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Shady business practice?

BeeZee Mar 3, 2014 07:41 AM

Went to a locally owned Italian restaurant over the weekend. It's a reasonably nice place, not a "chicken parm 'n pizza" kind of joint. The place was packed, although we've been there at times when it was only half full (open less than a year, so maybe just slowly catching on). Anyhow, as we were seated and our waiter did the usual intro, he said "I'll give 10% off if you pay in cash". Found it kind of strange. Would you think that the restaurant is doing something "shady" with the cash (ie, keeping it off the books) or what?

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    ultimatepotato RE: BeeZee Mar 3, 2014 07:46 AM

    I automatically assume it's a tax dodge. Does it stop me eating somewhere? Not usually.

    1. coll RE: BeeZee Mar 3, 2014 07:49 AM

      I would initially think he was trying to pad his tip, unless he was the owner.

      7 Replies
      1. re: coll
        jrvedivici RE: coll Mar 3, 2014 07:51 AM

        Pad his tip by skimming some cash??? Tell me how you are coming up with that assumption? Just curious not confrontational.

        1. re: jrvedivici
          coll RE: jrvedivici Mar 3, 2014 08:39 AM

          That if you saved 10% due to his suggestion, you might be inclined to leave an extra 2 or 3% to him for his helpfulness. I wasn't thinking about the cash angle exactly I guess.

          1. re: coll
            jrvedivici RE: coll Mar 3, 2014 10:34 AM

            Ok fair enough, I would "fear" if I were the server though, that if I gave 10% off the check, the people would only tip on the discounted amount, rather than the full value. (This happens all too often). So based on my cynical nature, and experience on the general public's cheapness, I'm not sure that would work.

            1. re: jrvedivici
              coll RE: jrvedivici Mar 3, 2014 04:28 PM

              Some are more optimistic than others! That's what makes the world go round.

        2. re: coll
          SaraAshley RE: coll Mar 3, 2014 08:59 PM

          But if the restaurant isn't authorizing the discount, then the server is still responsible for turning in the full amount of the bill without the discount, so whatever extra could possibly be made in tips, is probably mostly lost in having to make up the 10% discount the server just gave and now has to pay the restaurant with his/her own money.

          1. re: SaraAshley
            coll RE: SaraAshley Mar 4, 2014 05:06 AM

            This is a mystery to me. Still wondering if it was a server, or the owner maybe?

            1. re: coll
              mcf RE: coll Apr 19, 2014 06:53 AM

              Or an instruction to servers by the owner; that was my first thought.

        3. jrvedivici RE: BeeZee Mar 3, 2014 07:49 AM

          Yeah....they are doing something shady.......if you don't want to participate in it don't accept the 10% off and pay via credit card.

          Personally it's not my business what they are doing, and if I had the cash I would take the 10% discount and enjoy my meal. I think it's an individual decision, I for one am not without sin, so I'm not going pass judgement on them.

          1. h
            Hobbert RE: BeeZee Mar 3, 2014 07:51 AM

            I have been to places that offer a small percentage off for a cash transaction. I assume it has something to do with not paying a credit card fee? But those places had a sign or noted it on the menu- the way your waiter presented it seems a little odd.

            2 Replies
            1. re: Hobbert
              BeeZee RE: Hobbert Mar 3, 2014 10:00 AM

              that was exactly my thought, I have seen it printed for all to view at other places, but the verbal offer seemed odd. Have no compunction about taking advantage of the offer, this particular visit we had to use CC anyhow.

              1. re: Hobbert
                l
                Leonardo RE: Hobbert Mar 22, 2014 06:18 PM

                I've seen 5%, not 10.

              2. pinehurst RE: BeeZee Mar 3, 2014 07:51 AM

                We've experienced this before in other small retail settings (not food related)...usually an 8-10% discount. We don't give it a second thought...but it's happened so infrequently to us (maybe twice in 12 years of marriage) that it barely bears mentioning.

                1. m
                  MikeG RE: BeeZee Mar 3, 2014 08:00 AM

                  My first and primary assumption would also be that something shady was behind the offer, but to play "angel's advocate", it could be that the restaurant is having cash flow problems and would rather take a 10% hit than wait for reimbursement from the CC company...

                  4 Replies
                  1. re: MikeG
                    BeeZee RE: MikeG Mar 3, 2014 10:03 AM

                    that was another possibility we considered...anyone know how long it takes to get paid from CC companies? And would a restaurant normally be running so tightly that a few days float makes that much difference?

                    1. re: BeeZee
                      Motosport RE: BeeZee Mar 3, 2014 10:19 AM

                      Usually 24 to 48 hours.
                      It does make a difference if at the end of the day you have to pay out tips to servers or suppliers who will also give a cash discount.

                      1. re: Motosport
                        jrvedivici RE: Motosport Mar 3, 2014 10:36 AM

                        Correct......24-48 for Visa/MC

                        Amex can be 48-72 worst case.

