For restaurants and retailers, removing the penny from existence means a lot of things.
It’s symbolic for those of us who remember the dollar menu at McDonald’s or the true meaning of a “dollar store” — where everything was intended to be no more than a dollar, at least pre-sales tax.
The “death of the penny” is a microcosm for the immense inflationary pressures over the last four to five years. For example, in the restaurant industry we have seen a 30% to 50% increase in base hourly wages over the past five years. Of course, the corollary to this has been wage compression, as our industry doesn’t have the profitability levels to support salaries (fixed costs) seeing that same magnitude of increases, but make no mistake, they, too, have gone up.
The sheer fact that we can now only make a penny for $0.02-$0.03 a copy seems mind-boggling, yet here we are, in the new paradigm, and like we have done before, we will find ways to keep the operations going, with or without pennies.
What does it truly mean for those in businesses that still must or choose to accept cash? (As an aside, you would be hard pressed nowadays to find any restaurant or retailer, whose sales aren’t in the neighborhood of 70% to 80% cashless, but we also aren’t willing to part ways with the 20% to 30% or so of consumers that are using cash.)
You could gyrate for hours on the mathematical implications of this, by pricing every menu item to hit a nickel or dime (0 or 5), but when you throw in taxes (i.e. percentages) on numbers, the math can get a bit mind bending.
Furthermore, you can imagine the additional burden placed on employees having to do rounding in their head: “If it ends in this digit, round up; this one, round down. It will all balance out, right?” Not to mention the consumer perception of this process, sounds fun…
One can see how this quickly spirals into a worm hole — so what do you do? You use technology.
Let the computer do the work. We built some code into our point-of-sale systems to execute “rounding logic” on cash transactions. This means:
- If the final digit of total ends in 3, 4, 8 or 9 cents, round up to the nearest nickel.
- If the final digit ends in 1, 2, 6 or 7 cents, round down to the nearest nickel.
- If the final digit ends in 0 or 5 cents, do not round at all.
Regardless, finding a solution is quickly approaching as pennies are already becoming scarcer, to the point where we have team members bringing them from home.
While change can be good, and logically, the “death of the penny,” makes sense, it does not alleviate the burden on the small and large businesses alike that are saddled with the responsibility to figure it out.
Pike Howard is a New Orleans-based entrepreneur who’s grown a family-run taqueria, Felipe’s Mexican Taqueria, into a regional restaurant group. He may be reached via email at pike@felipestaqueria.com.
