Enforcing a Cancellation Charge May Be Costing You More Than You Think!

And not only could you be leaving money on the table, but you might also be passing up an invaluable opportunity to create loyal patrons.

Last week, I found myself at Republique Restaurant & Bakery in Los Angeles, deep in conversation with Jason Berkowitz and Troy Hooper . We discussed my recent keynote, “Why You Should Know Your Guests Better Than Ever Before”, presented at the Bar & Restaurant Expo in San Antonio.

During the talk, I shared an example of an automated email we send to guests who cancel their reservations. Remarkably, this simple outreach generates around ￡4,000 in revenue each month.

Jason urged me to share our strategy—so here it is; why I believe enforcing cancellation charges in your restaurant may be counterproductive.

The Common Approach and Our Alternative

Many establishments impose a cancellation or no-show charge, typically levying a fee—sometimes ￡20 per person or more. However, we choose a different path.

Rather than penalising guests, we seize the opportunity to recover the full value of the lost reservation. Instead of diminishing the chances of future visits by charging for a change of plans, we actively engage with the guest, setting the stage for their return.

Here's the email we send, courtesy of our Restaurant Manager, 24 hours after the reservation date or the cancellation:

Dear [First Name],

We were sorry to see you had to cancel your booking with us on [Reservation Date].

We understand that plans change, emergencies arise, or sometimes the babysitter falls ill. We’d still love the chance to welcome you and share some of our favourite dishes or signature cocktails in the future. When you're next making dinner plans, please use my personal link, and as a token of appreciation, I’ll arrange for your server to bring our House Cocktail on the house.

If there's anything I can do for you, don’t hesitate to reach out.

Warm regards,

[Restaurant Manager Name]

[Restaurant Details]

The Bigger Picture: Focusing Beyond the Immediate Loss

Too often, we get caught up in the notion that a ￡20 cancellation fee will mitigate the impact of an empty seat. Yet, in reality, many of these seats are filled regardless. Rather than concentrating on the fleeting “pure profit” from a one-time charge, we prefer to focus on fostering a lasting relationship with our guests.

By foregoing the cancellation fee, we can cultivate a loyal visitor who could potentially spend ten, twenty, or even thirty times the value of that nominal charge over the course of their visits.

To clarify, I’m not advocating for the complete removal of credit card guarantees. It’s essential to have a deterrent against cancellations and no-shows. However, I propose a different approach when managing cancellations.

Here’s Your Call to Action:

1. Revisit your current policy—are you charging guests for cancellations?

2. Assess whether your reservation system can automate the follow-up email.

3. Implement the automated email (feel free to adapt the one above).

4. Mark the guest as a VIP upon their next visit.

5. Deliver an exceptional experience.

Don’t let money and opportunity slip through your fingers.

Think differently.

See you next time.

Scot

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