                        1. re: Motosport
                          westsidegal RE: Motosport Mar 3, 2014 11:28 AM

                          also,
                          1) the terms of the restaurant's payment agreements with it's suppliers may allow them to avail themselves of a sizable discount by paying the supplier by a certain date.

                          2)(alternatively, they may end up being charged a hefty late fee if they are even one day late on their payment).

                          3) they may be able to use different, better, suppliers if they can pay cash up front

                          4) a supplier may have a "special" cash deal available for a particular item that the restaurant uses/wants.

                    2. Motosport RE: BeeZee Mar 3, 2014 08:02 AM

                      I believe in "Innocent until proven guilty"
                      When I go to Benjamin's in Kips Bay I take advantage of the 10% discount but still tip based on the original amount. I do the same thing when a restaurant has 2 4 1 night. I don't see why the server should suffer.
                      10% discount offsets the 3% + credit card processing fee and gives the manager cash to pay out tips at the end of the shift. We all know that servers declare 100% of their tips.

                      2 Replies
                      1. re: Motosport
                        westsidegal RE: Motosport Mar 3, 2014 11:33 AM

                        my former room mates who were servers DID declare 100% of their tips and STILL qualified for the Earned Income Tax Credit.

                        1. re: westsidegal
                          Motosport RE: westsidegal Mar 3, 2014 11:34 AM

                          As I stated!!

                      2. BiscuitBoy RE: BeeZee Mar 3, 2014 08:10 AM

                        Tho I've not come across it in a restaurant, I always ask/offer cash for a discount, not shady at all

                        2 Replies
                        1. re: BiscuitBoy
                          westsidegal RE: BiscuitBoy Mar 3, 2014 11:30 AM

                          BisquitBoy: i'd LOVE it if i could get cash discounts at ALL the restaurants on my regular rotation. i'd be paying cash EVERYWHERE.

                          1. re: BiscuitBoy
                            c
                            cresyd RE: BiscuitBoy Apr 28, 2014 11:14 AM

                            In Jerusalem (both East and West) this is fairly common (i.e. pay in cash get a discount/offer to pay in cash haggle for the level of discount/etc.). One small appliance place I knew had a small sign that said "pay in cash get 10% discount" - but would only give the discount if you reminded them that you were paying in cash and deserved the discount. A variety of variations on a theme. Now I also assume Jerusalem businesses of operating in a variety of levels of 'grey economy' (based on personal anecdotes/media coverage) - so I don't know if that's part of it or just a preference to cash.

                            Where grey economy goes to black economy/shady goes to illegal - I don't know. But I've never felt uncomfortable taking the discount.

                          2. b
                            beevod RE: BeeZee Mar 3, 2014 08:21 AM

                            The small family place around the corner does that. Doesn't bother me at all. Cash is KING!!

                            1. i
                              INDIANRIVERFL RE: BeeZee Mar 3, 2014 10:34 AM

                              A number of gas stations, some chains, give cash discounts at the pump in our area.

                              Not having to pay the credit companies has resulted in a variety of shops posting signs to that effect for cash discounts.

                              And when making a large purchase where the salesperson's commission does not reflect the payment from financing, I have always asked if there is a discount for cash.

                              1. westsidegal RE: BeeZee Mar 3, 2014 11:24 AM

                                what things look like may or may not be what they are.
                                this could be rationally argued both ways.
                                if it were me, normally, on this sort of issue, i stay away from trying to be the "morality police" or speculating as though i was the "morality sheriff."

                                1. bagelman01 RE: BeeZee Mar 3, 2014 11:27 AM

                                  This may not be a shady practice. The restaurant may want to expedite the cash flow. Sometimes restaurant owners come across deals that must be paid for in cash and are too good to pass up. This may help the owner accumulate the cash in a timely manner.

                                  Back when I was in the bakery business (late 70s) we had a number of accounts that were on a cash only basis. They either had run past due or had bounced checks to us. Once burned, we did not ever accept a check from that customer again. So, if XYZ restaurant, a cash only account, ordered a $300 wedding cake and $1500 worth of bread, rolls and desserts for a wedding on Sunday, they might need to make sure to have enough cash from Friday and Saturday night's business to pay for the delivery Sunday morning. The profit margin on the catered affair would more than cover the 10% cash discount, which really was 7% based on a 3% average credit card processing charge.

                                  A restaurant operator can easily hide almost all the cash that comes in without resorting to offering a 10% discount to get more.

                                  9 Replies
                                  1. re: bagelman01
                                    Motosport RE: bagelman01 Mar 3, 2014 11:32 AM

                                    I have been in the retail business for 40+ years. These days we almost never see any cash payments.
                                    At Dunkin Donuts this morning a woman put her cup of "Joe" on a debit card.
                                    It is what it is!

