Everyone understands that the restaurant industry is notoriously unpredictable and difficult to be successful in. There are many issues which mean that businesses don't make it past the important first year and furthermore past the critical first five years. These closures can be due to many reasons such as poor location, substandard dishes and ingredients, ineffective business strategies and insufficient finances. One factor which rarely is given the consideration it deserves is the loss of profits through table bookings not showing up. If a booking is made, restaurants will hold that table possibly turning away custom only for some of these bookings to cancel at the last minute or worse not make any contact and fail to show up at all. What is a restaurant to do? They have turned guests away on the assumption of profit from a booked table and once the reserved table becomes free again, walk in custom cannot be relied upon to make up the loss of profit.
There have been a number of techniques seen employed in restaurants around the world; could one of them preserve your profit margin?
- In 2011 an American restaurant implemented a prepay technique, much the same as theatres and airlines do. Guests wanting to book a table must buy a ticket specifying a date and time; this ticket is non-refundable of course. The amount paid for the ticket will be deducted from the total of the final bill should the guests show up. If the booking is cancelled the ‘deposit’ will be kept to cover the loss of earnings from the reserved table. The co owner of this American restaurant, Nick Kokonas, claims that this technique has reduced the percentage of customers who resulted in no shows for his restaurant. The theory behind this method being that customers are more focused on attending the restaurant rather than lose money that they have already paid.
This may appear to work in the US but what about in the UK? There are factors which need to be taken into consideration; the size of the restaurant and the type of food served will make a difference.
Larger restaurants with high numbers of seating which serve low cost food e.g. fast casual restaurants or pizza parlours = not much loss if a table doesn’t turn up.
Small independent restaurants which offer fine dining with high quality ingredients = a noticeable percentage of profits if a booking turns out to be a no show.
The percentage of no shows as a result of restaurant bookings in the UK can be estimated anywhere between 5-20% depending on the restaurant. Obviously full prepayment is never an option after all you can never correctly predict the exact amount that will be spent by each table, rather the booking charge should be classed as an average percent deposit with the amount being determined by the average cost of a bill in your restaurant.
This method does prove effective for certain types of restaurant however for others it either doesn’t catch on with their guests or simply doesn’t fit in with the restaurant’s core concept. So are there any other methods which could reduce the loss of profit from restaurant no shows?
- Some restaurants which find that they have long waiting lists choose to take a credit card number at the time that the booking is made; the guest being informed that they will be charged for example £20 per person for any restaurant booking that is not honoured. The amount payable as a deposit would again vary on the individual restaurant and the typical price of a meal.
There are a number of people that believe that these strategies can have a negative effect on the business. Customers that do not turn up to a booking yet are still charged, it is argued, could talk to others of the poor way in which they were treated; the news, whether correct or incorrect, spreading rapidly through ‘word of mouth’. Guests, although accepting of the fee initially, may feel differently once they have actually lost money through not honouring their booking. No one makes a restaurant booking with the intention of not attending and so should circumstance unexpectedly dictate that they cannot go out to dine they may be less understanding regarding the stated charge.
- It is the restaurants who believe that bad press can be caused by such prepayments which tend to adopt the stance of a ‘no booking’ policy. If guests want to eat, they simply turn up and if a table is free they will be seated. When employing this technique it is vital that your restaurant has an appropriate waiting area so that guests who would like to wait for a table to become available can enjoy a pre-meal drink in comfort rather than waiting in the street.
Restaurant bookings that turn out to be no shows can have a costly impact on the business’s takings. There are many techniques to try; what works for one business might not be suitable for another and so understanding how the maximum number of seats, the pricing of dishes and the level of demand impacts the potential success and acceptance of your chosen technique is crucial. If you have a close relationship with your customers why not ask their opinion and use their feedback as a starting point. By surveying the market closely and tailoring a technique to suit your individual business you could make a massive saving on lost custom; an aspect which could possibly even ensure that your restaurant makes it past the critical five year mark.
Does your restaurant employ any safeguarding procedures to protect the business against no show bookings? Let us know your ideas and practises!