasions. I went to the new gelato place on Mt. Pleasant a couple of nights ago, they are cash only and the lineups onto the street didn't seem to be hurting them at all.

                  I would never recommend that a high check average or volume restaurant forego credit card or Interac, but they probably wouldn't anyways.

                  As a side note, I've never understood why some higher end restaurants offer credit card but NOT Interac transactions. Especially when the guest check is large, they make more profit if the guest uses Interac.

                  1. re: bogie

                    To follow up to bogie's post, because some excellent points were made.

                    I am also talking about smallish places with many small check averages. Given my knowledge of what I paid in CC fees/year, I sat about trying to mentally compute what a local, and very popular brewpub and burger joint probably saves itself in fees each year by not taking credit cards.

                    They are open from lunch through late night, and are almost always busy. They have about 25 or 30 tables, always in rotation, with waits at lunch and happy hour. College students, 1-top tables with books, graduate students grading papers (like I did there), groups having pitchers, families with kids. Hundreds of potential credit card transactions/day. And they do also take checks (local with ID). In my experience, when you take CCs, that's about 75% of your take, so I'm considering that as well. My calculation merely involves the restaurant turning each table 6 times/day- easily done when always busy from 11 am to 10 pm.

                    Given that my modest shop paid thousands each year, and at about 2%, and the transaction volume of this place was easily 10 times my volume, not taking CCs saves this restaurant potentially $40K/year in fees. That's no small potatoes. And I didn't even try and figure how many "split the check" deals between 4 people at a table might come to if CCs were taken.

                    They also (cleverly) have an ATM on premises, from which they no doubt reap a fee from each transaction. Good for them.

                    1. re: cheesemonger

                      I had a retail business and bad checks, even with a verification service, were a problem. In some areas, this can be a major problem. College towns and end of the pay period transactions are notorious for them.
                      Without computer systems for cash registers and restaurant tabs, it's hard to keep track of cash transactions if you have more than a few waiters and staff. Bartenders can pour you right out of business.
                      It really depends on the business, but for some, credit cards provide protections that are well worth the fees.
                      The basic fact remains. People spend more when they use plastic. You make up those fees in your bottom line.

                      1. re: MakingSense

                        I never once in 3 years, received a bad check. I know that's not the norm, but the risk of a few bad checks probably doesn't come to $40K/year.

                        I respectlfully disagree with your statement as a fact, that the fees are made up in the bottom line. Maybe at a high-ticket restaurant, but at a place where the check size is small, I don't think it would make an appreciable difference- is someone going to break down and order one more $3 beer? Eat 2 burgers instead of one?

                        1. re: cheesemonger

                          there is also the problem with chargebacks, I had a few of those after the transaction when the customer complained that they hadnt eaten at my restaurant or were overcharged. I kept all transaction slips so was able to prove some of them but there were the occasional c ustomers who took both slips with them and then did a chargeback. This is a no win situation for the restaurant.

                          we also had situations where teens would use their parents cc for a takeout collection, then the parent would complain later seeing the charge, the teens were clever at scrawling a signature on the slip and the parent would then tell the CC company that it wasnt their signature. Again no win for the restaurant. And yes these have happened to me.

                2. One more thought, then I'l stop- really.

                  The 2% thing is kind of mis-understood, so let me clarify. To do so, I am pulling this information directly from my Merchant Billing Statement.

                  There are 2 things to consider in taking credit cards- one is the "Per Item Rate", the other is the "Discount Rate", aka percentage of the sale.

                  There are 4 types of Visa/Mastercards. Visa "Qualified", MC "Qualified", MC "Partially Qualified" and Visa "Non qualified"

                  There is no way to know which is which by looking at the card. These are my actual rates from my own Merchant Statement.

                  Quailified cards cost 20 cents to swipe, and 1.67% (this is a very good rate, FYI) and overwhelmingly, most my my transactions fell into this category)
                  Partially Qualified cost 31 cents to swipe, and 2.83%
                  Non Qualified cost 31 cents to swipe, and 3.35%.

                  Debit cards cost 61 cents to swipe, but no percentage.