                                    1. re: Motosport
                                      Ttrockwood RE: Motosport Mar 3, 2014 08:00 PM

                                      Debit card???
                                      How passe.....! Everyone just pays with a scan of their smartphones nowadays......
                                      ;)

                                      1. re: Ttrockwood
                                        l
                                        latindancer RE: Ttrockwood Mar 4, 2014 06:55 AM

                                        I was at a high end retailer where I live, pulled out a !00, and it took them a few minutes to run somewhere (to the bank?) to try and break it.
                                        Blew me away.

                                        1. re: latindancer
                                          jrvedivici RE: latindancer Mar 4, 2014 07:22 AM

                                          If it was the very beginning of the shift this might happen, most register draw's only start out with $200. in "change" small bill's etc. so if you had $90. in change coming back to you that might have cleaned them out of half their draw.

                                          Obviously just a guess.

                                      2. re: Motosport
                                        j
                                        Janet from Richmond RE: Motosport Mar 5, 2014 10:34 AM

                                        I put everything possible on my credit card. Love that cash back.

                                        1. re: Janet from Richmond
                                          Motosport RE: Janet from Richmond Mar 5, 2014 10:41 AM

                                          You get 10% back?? Which card??
                                          Not for nuthin' but I'll take the immediate 10% discount.

                                          1. re: Motosport
                                            monavano RE: Motosport Mar 5, 2014 10:55 AM

                                            I think the problem is having cash on hand. 10% beat 2%, so if I were a regular, I'd have the cash.
                                            Whenever we get a discount for cash, we hand over the paper.

                                            1. re: Motosport
                                              j
                                              Janet from Richmond RE: Motosport Mar 6, 2014 05:36 AM

                                              I don't carry cash. If I have $10 with me, that is a lot.

                                              As a merchant we don't offer discount for cash. It doesn't set well with me.

                                              And my response was in regard to your comment about the woman using her debit card (I don't get the appeal of debit cards at all, but that is another post for another day) at Dunkin' Donuts.

                                              1. re: Janet from Richmond
                                                bagelman01 RE: Janet from Richmond Mar 6, 2014 05:55 AM

                                                Janet...
                                                my 17 year old carries a debit card.
                                                She is too young to have a credit card in her own name.
                                                As a merchant, I always preffered when a custoimer used a debit card to a credit card, as the 25-35 cent transaction fee was usually less than the credit card percentage once a transaction hit $10.

                                                The appeal of a debit card is that one can only spend the money one actually has (unless your bank honors overdrafts) and not get caught up in credit card bills. I remember my oldest getting her first MasterCard bill for $250 and being shocked to find that more than $200 was fro consumables, not tangibles, such as clothing that existed when the bill arrived.

                                      3. l
                                        latindancer RE: BeeZee Mar 3, 2014 05:31 PM

                                        If the food is outstanding then I could care less.
                                        There are so many cash only restaurants that I go to that I wouldn't think anything about it.
                                        It's on them if they're doing something 'slippery' with my cash, not me.
                                        Don't over think it.

                                        1. PeterL RE: BeeZee Mar 3, 2014 08:51 PM

                                          I have had places told me their credit card machine is not working. When that happened twice I stop going. I'd say it's 90% a tax dodge.

                                          3 Replies
                                          1. re: PeterL
                                            westsidegal RE: PeterL Mar 4, 2014 07:26 PM

                                            PeterL: my local pharmacy's credit card machine has been out more days than not in the last week.
                                            i've witnessed the tech guys arriving several times to get the thing up and running.
                                            in your world these things don't break down? your business IT functions are always operating 100%?
                                            never get hacked? never have service interruptions?
                                            i want to live in your world.

                                            1. re: westsidegal
                                              w
                                              Worldwide Diner RE: westsidegal Mar 4, 2014 08:47 PM

                                              You hang out at a pharmacy?

                                              1. re: Worldwide Diner
                                                westsidegal RE: Worldwide Diner Mar 7, 2014 06:50 PM

                                                you bet 'cha

                                          2. ipsedixit RE: BeeZee Mar 3, 2014 08:55 PM

                                            Cash is not the only tax evasion technique.

                                            It is simply the easiest.

                                            Every dollar you give to a restaurant - be it cash, credit, check, or Bitcoins - is subject to tax fraud. It just becomes a question of how. And how easily.

                                            Don't overthink things.

                                            Go to a restaurant to enjoy good food and hopefully even better company.

                                            Leave the tax issues to the IRS.

                                            1. Withnail42 RE: BeeZee Mar 4, 2014 05:08 AM

                                              Lots of gas stations have a cash price and a credit card price.

                                              Perhaps they want to avoid credit card fees.

