BEVERLY — At What’s Brewin’ Cafe on Cabot Street, it’s not unusual to see college students come through the door, look, turn around and walk out.
It’s not because of the cafe’s quality coffee or food; it’s because of the sign on the cash register that states this is a cash-only cafe.
“It stinks to see some of them, as they come in, you hear them say: ‘Oh, cash only,’ and one of them steps out, goes to Dunkin’s next door,” co-owner Kevin Shin says.
In the days when customers mostly use credit and debit cards or tap smartphones to pay, there are still plenty of small businesses where cash is the only coin of the realm. According to a 2012 Intuit GoPayment Survey, 55 percent of small businesses in the U.S. don’t take plastic.
However, some small business owners see a cautionary tale in how to handle cash in two recent high-profile cases involving Nick’s Famous Roast Beef in North Beverly and Giovanni’s Roast Beef & Pizza in West Peabody.
In the latter example, the owners of Giovanni’s are alleged to have hid much of their income from the IRS by not reporting most of their food expenses, which they paid for in cash. Federal prosecutors allege they reported a small amount of expenses paid for by check. This made the eatery appear to be a much smaller business than it was. The eatery remains in business and accepts credit cards.
Earlier this year, the owners of the Nick’s pleaded guilty to tax fraud charges that could send them to jail when they are sentenced later this month. An investigation concluded the owners had under-reported the popular restaurant’s income by up to $6 million in cash receipts over a six-year period. Back when the legal troubles surfaced, the restaurant only took cash.
Nick’s recently announced on Twitter it not only will remain open, but it now accepts credit cards.
“I see businesses all the time that are cash-only, that have been around for decades, decades, and I’m like, ‘Just do it right, guy. Why are you, why hide money, just do everything ... the right way and make an honest dollar,’” Shin said.
Shin took over the 10-year-old cafe last June, and he kept the practice of accepting only cash.
“But, we are transitioning into the credit card realm,” he said. He plans to start using Square, a mobile payment processing solution, which charges 2.75 percent per “swipe, dip or tap.” Shin said other business owners have told him business picks up when you start to accept credit cards.
Plastic the more popular choice
Statistics on how many businesses are cash-only are hard to come by.
The Retailers Association of Massachusetts doesn’t track cash-only retailers, and the Massachusetts Restaurant Association doesn’t, either.
Steve Clark, director of government affairs for the Massachusetts Restaurant Association, said of eateries taking only cash: “The incentive is there for smaller restaurants just because of the cost to have credit card processing and what have you. That’s why you might see more cash businesses, especially at the mom and pop level, because of the infrastructure to protect credit cards and process them.”
Research shows that cash is no longer king at the cash register.
According to the research-based advisory firm Javelin Strategy & Research, retail businesses in the U.S. rang up $4.3 trillion in 2015, but only $846.6 billion of that was in cash. It’s expected that cash at the register will fall to a volume of $738 billion by 2020.
Meanwhile, the volume of credit card payments was $1.5 trillion in 2015, while debit card volume was $1.4 trillion.
As a percentage of point-of-sale retail sales, cash is expected to go from 20 percent in 2013 to 16 percent in 2020, Javelin says.
Joe Garuti, a West Peabody resident and the owner of Boston Hot Dog Company on Washington Street in Salem, spins a cautionary tale about going cash-only.
When he opened the hot dog restaurant, he took credit cards, knowing that people don’t carry cash anymore. When Garuti sold the restaurant in 2008, the new owner switched to a cash-only format and installed an ATM machine, against Garuti’s advice. Then, the hot-dog sales cooled.
Garuti said he wound up buying back the restaurant for far less than he was paid for it. The first thing he did was remove the ATM.
“What I found was, I did 45 percent more business with accepting credit cards,” Garuti said. He’ll even ring up a $1 bag of chips for someone who does not have cash on them, despite the credit card processing fees, which is a major drawback to accepting credit cards.
‘It’s the way of the world’
Paul Guanci, an owner of the family-owned Super Sub Shop/Casual Catering in Beverly, said the shop began taking credit cards about 10 years ago.
“Businesses like myself have to take debit and credit cards,” said Guanci, who is also president of Beverly’s City Council. “It’s the way of the world.”
That’s despite fees of 3.5 percent for some cards.
“Credit cards, it’s all the cost of doing legitimate business,” Guanci said. “As time goes on, you will see more business done with credit cards instead of cash.”
There’s also the other extreme — Gentile Brewing’s taproom on Park Street in Beverly refuses to take cash.
The taproom, which is open Fridays, 4 to 10 p.m., and Saturdays, noon to 8 p.m., only excepts plastic, said Paul Gentile, who cofounded the craft brewery with his wife, Christen.
As a new business owner, Paul Gentile said part of the reason why he decided to eschew cash had to do with the legal trouble other cash-only businesses were getting into.
“It wanted make sure everything was above board,” he said.
He and his wife had never run a business before, Gentile said, and he was unsure of the nuts and bolts of handling cash.
“How do you reconcile everything at the end of the night,” he asked. “If things don’t match, where did it go?”
Using credit cards means no worries about someone skimming money or forgetting to ring up a patron. The brewery pays a 2.5 percent fee per card swipe, but Gentile says he builds that into the cost of his business. He also doesn’t like businesses that won’t take credit cards.
“We don’t go to places that only take cash,” Gentile said, “because it’s one more stop we have to make ... For us, it’s an inconvenience.”