Cash or Charge: Save Money AND Give Your Customer A Discount

Credit cards have become the currency of choice in restaurants everywhere.  Many restaurateurs report 80% – 85% of their customers pull out plastic when it’s time to pay the bill.  For a long time now the conventional wisdom in food service goes like this: any way the customer wants to pay me I’ll take.

But credit card companies are good at charging for the convenience they provide.  Every time a card is swiped in any restaurant, a flat fee of 10 – 25 cents is charged to the restaurant outright, plus another 2% – 3% of the transaction’s value in fees.  Depending on how much business you do, those credit card fees add up to hundreds or thousands of dollars every month.

Of course, I’m not really telling you anything you don’t already know if you own or manage a restaurant.  What I do want to tell you is that some restaurateurs have figured out a way to pass some added value on to their customers and save some money on monthly transaction fees at the same time.  By offering as much as 20% off the bill to customers who pay with cash, some restaurants have turned the 80% ratio of plastic payers on its head: now 80% pay with cash and enjoy a discounted meal to boot.

The discount-for-cash program has proven so successful in some cases that restaurants have been able to actually grow business, even in such a sluggish dining market.  If marketed cleverly, the discount program could work well for any independent restaurant.  Some ideas:

Offer an additional discount coupon.  Use email marketing to offer a coupon that gives your loyal customers an additional discount for paying with cash.  While you’ll be losing profit margin, you’ll be able to gauge how enthusiastic your most frequent customers are about the cash-for-discount program.  The discount will also get some bodies in some seats, where hopefully (with a little server encouragement) order an appetizer or a bottle of wine since they’re expecting a discount.

Offer the discount-for-cash on a specific night.  Take the slowest night of the week and turn it into discount night and then gauge how much that increases business.  This way you can roll out the discount program slowly and get a feel for how the numbers really add up in terms of increased business versus lost margin.

Make a special discount-for-cash menu of high margin items.  If you really want to mitigate your loss on the program but still want to market it to get some butts in seats, make a special menu comprised of the highest margin items on your menu.  That way you know you’ll still be making a little profit after the discount and you can push the entrees that are your favorite kind to sell.

Anybody who leverages a cash-for-discount program is bound to see a bump in business.  Figuring out how to leverage that bump and get the most out of the discount you offer is the real key to success.  No matter how you implement it, make sure you leverage this discount program as much as you can.  If you aren’t getting money from your customers because of the discount, at least get some information so that you can understand your customer better.