                                              2 Replies
                                              1. re: Withnail42
                                                BiscuitBoy RE: Withnail42 Mar 4, 2014 06:21 AM

                                                excellent point

                                                1. re: Withnail42
                                                  p
                                                  Puffin3 RE: Withnail42 Mar 4, 2014 06:24 AM

                                                  CC transactions must go through a business's bank account.
                                                  In all small restaurants 'cash is king'. If the purveyor of those lobster tails knows a restaurant that will pay cash the purveyor benefits and so does the restaurant.
                                                  I'm willing to guess that 30% minimum of all small ma and pa restaurants are involved in the 'gray market' at some level.
                                                  If you can ever go through a check out line at a large wholesale food business catering to restaurants and small catering business pay attention to how many buyers pull out a wad of hundred dollar bills when paying.
                                                  They got that wad from customers who paid them cash....not from a bank machine.
                                                  I've known lots of small restaurant owners over the years who only put enough money 'on the books' to avoid the curiosity of the 'Tax Man'.
                                                  One of the funniest things that's ever happened many years ago was when a small restaurant owner friend phoned and was in a huge panic. He pleaded with me to come over at once. I did. He said "I've just got a call from my accountant. He says I have to spend ten thousand bucks within three days or I'm screwed!" We hired an air taxi to fly us to Vancouver and we spent the next day buying used restaurant equipment. To this day most of it is still sitting in a shed at a local dairy farm. I actually drove past the farm the other day and the shed roof had collapsed.

                                                2. monavano RE: BeeZee Mar 4, 2014 06:27 AM

                                                  Nope, nothing shady. Credit cards charge processing fees and they add up.
                                                  The restaurant is just trying to keep afloat.
                                                  For me, it would be great to get a discount! I love spaving.

                                                  1 Reply
                                                  1. re: monavano
                                                    p
                                                    pedalfaster RE: monavano Mar 4, 2014 06:46 AM

                                                    "Every time a card is swiped, a banker gets his wings"

                                                  2. monavano RE: BeeZee Mar 4, 2014 06:30 AM

                                                    I can't get over all of the "yeah, it's shady" replies.
                                                    Many places ONLY take cash and I would never assume they are tax cheats.
                                                    If they are, may karma, or Uncle Sam, catch up with them. Meanwhile, pass the parm.

                                                    18 Replies
                                                    1. re: monavano
                                                      h
                                                      HungWeiLo RE: monavano Mar 5, 2014 01:42 PM

                                                      I have two accountants in the family who do nothing but non-chain/mom-and-pop restaurants. They said if they're offering cash discounts, you can safely assume a good chunk of them are tax cheats.

                                                      1. re: HungWeiLo
                                                        Motosport RE: HungWeiLo Mar 6, 2014 04:26 AM

                                                        A new legal concept: "Assumed guilty until proven innocent."

                                                        1. re: Motosport
                                                          h
                                                          HungWeiLo RE: Motosport Mar 7, 2014 10:15 AM

                                                          It's not an entirely new concept if you've ever been on the business end of an IRS audit.

                                                          1. re: HungWeiLo
                                                            Motosport RE: HungWeiLo Mar 7, 2014 10:52 AM

                                                            Been there, done that!! They will always find something, anything! You just hope it is minor.

                                                        2. re: HungWeiLo
                                                          jrvedivici RE: HungWeiLo Mar 6, 2014 05:53 AM

                                                          I having been the employee, manager, owner of several non-chain/mom-and-pop restaurants know, you are only as good at cheating on your taxes as your accountant can make you.

                                                          Remember.....the operator can accept cash and "cook his books" but it's the still of the accountant to file the tax returns in such away it's not apparent to "big brother". As the saying goes it takes two to tango. ;-)

                                                          1. re: jrvedivici
                                                            bagelman01 RE: jrvedivici Mar 6, 2014 02:36 PM

                                                            "I having been the employee, manager, owner of several non-chain/mom-and-pop restaurants" and retail establishments in my case..." you are only as good at cheating on your taxes as your accountant can make you"

                                                            To quote my first accountant when I bought my first business: "You worry about making the money, we worry about the taxes"

                                                            And when I went into the retail business as an equal partner with my father 34 years ago: Ones, Fives, Tens, Twenties and Hundreds belong to the government, Fifties are ours.

                                                            My father and the accountant tauight me that we were far better off declaring all the income and having expenses to negate taxable profit: expensive cars, travel and expense, company owned homes, a company membership in City and Country Clubs.

                                                            When you go to sell a closely held business, it's value can only be worth what you show on the books and the matching tax returns. That 'private' set of books has no value.
                                                            Have a business that does $1million per year, skim 300K then you have a 700K business to sell. Never mind you could go to jail!
                                                            Have a business that does $1million per year, pay your family well, including travel, cars, education and memberships. Why pay for these with after tax dollars when they can be paid for with pretax money? The P&L you construct to show potential buyers doesn't say Profit after taxes, it says: 'profit before owner's remuneration and expenses.' That extra $300K per year on the books is worth far more than cash you grabbed, AND no threat of Jail. Tax evasion is illegal, Tax avoidance is legal.

