Are Reservation Cancellation Fees Good Business or Bad Karma?

A great best practice: assessing and evaluating business decisions, forecasts, and plans regularly to make sure you’re in line with your goals. Bonus here: making adjustments before issues arise.

One business practice that has snagged our attention recently is restaurant reservation policy, specifically reservation cancellation fees: FRIEND or FOE?

Let’s be clear. Restaurants aren’t the enemy. As owners and operators, you’re running a business. Sure, to feed people great food, but let’s be honest, to also make a profit.

Even the leader in online restaurant reservation systems, OpenTable, has weighed in on this topic revealing that no-shows and last-minute cancellations account for about four-percent of reservations. May not seem like a lot, but for small, local eateries and big conglomerates alike, that’s a lot of no-show tables to fill.

OpenTable therefore implements clear dining reservation policy: if a guest is unable to keep a reservation and fails to cancel at least 30 minutes prior, OpenTable sends a no-show warning email. If in error, it’s the users responsibility to correct online. If a guest amasses four no-show reservations within a 12-month period, their account is suspended.

Good business practice or good way to alienate customers?

We asked our Vice President of Conceptual Projects, Valerie Zweig, who oversees our projects from demographics through development, to weigh in.

Val’s bottom line: To create guest loyalty, make the reservation process painless.

“The perspective to spotlight here is, if we make it difficult for guests to make a reservation (i.e.putting them on a hold, making them wait for an extended period of time, making them leave a message/call back to make a reservation, holding their credit card as collateral, etc.), we may give them reason to go elsewhere in order for them to make a reservation more seamlessly,” Val says.

Adding, “Rather than putting up hurdles, use this as the start of the service experience. Have guests make the reservation, then have your FOH person contact them to confirm the day of, gathering any information to start their experience off right (allergies, special occasions, etc.).”

We believe creating that personal connection right away will mostly likely save you from no-shows, as it’s the first step to building loyalty. Provide guests with clear guidelines outlining your reservation cancellation stance. Honesty will help create relationships and guests will appreciate the feedback re: the impact a no-show can have on your business.

*photo: service with a smile at Founding Farmers DC.