Split Bread Takes Home the Bacon by Banning Cash And Using QR Codes

With interchange costs ravaging their balance sheets, most merchants will tell you they’d far rather take cash than cards. Not Split Bread. In fact, the San Francisco sandwich shop doesn’t just discourage cash, it plain won’t accept it. Cards only, please.

“Cash is expensive,” David Sliverglide, chief executive of Split Bread, told his audience at a recent electronic-payments conference. So expensive, in fact, that Split Bread has banned cash since it opened. Instead, customers pay by swiping their cards conventionally or by using a quick-response (QR) code etched into a metal plate at their table. Scanning the code brings up a screen that identifies their table and then lets them place an order and pay for it by entering their card credentials. Minutes later, a server brings them their meal.

With merchants filing lawsuits and winning passage of legislation like the Durbin Amendment to control the cost of credit and debit interchange, banishing cash appears to fly in the face of conventional retail wisdom. But Silverglide, who with his partners also manages Mixt Greens, a small chain of salad restaurants that does take cash, has measured his transaction costs with all expenses fully loaded. For cash, that includes not just the immediate transaction itself but also such factors as counting it, reconciling it, and taking it to the bank. It also includes cash losses, the time a manager must spend dealing with cash, and the slower transaction time.

“You’re taking your highest-paid employee and for an hour or an hour and a half he has to deal with cash and can’t manage the store,” Silverglide tells Digital Transactions News.

As for speed, cash takes about seven seconds longer than a card transaction, according to Silverglide, time that could be spent processing another card transaction at peak times. “We can process a card transaction in the blink of an eye,” he says.

All told, he figures the toll comes to some $51.29 for the first $240 in cash sales. With a 2.75% blended discount rate, a like amount of card-based sales would cost $6.60. That may look like an eye-popping cost for cash, but Silverglide cautions that while cash remains costly,some of the cash cost is fixed rather than variable, so it doesn’t rise with cash receipts.

As a place that prepares food, Split Bread also wanted to get rid of cash for hygienic reasons. Besides being expensive, cash is dirty, Silverglide says. “If you’ve ever run a till, [you know] your fingers are black at the end ot the day,” he said to the audience during the breakout session at the recent Money2020 conference in Las Vegas, Nev.

The QR-code system makes for even more benefits. Customers who use the codes visit Split Bread, on average, 2.83 times per month, compared to 1.72 times for customers who swipe their cards at a terminal. They also order more. The average ticket using the QR codes is $12.53, versus $11.39 at the terminal and $11.35 for online orders. “We’re getting an extra visit and an extra dollar on the ticket,” Silverglide told the conference audience.

But Silverglide doesn’t break entirely with his interchange-weary brethren in the retailing business. “I’m not thrilled about the interchange,” he says.  “It’s a huge expense, hundreds of thousands of dollars, but there’s a benefit there. Your interchange is paying for something. It has value, at least for a small merchant.”

Still, Mixt Greens hasn’t been able to do away with cash at its seven stores and two food trucks (two of the stores are in Los Angeles). That’s because they’ve been open longer than Split Bread and started out taking cash, so it’s harder to wean customers off coins and folding money, Silverglide explains. Split Bread expects to open two more stores within the next 12 months, and they too will be cash-free zones, he says. The company processes with Mercury Payment Systems, Durango, Colo., and Atlanta-based First Data Corp.

Experts caution that while banning cash may work in some circumstances, as a general matter the approach may be ahead of its time. In later years, consumers may be more attuned to paying with mobile devices or wearable items like wristbands, for example.

“I don’t think it’s a viable solution now, maybe in 20 years,” says Adil Moussa, a former merchant and now principal at payments researcher Adil Consulting, Omaha, Neb. “As a retailer, I’m not going to turn down anybody, especially somebody with cash.” Even Silverglide admits Split Bread keeps some petty cash on hand to accommodate joggers who occasionally stop in for a sandwich on their way home.

Still, Moussa agrees that most merchants badly underestimate the total cost of cash. “It’s not as high as interchange, but it’s pretty darn high,” he says.