                                                            BTW, I haven't used an accountant in more than 30 years. I have a degree from the top US business and finance school (in Philadelphia) and am an attorney. With modern accountaing software the yearly accounting bill is uneccessary.

                                                            1. re: bagelman01
                                                              n
                                                              nocharge RE: bagelman01 Mar 7, 2014 12:19 AM

                                                              "That 'private' set of books has no value."

                                                              Totally disagree. For a couple of reasons. The standard for evaluating the value of a restaurant as an on-going concern if you try to sell it involves the notion of "adjusted cash-flow". The adjustments to the official cash flow may involve factors like the owner's use of a company car for private purposes. Or that expensive bottle of wine that somehow disappeared from the restaurant's wine cellar and made its way to the owner's home while making the accounting sheets as part of the normal loss percentage when you pour alcoholic beverages.

                                                              So "adjusted cash-flow" may have many shades of grey when to comes to tax legality issues, but ignoring the adjustments would be stupid. Let's say you could buy a restaurant where you could skim off $1M tax free with impunity. Wouldn't that have an impact on the value of the restaurant? I would think so.

                                                              1. re: nocharge
                                                                bagelman01 RE: nocharge Mar 7, 2014 06:17 AM

                                                                No, I don't think so. A buyer only will pay for what is poven. That hidden set of books with no correlating tax returns is not to be believed. In fact the mere existence shows how stupid the sellers are, how do they know the inquiring buyers are not tax agents? Hello Jail term.....

                                                                The adjustments you write of, such as owner's use of company car are exactly what I posted about when showing 'profit before taxes and owner's remuneration and expenses' These are on the books, not hidden in private books and lower the tax consequences. They just show potential buyers how big the owners' pot really is.

                                                                1. re: bagelman01
                                                                  n
                                                                  nocharge RE: bagelman01 Mar 7, 2014 10:33 AM

                                                                  The problem with that argument is that there may be a lot of things that may be shady from a tax perspective and may not be in any books, public or private. To what extent is the company car used for private use? Is that in any book? How much food does the owner of a restaurant bring home? May not be recorded. As a restaurant investor, I know a bunch of restaurant owners and if anyone of them would walk up to the bar and tell the bartender to pour him a drink, not only would it be free, but it wouldn't involve any taxes. Lots of possible shades of grey here when it comes to taxes but stuff like this needs to be taken into account when considering the value of a restaurant as a going concern.

                                                                  Steve Zimmerman addresses the issue briefly in the going-concern valuation part in the following link:
                                                                  http://www.restaurantrealty.com/purch...

                                                                  I do agree that tax evasion has pitfalls other than the possibility of going to jail. That restaurant owner may get less money when selling the restaurant since a buyer might be skeptical about how the cash flow should be adjusted. That cocktail waitress who underreported her tips might have a harder time getting a mortgage, etc.

                                                                  1. re: bagelman01
                                                                    w
                                                                    Worldwide Diner RE: bagelman01 Mar 29, 2014 03:41 PM

                                                                    You probably haven't bought and sold restaurants then.

                                                                    1. re: Worldwide Diner
                                                                      bagelman01 RE: Worldwide Diner Apr 19, 2014 06:44 AM

                                                                      Only 5 or 6......
                                                                      And as an attorney been involved in the purchase or sale of more than 25 restaurants for my clients.
                                                                      I always advise my clients not yo pay for anything not supported by the filed tax returns.
                                                                      If a seller admits to cheating the government the seller is admitting to being a liar and should not be trusted.

                                                                      1. re: bagelman01
                                                                        n
                                                                        nocharge RE: bagelman01 Apr 19, 2014 11:41 AM

                                                                        If you are an attorney, you would hopefully not advise your clients to break the law. Stuff like that could get you sued and disbarred. But that doesn't mean you are giving your clients optimal advice when it comes to restaurant purchases.

                                                                        It's very much common knowledge that restaurant owners draw advantages from their ownership that are not in any book, public or private. That factor should be taken into account in any rational valuation of a restaurant as a going concern. That's part of the logic behind the adjusted cash flow valuation method for calculating the value of a restaurant.

                                                                        1. re: nocharge
                                                                          bagelman01 RE: nocharge Apr 19, 2014 05:20 PM

                                                                          Simply put, I don't agree with you. If the sellers have enjoyed 'illegal' gains, the buyer does not have to pay for the right to cheat and steal. Many buyers are completely honest. I recommend that valuation be made only on what is shown on filed tax returns. Don't reward past bad behavior.

                                                                          There is nothing wrong with showing sales and expenses that include owners' perks. A buyer can then evaluate wht legal living they may make from the possible purchase.