                  So, say you make a $100 sale- the businesses cost (transaction fee + percentage)would be between $1.87 to $3.66, depending on what type of card it is. That doesn't seem prohibitive, right? The business made at least $96.34 on that $100.

                  But say instead, you make 10 $10 sales to get that same $100.

                  Now you've got it adding up.

                  And it's the "per item fee" that does it. For qualified cards, still the 1.67%, but .20 each swipe ($3.67), for unqualified, 3.35%, and .31 per swipe ($6.45) out of each $100..

                  What about all the people that want to charge a $3.00 coffee? That's 33 transactions by CC, costing between $8.27 and $13.50 out of each $100.

                  That's way more than 2%. That's what adds up for the small-ticket business.

                  3 Replies
                  1. re: cheesemonger

                    That is an eye-opening post, cheesemonger!
                    Makes me wonder why so many low-end restaurants, sandwich and coffee shops take credit/debit cards at all and if it doesn't in some way contribute to their economic difficulties - especially that debit card swipe fee! 61 cents on a $3 tab and then tax and overhead! Damn that's high! No room for profit.
                    Most of my experience has been with retail and fundraising where the average sale or contribution is at a level where the low end fees apply. Taking credit cards for those increases volume and average sale. For fundraising it makes a big difference in "closing" the decision to give - people will forget or neglect to send checks but will pull that credit card right out of their wallets.
                    There are a lot of studies on spending habits. If people leave credit/debit/ATM cards and checkbooks at home, depending only on the cash they carry, they spend less. The so-called "cashless economy" makes it easy for people to overspend. The burdens are not only on consumers however as you've so well pointed out. Business is paying a heavy share of that cost.
                    Thank you so much for a great posting.

                    1. re: MakingSense

                      I think the low dollar amount fee is something that the big guys (like McDonalds & Starbucks) try to get around by selling their "pre-paid cards" -- so yes I can see the logic in that sort of situation.

                      I would not say that I cannot see why small place take plastic at all, but that it must surely have more tradeoffs. I suspect very few small businesses use an armored car service while almost all larger retailers do, but that must also leave them more vulnerable to a heist. Same sort of problem...

                      1. re: renov8r

                        Heists? What world are we talking about here?

                        The point is, that you replied to and missed, was that the "2%" idea that everyone thinks is what CCs cost, isn't 2% at all. Multiple small transactions make the percentage much higher- more in the 9-13% range.

                        Heists... there's this crazy newfangled invention called a safe. Many small biz keep the "heistable" money there. And then they hire the bodyguards as escorts to the bank. ;-p

                  2. I guess I'm really surprised to see this type of complaint here. It's not that I haven't been caught by a surprise ~cash only!~ situation with little or no cash, because I have, and I didn't like it.

                    But if I know that's the situation, I tend to think postively of the place, because I figure they're too small an operation to justify the resources for using plastic. In my mind, small is a good thing for a food enterprise. Now that we have a kid and go to way less upscale restaurants, many if not most of them are cash-only: ethnic places, BYOBs, etc. It may be the particular culture of business in my state or my region, but cash-only sounds like a good thing to my ears.

                    1 Reply
                    1. re: Mawrter

                      There are quite a few small, "ethnic" ones especially, in Montréal. Don't understand why someone wouldn't carry around $40-50 or so. It can save your life in the event of a mugging, for one thing...

                      Remember that there are businesses (such as many internet servers) that require payment by credit card. I don't have a credit card and don't want one.

                    2. It's hardly a high-priced establishment, but we almost never go to the Waffle House (even though we love their potatoes) because they are cash-only and getting cash takes specific pre-planning to make sure that you have enough to cover the bill. I'd be even more annoyed if it was an actual restaurant rather than a hole-in-the-wall...

                      1. We live in NYC and there are many "cash only" restaurants. Many of them are fine restaurants. One of the restaurants we go to fairly often is Peter Luger, always rated the best steak in the world. Cash only. The bill for two is rarely inder $150-$200. You have to book at least 3 months in advance.

                        The restaurants that are cash only are crowded if they are good. It may be that people here just don't mind.