How often do guests make reservations only to not show up later? Restaurant no-shows are one of the biggest problems in the restaurant and hospitality industries.
No-show guests aren’t a new problem. But when the pandemic hit in 2020, the restaurant industry was one of the most heavily impacted industries. Restaurants were forced to close. Some had to close permanently.
But now with pre-pandemic dining-out returning to normal, the issue is back. Only this time, some restaurants seem to be fighting back with restaurant reservation fees, also known as cancellation fees.
In this article, we’ll be taking a deep dive into how no-shows affect restaurants and the industry as a whole. We’ll also explain what restaurant cancellation fees are and examine ways to reduce no-shows in your restaurant.
We’ll also answer some of your most pressing questions about cancellation fees, like “when to implement a reservation fee?”
A restaurant reservation story
On Tuesday, Francis booked a table for 5 people at your restaurant for Thursday night. They specifically chose the one overlooking the fountain. So, it’s a prime location inside your restaurant.
It’s Thursday night, you have a table with the reserved plaque on it. Plates are neatly arranged with cutlery, glasses, and all. Servers are milling about your restaurant, bringing drinks and food orders to other guests. But that one table is empty by the window overlooking the fountain.
New guests are at the door, requesting a table for 4, but your restaurant manager points out that there are none available. One of the guests in the group points to the lonely, empty table by the window. But your restaurant manager says “Unfortunately, it’s booked sir.”
The potential guests decide they don’t want to wait and leave.
Five hours later, it’s closing time, your servers are cleaning up and that table remains guest-free. Your restaurant manager shakes their head, knowing that they’ve had yet another case of no-show guests. Not to mention, they’ve turned down other guests who could have become future regulars.
Reservation cancelled! Now what?!
Many restaurants, including hotel restaurants, require guests to book tables in advance. This helps them organize their servers’ shifts to accommodate peak times like lunch hour or dinner or special events. Reservations also help restaurants maintain smooth operations and offer better guest experiences.
But when guests make reservations, fail to show up, and don’t notify the restaurant, this creates a series of problems for the restaurant.
Research by Zonal and CGA Strategy found restaurant no-shows in the UK cost the industry roughly GBP 17.6 billion ($21.92 billion or AED80.51 billion) each year.
Restaurant reservation fees vs restaurant cancellation fees
To overcome the rising numbers of no-shows, many restaurants are now imposing a reservation fee. To make a booking, guests would have to pay a fee that’s deductible from their final bill.
They’re often referred to as a ‘restaurant cancellation fee’ or a ‘no-show fee.’
Meanwhile, a restaurant cancellation fee is a fee guests pay if they cancel their reservations on short-notice or if they don’t show up. Restaurant cancellation fees are often referred to as no-show fees.
It’s worth mentioning that guests will only be paying either the reservation fee or the cancellation fee. The reservation fee makes up for the last-minute cancellation.
Restaurants around the world are imposing no-show fees to avoid sharp drops in revenues. Especially since they’re likely to turn away walk-in guests because the tables are ‘booked.’
Restaurant cancellation fees, unfortunately, may create some friction for guests who didn’t dine in but still paid for their tables.
How much do reservation fees cost?
The cost of cancelling a restaurant reservation differs from one eatery or pub to another. In the UAE, restaurant reservation fees range from AED 130 ($35) to AED 500 ($137) or more, depending on the restaurant.
Meanwhile, in the UK, cancelled reservations can cost anywhere from GBP 20 ($25) to a whopping GBP 375 ($469)! Gordan Ramsey’s UK restaurant charges GBP 150 ($188) per cancellation.
Most restaurants charge a cancellation fee per diner or guest. So, the larger your group, the bigger your cancellation bill might be.
Why do cancellation fees exist?
You may be wondering: Why should I consider a cancellation fee if I want more people to come?
But you’d be asking the wrong question.
It’s important for guests to understand ‘why’ cancellation fees exist. Here are several reasons:
Lost revenue
The top reason restaurants impose a cancellation fee is to reduce their lost revenue.
When a guest cancels a reservation, especially last-minute or ahead of a special event, restaurants suffer because they’d already ordered the ingredients needed and cancelled on other guests who wanted to book a table.
It’s hard for restaurants to make up for the lost revenue so they impose the reservation fee.
Lost sales
Like lost revenue, when restaurants reserve for guests, they have to turn down many walk-ins, those guests who come in without a reservation. So, not only do no-show guests mean revenue lost, but also prevent these restaurants from making up for that lost revenue.
In some cases, when guests cancel their reservation ahead of time, some restaurants are able to make up for the lost revenue by accepting walk-ins. However, this isn’t the case for many restaurants.
To make up for this dilemma, dine-ins impose restaurant cancellation fees.
Higher overhead costs
With no-show guests, restaurants aren’t just bogged down by empty reserved tables. Eateries, bars, and restaurants arrange their waiters’ shifts based on peak times and busy days and shifts.
In other words, when they have many reservations on certain days or at specific times, they’ll get in more servers to accommodate the larger number of people.
However, having several no-show guests means the restaurant suffers a higher overhead cost in shifts where they increased their waiters. This may also affect other shifts where the restaurant pulled away servers or if they have to pay overtime.
Reduces no-shows
Lastly, restaurants impose cancellation fees to reduce the number of no-shows. It’s a tactic to avoid incurring higher overhead costs and cut their lost revenue and sales.
A restaurant cancellation fee poll
In August 2023, we ran a poll on our LinkedIn page asking our followers if they had a cancellation fee for no-shows at their restaurant.