                                                                          1. re: bagelman01
                                                                            n
                                                                            nocharge RE: bagelman01 Apr 20, 2014 10:55 AM

                                                                            I think you misunderstand the concept. It has nothing to do with the honesty of the buyer. It's all about understanding the value of the restaurant. If the owners have engaged in some form of shady practices that are not in the books, a smart and honest buyer will take that into consideration and realize that there is more money that could be put in the books. By contrast, the clients that retained you and only think in terms of what's in the books will get outbid by the smart people, possibly losing out on a perfectly good deal.

                                                                            1. re: nocharge
                                                                              bagelman01 RE: nocharge Apr 20, 2014 12:32 PM

                                                                              I don't misunderstand the comcept, I don't agree with it. I have handled many buy/sell of "cash" businesses over the years, and so did my father and grandfather. I grew up in the retail business, have a fine business education from Wharton and a law degree...............
                                                                              In the economy of the last 8 years, getting outbid for a restaurant up for sale ois not a problem. The numbers that are not on the books are not to be trusted. It is too easy to fake the backup for the type of cash flow evaluation to recommend.

                                                                              That said, this discussion has gone far afield of the OP is probably of little interest to most Chers. I suggest we leave it at having differing business philosophy

                                                                              1. re: bagelman01
                                                                                n
                                                                                nocharge RE: bagelman01 Apr 20, 2014 12:51 PM

                                                                                I don't want to prolong the discussion either, but let me make one final point: There are two issues.
                                                                                1. What is the methodology for establishing the value of a restaurant as a going concern?
                                                                                2. How do you do due diligence when it comes to restaurants as a going concern?

                                                                                My point is simply that due diligence, when buying a restaurant, should include enough understanding of the dynamics of the place. That would include a lot of stuff but at least some rudimentary idea of the owner's shady practices, if there are any. If the potential buyers doesn't have the skills to do due diligence and buys a restaurant purely based on tax records, he probably shouldn't be in the restaurant business and probably won't be in it for long.

                                                                2. re: bagelman01
                                                                  westsidegal RE: bagelman01 Mar 7, 2014 06:55 PM

                                                                  <<having expenses to negate taxable profit: expensive cars, travel and expense, company owned homes, a company membership in City and Country Clubs.>>

                                                                  bagelman01: you forgot to mention deducting the cost of flying your wife's dancing horses (dressage) all around the world and their maintenance and training and boarding and, and, and. . . .

                                                              2. re: HungWeiLo
                                                                monavano RE: HungWeiLo Mar 6, 2014 02:05 PM

                                                                Again, speculation and I don't give their opinion any more weight than the next guy.
                                                                The fact is, they don't know, so it's far from "safe" to assume anything.
                                                                But, hey, if that's their personal opinion, fine. Far from fact.

                                                            2. monavano RE: BeeZee Mar 4, 2014 07:30 AM

                                                              Do people here assume that their servers dodge taxes? I mean, there have been enormous threads about tipping in cash.

                                                              1. LMAshton RE: BeeZee Mar 4, 2014 05:54 PM

                                                                If they *always* issue a receipt, it could just be their way of avoiding paying credit card transaction fees. If they don't issue receipts, then it's likely a tax dodge.

                                                                1. w
                                                                  Worldwide Diner RE: BeeZee Mar 4, 2014 08:41 PM

                                                                  10% is more than credit card fees. It's likely they're cooking their books.

                                                                  11 Replies
                                                                  1. re: Worldwide Diner
                                                                    n
                                                                    nocharge RE: Worldwide Diner Mar 5, 2014 12:00 AM

                                                                    Without going into accusing anyone of cooking their books, I agree with the sentiment that 10 percent is quite a bit more than needed just for credit card fees.

                                                                    1. re: Worldwide Diner
                                                                      monavano RE: Worldwide Diner Mar 5, 2014 04:26 AM

                                                                      Maybe offering a 5% discount gets very few takers.
                                                                      Maybe the restaurant is factoring in labor costs to deal with CC transactions.
                                                                      Maybe none of use know what their food margins are.
                                                                      Maybe they actually come out AHEAD with no hanky panky involved whatsoever.
                                                                      Maybe it gets more seats filled, see above.

                                                                      1. re: monavano
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                                                                        nocharge RE: monavano Mar 5, 2014 10:51 AM

                                                                        I have a hard time believing the labor cost argument. You need to do bookkeeping regardless of whether you are doing stuff in cash or in credit card transactions. If you can offer a 10 percent discount for cash and come out ahead without any "tax benefits" involved, your accounting department is not running a very tight ship.

                                                                        My sense in general is that people are increasingly wanting to pay everything with their credit cards. They get frequent flyer miles, don't have to carry around cash, etc. Sending a message to diners that it will cost them 10 percent more, or so, to pay with a credit card is not a good recipe for "coming out ahead" in my opinion unless there are "tax benefits" involved.

