Being ghosted by no-show customers can be a major headache for restaurants, severely impacting profits. According to one restaurateur, "We don't make any profit for the night. We only have 60-65 seats, so if 10-12 people don't show up, the profit gets thrown out the window."
This is why many restaurants are now implementing reservation deposit policies to combat the problem of no-shows. But is this the right approach for your restaurant? Let's explore the pros and cons.
- Reduces no-shows: Studies show that restaurants implementing deposits can reduce their no-show rate by up to 55%. Asking guests to put down a deposit gives them a financial incentive to show up.
- Ensures revenue isn't lost: No-shows mean wasted inventory, overstaffing, and lost revenue from turning away other customers. Deposits help protect your bottom line.
- Facilitates planning: Knowing who has committed to dining with a deposit allows you to better plan inventory, staffing, and other operations.
- Improves employee retention: Without no-shows impacting their tips and hours, your staff can have more job stability and security.
- Satisfies most guests: Contrary to assumptions, most customers don't mind paying a deposit, especially post-pandemic when they've grown accustomed to it.
- Reservations are typically free: Some guests may be surprised or annoyed at having to pay a deposit for a reservation, as this is not standard industry practice.
- Deposits could deter bookings: The additional cost may cause some guests to skip making a reservation at your restaurant altogether.
- Increased customer service: Deposits may lead to more questions and complaints from guests, requiring additional staff time.
If you do decide to charge deposits, here are some tips:
- Choose a deposit amount that's high enough to deter no-shows, but not so high it feels punitive (e.g. $25-$50 per person).
- Clearly communicate your deposit and cancellation policies upfront, both online and in-person.
- Train your staff to handle deposit-related inquiries professionally.
- Consider only requiring deposits for larger parties or busy periods when no-shows hurt the most.
- Use a reliable online booking system that seamlessly handles deposit payments.
Ultimately, whether reservation deposits are right for your restaurant depends on your specific situation and clientele. But for many, it's a proven way to protect profits and provide a better dining experience for guests who do show up.
The weekly newsletter Food & Beverage Weekly is created and distributed by all-in-one restaurant marketing consultancy, Monogic (Hong Kong & Singapore), to explore the exciting and ever-changing world of the food and beverage industry.
