Not to mention, as someone who spent a few years in that industry, in many cases those cash customers are not getting reported to the IRS, or local authorities for sales tax.

So they could already be "saving" up to 10% or more on cash customers...

well they must take cash anyway, so cost of handling cash isn't that significant compared to fixed+variable cost of credit card.

Its been a long time since I worked retail, but I remember the costs of cash handling to be quite a bit more than you might assume:

-Count cash drawers in and out for every employee, every shift

-Count cash payments received & change returned

-Prepare daily bank deposits

-Take daily bank deposits to bank, get more change

I couldnt say exactly what percentage all of that adds up to, but I could see it being 3% or maybe even more.

There is no federal law requiring a business to accept currency. You may be in a local jurisdiction with such a law.