                                                                        1. re: nocharge
                                                                          monavano RE: nocharge Mar 5, 2014 10:57 AM

                                                                          We have reoccurring expenses that we pay in cash because we get a good discount. I don't for a moment think these good private business owners are tax dodgers.
                                                                          The first and foremost of which offers, yes, a 10% discount for cash.
                                                                          You better believe we pay is cash!

                                                                          You don't know, I don't know and the OP doesn't know. It's all just speculation about the restaurant in question.

                                                                          1. re: monavano
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                                                                            nocharge RE: monavano Mar 5, 2014 11:08 AM

                                                                            Since I don't mind carrying cash, I would probably take a 10 percent discount in a split second. However, I highly doubt that such a high discount would make business sense merely based on the cost of credit card processing. If I spend $100 on a meal at a restaurant, would $10 of that go to credit card processing? Highly doubt it.

                                                                            1. re: nocharge
                                                                              monavano RE: nocharge Mar 5, 2014 11:14 AM

                                                                              I did not say that credit card processing fees are the sole reason.
                                                                              Gawd.

                                                                              1. re: monavano
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                                                                                nocharge RE: monavano Mar 5, 2014 11:25 AM

                                                                                No, but you implied that the general overhead of credit card processing could justify a 10 percent discount for cash. That number seems a little high for me.

                                                                                1. re: nocharge
                                                                                  monavano RE: nocharge Mar 6, 2014 02:03 PM

                                                                                  Well, again, not what I said, or meant to imply. It could be ONE FACTOR.
                                                                                  Hope that's more clear on how I put weight on ONE possible factor.

                                                                                  1. re: monavano
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                                                                                    nocharge RE: monavano Mar 6, 2014 04:31 PM

                                                                                    As a restaurant investor, let me give you the following perspective: Given the different kinds of costs for a restaurant, cost of goods, labor, linen service, electricity, etc. there is no way in hell that a restaurant would be able to stay in business if offering the convenience of providing credit card service would be worth 10 percent of the revenue. So offering a general 10 percent discount for cash would be suicide for a restaurant unless there was some form of "tax benefit" involved. No freaking chance in hell of giving a general 10 percent discount for cash being a viable business model without a "tax benefit". Now, dirt-cheap hole-in-the-wall places may get away with being cash only but for more upscale places, being perceived as anti-creditcard might rub people who use credit cards for everything the wrong way. Not a good idea unless there are "tax benefits".

                                                                                    My hairstylist stopped accepting credit cards a few years ago citing the cost of card fees and going cash or check only. He charges $100 just for a men's haircut and much more for coloring a woman's hair. Given that a lot people are not into carrying large amounts of cash and that paying by check is perceived as somewhat antiquated in this day and age, I'm sure it makes him lose some business. The only reason I can think of why he made the change is of possible "tax benefits" involved.

                                                                                    1. re: nocharge
                                                                                      coll RE: nocharge Mar 7, 2014 06:40 AM

                                                                                      They also say that people using credit cards spend at least 30% more on their purchases. I know I do!

                                                                                      1. re: coll
                                                                                        LMAshton RE: coll Mar 7, 2014 05:16 PM

                                                                                        Not us. My husband is a serious tightwad. Which I don't mind since it means we have more saved for our retirement than we would if I were in charge.

                                                                    2. j
                                                                      jlhinwa RE: BeeZee Mar 5, 2014 10:23 AM

                                                                      Lots of plausible reasons offered that don't involve shady stuff, and of course that's always a possibility as well.

                                                                      If it were a restaurant I enjoyed and would like to visit regularly, I would just ask them. Not in an accusatory manner, of course, but in an "I'm curious" kind of way.

                                                                      5 Replies
                                                                      1. re: jlhinwa
                                                                        monavano RE: jlhinwa Mar 5, 2014 10:49 AM

                                                                        I'm thinking that "oh, we're dodging taxes!" won't be among the explanations given!

                                                                        1. re: monavano
                                                                          Motosport RE: monavano Mar 5, 2014 10:50 AM

                                                                          "Too many ex wives"

                                                                          1. re: monavano
                                                                            j
                                                                            jlhinwa RE: monavano Mar 5, 2014 11:03 AM

                                                                            Maybe, maybe not. I've run across a few folks who feel entirely comfortable dodging taxes and don't seem to have a problem saying so.

                                                                            More likely, you could get some information from a direct and plausible answer (need cash for vendors or whatever) or some interesting non-verbal clues.

                                                                            1. re: jlhinwa
                                                                              monavano RE: jlhinwa Mar 5, 2014 11:15 AM

                                                                              "Well, our meat falls of the truck"
                                                                              Wink.

                                                                              1. re: jlhinwa
                                                                                Motosport RE: jlhinwa Mar 5, 2014 11:21 AM

                                                                                "Render unto Caesar.................."