Here are the results:
How to reduce restaurant no-shows
Imposing a restaurant cancellation fee is just one way to reduce the number of no-show guests. But what are other ways to cut down on no-show guests without having them pay money?
Here are a few ideas:
Let guests choose
One way to reduce no-shows and help guests avoid cancellation fees is to give them the opportunity to choose when to book.
If they’re making a reservation over the phone, give them available options and offer to let them call you back. Sometimes making on-the-spot decisions makes people choose randomly and feel they’re unable to commit later.
Use reservation management software like Servme and let guests know they can get to see all available tables and times via your website or a booking site.
Send a confirmation
After guests book a table, make sure to send a confirmation via SMS or email, or both. Be sure to send a second confirmation one day before the reservation.
Bonus tip: Make sure that part of the process for reserving a table, guests add both their mobile number and email. Not only does this help you confirm their attendance, but also you can add their details to your guest profiles.
You’ll need their permission to add their emails to your restaurant’s newsletter.
Ask for advance payment
One method many restaurants are turning to is asking guests to pay in-advance for reserving a table. This is fairly common ahead of special events like Mother’s Day or New Year’s. It’s also common during the month of Ramadan in the Middle East.
Guests can either make a deposit or pay a fee that’s later deducted from their bill. Alternatively, you can ask for a full upfront payment. However, this is often done with reservations for larger groups, like birthdays or corporate lunches or dinners.
If you’re using restaurant table management software like Servme, you can easily get customers to pay the reservation fee in advance.
Explain your cancellation policy
If you have a no-show fee, make sure people who are making reservations are aware of it in your cancellation policy.
Answer all the following questions in your restaurant’s reservations and cancellations policy.
When does it become effective
What the reservation or cancellation fees involved are
When you’ll deduct the fees from customers
When is the last date and time they can cancel or reschedule their reservation
How you’ll deduct the cancellation fees
FAQs about restaurant cancellation fees: Questions by Restaurants
Whether you’re the restaurant owner or manager, we’ve compiled the top frequently-asked questions (FAQs) about restaurant reservation and cancellation fees.
How much should I charge for a cancellation fee?
Unfortunately, this is one of those ‘it depends’ questions. Look at restaurant analytics and metrics like your average check per table to estimate how much to charge for reservations or cancellations.
The fee will also differ based on where your restaurant is located and the currency in that country.
When do I enforce a restaurant reservation fee?
Imposing a reservation or no-show fee is optional. Not every restaurant owner or manager wants to do it. And that’s ok.
With the exception of eateries with very limited seating, most restaurants charge cancellation or no-show fees during peak seasons.
These could be the weekends or during special events like Mother’s Day, the month of Ramadan, Christmas,…etc. Alternatively, it could be for large groups of 5 or more people, who may take up several tables.
Can I legally charge a cancellation fee?
You may need to check with your legal counsel or relevant city regulations but generally, there should be no issue in charging a no-show fee. Provided that you clearly explain the fee for guests when or after they make a reservation.
How do I collect the reservation fee?
To collect restaurant reservation fees, you should use restaurant management and table booking software like Servme.
Not only does using this type of software let you collect reservation fees in advance, but also helps you manage your waiters’ shifts, accommodate busy dates, improve guest experiences, among other benefits.
If you’re using Servme, you can even automate your restaurant’s marketing activities and measure guest and customer analytics.
FAQs about restaurant cancellation fees: Questions by guests
Like you, guests have questions about restaurant reservation fees. You can use the following for inspiration for your reservations and cancellations policy.
What is a cancellation fee?
A restaurant cancellation fee is a fee imposed when guests make a reservation and cancel it without giving the restaurant ample notice. A no-show fee, on the other hand, is when guests don’t alert the restaurant that they’re cancelling their reservation or are unable to make it.
When is the restaurant cancellation fee enforceable?
This varies from one restaurant to another. Some restaurants let guests cancel reservations for free up to 48 hours before their scheduled reservation, while others may impose fees up to 2 weeks in advance!
How far in advance do restaurants take reservations?
Another ‘it depends’ question. It’s best to ask the restaurant you’re considering making a reservation at about their reservations and cancellations policy.
How do we make a reservation?
To make a reservation, you can call a restaurant over the phone or you can check their website to see if they have reservation management software and book directly from it.
What are the two types of restaurant reservations?
There are two ways for guests to book tables at a restaurant. These are via manual bookings or online bookings.
Manual bookings are those you make by phoning the restaurant and making the reservation. To book online, you can visit the restaurant’s website, book via social media platforms like Facebook and Instagram, or use a third-party booking platform like TripAdvisor, or Booking.com, among others.
Wrapping it up
Choosing to add reservation or cancellation fees is an important step for multi-chain and F&B groups. The size of your restaurant, foot traffic, and how often you’re fully-booked can help you determine whether adding a cancellation or no-show fee is something you should do.
Restaurant reservations aren’t for everyone. A restaurant that’s just starting out will not want to scare people away.
On the other hand, a restaurant or chain that’s been in business for years, especially high-end restaurants, may turn to reservation fees. That’s because guests already know them and are more willing to make an advance payment compared to a newly-opened restaurant.
If you need help managing and collecting reservation fees, booking tables, or simply improving your restaurant’s operations better and faster, then check out Servme.
Servme offers reservation and table management software that comes with various marketing features, customer relationship management (CRM) software, guest profiles and more. Restaurants and hotels use Servme to manage their restaurant operations, improve guest experiences, turn new guests into regulars.
Book a quick demo to learn more.
Nada Sobhi
Operations
