To coin or not to coin: chains, vendors debate dollar's fate

Nation's Restaurant News, May 1, 1995 by Suzanne Kapner

WASHINGTON - As Congress opens debate this week on the merits of replacing a $1 bill with a $1 coin, quick-service restaurateurs and vending operators are bursting with anticipation that the long-awaited legislation finally will materialize.

Congressional Republicans are backing the legislation, which they say could save the federal government $112 million over the next five years.

Support also is strong for the bill in the vending and quick-service restaurant communities, both of which conduct most transactions in the 50-cent-to- $5 range.

"It would make transactions easier," said Jim Benfield, director of the Coin Coalition, a group of 25 trade associations formed to lobby for the measure. He cited fewer repairs to bill changers and increased transaction time as additional benefits.

Yet as the currency issue, which has languished for years in Congress, once again surfaces, some still question the merits of a coin.

The Federal Reserve estimated that switching to a dollar coin would save the Treasury $395 million a year over the next 30 years. A coin costs eight cents to produce and lasts 30 years. In contrast, a bill costs only four cents to manufacture but expires after 18 months.

Questions of savings are more muddled in the restaurant sector, where operators voice concerns that range from public acceptance to capital outlay for new coin mechanisms.

"There would be costs to the private sector that aren't counted in estimated savings to the government," said Tim Hackler, spokesman for Save the Greenback, a coalition formed last year to promote the interests of unions that print paper currency and companies that manufacture paper and ink.

Benfield said McDonald's has voiced concern that bill changers at automated drive-thru sites would require capital investment to accommodate a $1 coin.

Others in the vending industry question the impact a coin would have on sales. "I think we'd be kidding ourselves' to assume business would increase with a $1 coin, said David Hatch, vice president of marketing for Phoenix-based Restaura Inc., a division of Dial Corp. "If you buy an entree or a sandwich from a vending machine, you can spend $2.50 to $3. People aren't going to walk around with a bag of coins."

Hatch said that in order to accommodate those higher-priced items, companies would still need to provide bill changers, which can cost up to $500. "We'd be shortsighted to think we could do away with the convenience of changing $5 bills,' he said, adding that companies could incur costs if they have to refit machines with mechanisms to accept a different-size coin.

Despite those pitfalls, Benfield and others argue that long-term gains more than outweigh initial investments.

He cited a study conducted by the Walgreens Drug Store chain that he said is analogous to the quick-service restaurant industry, since the majority of transactions involve petty cash.

Walgreens determined that use of a coin in place of the greenback would save the company $500,000 a year by speeding up transactions and reducing the number of coins employees must count at the end of shifts, Benfield said. A further study indicated that elimination of the penny would save the chain an additional $3.2 million a year.

While the current legislation contains no measure to phase out the penny, Benfield said the copper coin's future demise is a strong possibility.

Benfield said vending sales increases are almost certain. He referred to the percent unit sales jump that Canada's vending operators recorded after switching to a $1 coin in 1987.

And while many vending companies can't predict the impact on their sales if such a change were to happen in the United States, some, such as Marriott's Ty Gagne, stick to the adage: "The least amount of coins, the better the vending sale."

Gagne, who is director of finance and planning for the Washington, D.C.-based company's corporate services, said the coin would help reduce the number of sales lost as a result of malfunctioning bill changers.

Conjuring up images of the commercial where a man tries to purchase a Pepsi by feeding a limp dollar bill into a soda machine only to have the greenback repeatedly rejected, he added, "From a vending perspective, we believe this win be a positive occurrence, and we've been anticipating it for the last couple of years."

Brian Allen, director of government affairs for the Chicago-based National Automated Machine Association, also sees significant advantages for the vending industry.

He cited a study conducted in 1991 by a professor at the University of Chicago, which estimated that the use of coins would save the vending industry about $142 million a year.

Those savings would come from fewer service calls and repairs to machines with jammed bill changers, Allen said.

"Fewer machines would need to have a dollar bill validator on the machine, because the purchase price of a product will be a dollar or less," he said, adding that companies could save about $300 per machine by eliminating bill changers.

Allen said 3 million vending machines are currently capable of accepting the Susan B. Anthony coin, the 1979 botched attempt at a $1 coin.