                                                                          2. s
                                                                            sedimental RE: BeeZee Mar 6, 2014 10:04 PM

                                                                            Not my business. I have plenty of other things to concern myself with.
                                                                            I don't carry cash so it wouldn't effect me anyway.

                                                                            6 Replies
                                                                            1. re: sedimental
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                                                                              latindancer RE: sedimental Mar 7, 2014 07:43 AM

                                                                              <I don't carry cash>

                                                                              I'm curious about this. I live in a big city (LA) and I'd never, ever be without it. I've usually got at least $200 broken into smaller bills.
                                                                              I have credit cards and a debit card but being without cash would like being without shoes for me.
                                                                              It's a virtual necessity if I can't find parking and have to valet or somebody needs to be tipped for one reason or another…
                                                                              Or a restaurant is 'cash only' or…
                                                                              Do you allow for ATM's? What if one isn't readily available?

                                                                              1. re: latindancer
                                                                                h
                                                                                Hobbert RE: latindancer Mar 7, 2014 07:53 AM

                                                                                I don't carry cash either. I don't live in an area where I pay for parking and when I go to DC, I use an app that's linked to my credit card. I use a card for the toll road, for 7-11, for everything really. Cash only restaurants aren't really a big thing in this area. If I plan to go to a mom and pop that I know has a minimum card purchase, I'll hit an ATM but not otherwise.

                                                                                Funnily enough, my husband's the opposite. He's never had a credit card and uses cash for everything. That just seems like too much planning to me!

                                                                                1. re: Hobbert
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                                                                                  latindancer RE: Hobbert Mar 7, 2014 08:04 AM

                                                                                  Thanks for the response.

                                                                                  I guess, eventually, I'll have to download that app too as I've seen it used more often than not around here.
                                                                                  It seems like a practical practice and it's quick.
                                                                                  I suppose it's my age or something that's just got me in the habit of having that cash in my bag :).
                                                                                  I think in this area someone's being tipped one way or another throughout the week so therefore my proactivity.

                                                                                  1. re: latindancer
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                                                                                    Hobbert RE: latindancer Mar 7, 2014 09:49 AM

                                                                                    Yeah, I think that's the difference. I rarely have a reason to tip someone that's not on a card. I'm thinking of valets, hotel maids, coat checks, that kind of thing. I plan ahead for those occasions and bring cash.

                                                                                    The app is great! It alerts you 15 minutes before your session ends and you can extend it or just head out. So much nicer than keeping a bag of quarters in the car and watching the clock.

                                                                                    1. re: latindancer
                                                                                      westsidegal RE: latindancer Mar 7, 2014 06:57 PM

                                                                                      also, without cash, you can't go to Hide for sushi. . . .

                                                                                  2. re: latindancer
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                                                                                    Janet from Richmond RE: latindancer Mar 7, 2014 11:00 AM

                                                                                    I have had $2 in my wallet for months. I don't pay for parking and only use valet if out for the night with my husband (who does carry cash). Cash only restaurants aren't typical around here.

                                                                                2. Firegoat RE: BeeZee Mar 22, 2014 10:21 AM

                                                                                  I would be surprised they would say it, but wouldn't be offended and would probably take advantage of the discount.

                                                                                  1. elegraph RE: BeeZee Mar 31, 2014 08:17 PM

                                                                                    It could be the restaurant owner is trying to reduce the many credit card fees: merchant discounts, merchant interchange fees, misc. merchant fees, credit equipment rental fees, etc. These could easily add up to 10% of the bill. Why not offer a cash discount? It would help the owner as well as the patron.

                                                                                    OTH, if the waiter is not reporting 100% of his tips, he would prefer payment in cash.

                                                                                    1. w
                                                                                      Worldwide Diner RE: BeeZee Apr 19, 2014 05:36 AM

                                                                                      I just got a flyer form a local Thai restaurant. They're offering 30% off cash payment, with a minimum purchase of $20. I call that the uncle Sam discount.

                                                                                      1. k
                                                                                        Kalivs RE: BeeZee Apr 19, 2014 11:47 AM

                                                                                        My gut feeling is that they are not paying sales tax, which means they are not reporting the sale.

                                                                                        1. elegraph RE: BeeZee Apr 20, 2014 10:31 PM

                                                                                          As a restaurant owner, I doubt there is anything shady going on. Credit card usage costs the merchants a lot of money. We pay to rent the equipment, bank fees, merchant discounts and something called interchange fees. When your credit card offers airplane miles or other incentives to use the card, it's the merchant who bears the cost, not the bank. We accept cards because it is convenient for our customers. Period.

                                                                                          OTOH, the waiter may be under-reporting his tips, which is difficult to do when they are recorded on a charge card.

                                                                                          1. pdxgastro RE: BeeZee Apr 28, 2014 10:08 AM

                                                                                            A politician, no less. http://edition.cnn.com/2014/04/28/pol...

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