The Dilemma Of Booking Deposits When Dealing With No-Shows

July 14, 2020

No-shows have always been a problem in restaurants. Many owners seek to deal with it by imposing non-refundable booking deposits. But do they do more harm than good? Is there a better way?

The problem of no-shows is an old one. In the good old “before times” it was an irritant but with reduced capacity today it can break a business. As a result many restaurants are looking at imposing non-refundable deposits with every booking. But there are downsides - and alternatives - to this approach which any restaurant should consider.

Let’s start with the causes of no-shows.

What Causes No-Shows?

The easy thing to do is to blame the customer for the no-show. But often (not always) the restaurant is at fault for one of a number of reasons…

1. Difficult Cancellation Process

Making cancellations should be easier than making the booking in the first place. But this is rarely the case.

Most often any booking acknowledgement lacks information on how to cancel, much less any direct link. But make it hard for someone to cancel and they won’t do it.

This is not just an issue with restaurants, very few businesses put the same effort into the cancellation process as they do into the actual sale.

2. Lack of Communication

The most common complaint I hear about a no-show is that “they wouldn’t even pick up the phone.” But I know from experience that a lot of restaurants have one phone line that is often busy. Facing into an indeterminate wait time to cancel a booking is something people just won’t do.

This of course relates to making cancellation easy, but it also goes further. Why should someone who booked online have to pick up a phone?

And more damningly why can they not use one of the many other channels you are present on? If you have a Facebook page or an Instagram or Twitter account you have to recognise that these are not one-way channels. People can and will contact you on these as well. But very few businesses monitor them.

As an example 18 months ago I read an article where 6 restaurants complained about no-shows. So I sent each of them a message on Facebook, asking if they had availability that night. Eighteen months later I’m waiting for 5 of them to reply.

And this was to make a booking.

If you’re not monitoring these channels then how do you know the customer didn’t cancel?

3. Lack Of Follow-up

How often have you followed-up with no-shows? Have you called them the next day to see if anything happened? Nobody does.

And for reasons I’ll cover below this is something you absolutely should be doing if you want to reduce them in the future.

The Problem With Deposits

So if we can agree that the customer isn’t always at fault, let’s look a the impact introducing deposits can have.

Booking deposits can seem like the straightforward solution to no-shows. And they do work to reduce the problem, but they come with costs, some tangible and others intangible.

1. Reduced Bookings And Fewer Repeat Customers

The purpose of the deposit is to eliminate the no-show. But it does this by putting a barrier to the booking in the first place. So your bookings are mostly sure to turn up but they are most likely to be your existing customers.

Stopping a new customer from booking now eliminates the opportunity for them to become a repeat customer in the future.

But repeat customers are the foundation of any business. They are the ones who come back without you having to spend a fortune on advertising. Having a pool of 1,000 customers, each of whom return one a month is far preferable to having 100 returning every week. It gives you an assurance that you can survive when hard times strike. Reducing them is a big risk.

2. Legal Issues

Legally you have to try and resell the product before keeping any deposit. If you don’t do this you open yourself to legal problems. But what constitutes an “effort”? Do you have to advertise it? Where and for how long? And if you sell it do you have a method to cancel or return the deposit?

3. Angry Customers

Will you take the deposit in every circumstance? Or will you leave it to discretion?

What if someone dies or is seriously ill? Will you refund every claim like this or demand proof? What about less serious issues like breakdowns or missed buses? If you’re seen to discriminate you can cause a lot of bad will - and even legal issues.

And if it’s an existing regular you annoy you’ve now reduced that pool too.

4. Bad Reputation With Credit Card Companies

Chargebacks are not a common occurrence in Ireland but are very accepted in some parts of the world. If you have a big group of annoyed customers who decide to go down this route you could find yourself in a lot of issues with credit card companies.


So if we accept that there are downsides to deposits, what are the alternatives you can look at?

1. Monitor All Communication

Take a look at all the channels people can contact you. You’ll be surprised at how many there are, including phone, email, text, Facebook, Twitter, Instagram, YouTube and more. It might not seem obvious to you that these are 2-way channels but to the user that’s how they are seen.

Monitor each and every one all the time. And don’t allow phone calls to go unanswered.

That might seem like a tall order but the good news is many of them can be automated. If there are still too many then consider removing yourself from that channel or network completely.

2. Make The Preferred Cancellation Channel Clear

You might be able to live with a reduced number of no-shows. Making one or two dedicated channels and highlighting these every time someone makes a booking. That could include a dedicated phone line with an answering machine. This won’t remove all the other channels but might reduce the number of people using them to a manageable number.

3. Get The Customer To Commit To Cancelling

At heart I believe people are decent. They don’t want to put you out of business but they also don’t understand how many no-shows there are and how serious an effect this can have. Especially at this time it’s very acceptable to highlight this and ask them to promise to cancel rather than show-up.

The key points here are education and commitment.

One study showed a reduction in no-shows from 32% to 10% simply through asking he customer to make this commitment compared to just informing them.

4. Follow-up

Make it a point to call every no-show and ask them what happened. I’m not saying be aggressive or accusing, in fact it should be the opposite.

Ask them if everything is ok, show concern and ask for their help. You’ll be surprised at the responses and get good information that can help you further reduce no-shows.

Not everyone will respond but if approached in the right way a large number will. And the extra benefit is that you can persuade them to come in some other time, turning an otherwise lost customer into a potential regular.

4. Advance Meal Purchase

This is a potential implementation of a deposit that can actually be positioned as helping the customer, making it more acceptable to them. This is achieved by allowing the customer to actually book and pay for their meal at the time of booking.

So how is this different? Isn’t having to select the meal an even bigger hurdle to booking than just paying a deposit?

To an extent that is true. But it can be positioned as a convenience and safety service. By booking the meal in advance you can have it ready when the customer arrives. This reduces the time the customer has to spend in your premises. Maybe that seems like an odd thing to say, but in the current situation when close proximity is an undeniable issue this can be a positive.

And customers are more likely to understand and accept that there can be no refund once the meal has been produced. This is more obviously a cost than a lost booking (which in the customers mind can be resold) is.

Now this isn’t necessarily a better solution than no advance payment but, if you feel some imposition is necessary, it can be far more acceptable than the booking deposit. It’s worth investigating.

Our own restaurant ordering system has this option.

Booking deposits can be a legitimate requirement. What I’m saying here is that they have downsides that many businesses don’t consider. And there are other options you can try first.