The restaurant operators are urging local government to consider the operational efficiencies that going cashless provides, while local government urges operators to consider the larger implications of closing off their restaurants to customers who don't have easy access to bank accounts. At least at this point, it doesn't exactly sound like either side is listening to the other.
— Erika Adams
Cashless restaurants are under scrutiny in New York City, where local legislators have proposed a ban on cashless businesses due to the discriminatory effect they might have on New Yorkers who don’t have easy access to bank accounts.
On Thursday, the New York City Council hosted a public hearing on the proposed legislation to ban businesses in the city from going cashless. Although the ban would affect any business that doesn’t accept cash as a form of payment, the conversation at the hearing most closely centered around the fast casual restaurants and coffee shops in the city that have gone cashless.
The proposed ban drew widespread attention when local councilmember Ritchie Torres first introduced the potential legislation late last year, calling the cashless business model racist and discriminatory towards low-income households.
“We live in a society where it’s not enough to stigmatize poverty; we are also going to stigmatize the means with which poor people pay for goods and services,” Torres told Grub Street last November.
Many U.S. Households are Unbanked or Underbanked
Much of Torres’ argument stems from the fact that many New Yorkers — and, on a larger scale, U.S. households overall — don’t have easy access to regular bank accounts.
The New York City Department of Consumer Affairs commissioned a study that found that over one in four local households were underbanked in 2013, meaning that they have a bank account but still rely on some other place “to cash a check, purchase a money order, transfer money internationally, or complete some other financial service.” 11.7 percent (360,000 households) of the city’s population were unbanked, or had no bank account at all.
Nationwide, 20 percent (or 24.8 million) of U.S. households were underbanked in 2013, according to a report by the Federal Deposit Insurance Corporation. 7.7 percent of U.S. households were unbanked.
The Cashless Debate
Only one state in the U.S., Massachusetts, has upheld a statewide ban on cashless businesses. The ban has been in effect since 1978. Recently, however, more areas across the U.S. are considering their own version of cashless bans, including in Chicago, Philadelphia, Washington D.C., and the state of New Jersey. Just this week, San Francisco officials introduced their own proposed legislation restricting businesses from going cashless.
In New York City, industry representatives from three establishments — ByChloe, Dos Toros, and Mulberry & Vine — testified in opposition to the proposed cashless ban at the public hearing on Thursday. Like Sweetgreen, Dig Inn, and other prominent fast casual chains with locations in Manhattan, these companies largely went cashless due to both employee safety concerns and operational efficiencies — employees don’t have to manage the money, order processing is much faster, and balancing the books is much easier.
All three restaurant operators at the hearing confirmed that, before they went cashless, that form of payment represented 10 percent or less of total transactions in their restaurants. Dig Inn also notes on its website that it only went cashless in locations where cash represented eight percent or less of total transactions.
Operational Effects of Going Cashless
Leo Kremer, the co-founder of Dos Toros Taqueria, said that Dos Toros locations had been robbed twice prior to going cashless, and not once since making the switch. They no longer have to discipline or fire employees based on cash discrepancies, or devote time and expenses to managing cash in the restaurants.
“We pay all taxes owed on all revenue received, which is definitely not happening at certain establishments, particularly those that are cash-only,” Kremer added.
When the growing chain was looking to expand into a second market, Massachusetts’ statewide ban on cashless businesses was one of the reasons that Kremer and his team decided to open up Dos Toros in Chicago rather than Boston.
Vegan restaurant chain ByChloe went cashless in late 2017. “The primary reason we decided to go and continue to stay cashless is for the benefit and safety of our employees,” Annamária Ferencz, a regional director at ByChloe, said. “By not keeping any cash in our stores our employees feel safer, especially in our pre-opening and closing hours when our stores are relatively empty.”
Jillian Grossberg, who has been employed at one of ByChloe’s Manhattan locations since November 2016, also testified at the hearing. “I feel a lot safer knowing that we don’t have cash in the building,” she said, referencing the opening shifts that she works where it’s typically just her and one other employee behind the counter. “We also do not have to worry about theft, and our tips being stolen from tip jars, as has happened in the past.”
Michelle Gauthier, the owner of Mulberry & Vine, a small fast casual chain with five locations in New York City, said that she decided to take her business cashless in April 2016 for the benefit of her employees. After Mulberry & Vine went cashless, employees on closing shifts were able to leave up to an hour and a half faster since they stopped having to balance and secure the cash drawer at the end of the night. Staffers no longer had to do mid-week bank runs to load up cash tills with correct change.
“It saddens me that a decision that was made for the best interest of my employees could be misconstrued as classist or discriminatory,” Gauthier said at the hearing. “Many of my employees are the same people I’m supposedly discriminating against, yet they wholeheartedly agree with my decision to go cashless.”
“Our cashless policy was never intended to upset, embarrass, or lose a customer, nor to be political,” Gauthier continued. “It just simply works a whole lot better for us.”
Councilmember Torres pushed back on the operators’ claims of employee safety and operational efficiency, noting that his central Bronx district includes Arthur Avenue, home to a variety of well-known restaurants that all accept cash and seem to be doing just fine.
“Some of these businesses have endured for more than 100 years, accept cash, and are able to operate smoothly and efficiently and safely in the Bronx, which is probably much tougher than some of the neighborhoods in which you operate,” Torres said.
He also brought up Gauthier’s concerns that the decision to go cashless could be misconstrued as discriminatory.
“I am in no way claiming that you are classist or discriminatory or racist. You could be Mother Teresa,” Torres said. “You could be the most philanthropic, wonderful human being on the face of the Earth. You could adopt a cashless business model with the best of intentions. Our concern is that it could have the effect of disadvantaging underbanked New Yorkers.”
When asked what happens when a customer steps up to the register to pay and only has cash, Kremer, Gauthier, and Ferencz all confirmed that they have policies in place to give those customers their meals on the house.
City councilmembers are now in the process of reviewing the public testimonies to decide if the proposed legislation needs to be changed in any way before a vote takes place on whether to enact the ban into law. The impending vote has not yet been scheduled, a New York City Council spokesperson confirmed.
If enacted, noncompliant businesses will be fined up to $500 for violations of the cashless ban. Enforcement would begin 120 days after the legislation is signed into law.