Titanic - © Rick Archbold and Dana McCauley

Sunday Musings: Fancy Restos Charging For Reservations

More and more fancy restaurants are now charging for reservations. It’s the latest attempt by the industry to combat ‘entitled’ diners who make multiple reservations for the same night. And cancel all but one at the last minute…

OpenTable Screen - © 2024 - Open Table

What’s going on?

Some customers – apparently – make dinner reservations, and then decide not to eat out after all. Others admit they’ve made reservations at multiple restos and decided at the last minute which resto appealed most. According to their whim of the moment. Some cancel all but one reservation when it’s too late for the resto to book another party to fill their spot. Others just don’t show up at all.

Open Table – the popular mobile reservation app (pictured at left) – polled its customers on the issue. And a full 28 percent admitted they’d cancelled at least one resto reservtion at the last minute.

They know not what they do…

Resto managers will tell you, folks just don’t understand how seriously cancelling a reservation at the last minute impacts their operation. For  start, most restaurants operate on a slim profit margin – 3 to 5 percent. Seems too low, but eateries traditionally make their money on low-overhead and high-mark-up menu items – such as coffee and booze, respectively. The ancient and immutable rule of thumb for running a successful resto dictates that the cost of the food must never total more than 30 percent of the menu price.

Given that 3 to 5 percent margin, of only 3 to 5 percent of folks with reservations on a given night fail to show, you’re barely breaking even. Or losing money.

Post COVID developments

Many resto operators lost their businesses during the COVID crisis. Folk’s couldn’t come to their dining rooms. Some converted to contact-free delivery service. But they all had to continue paying monthly bills, insurance and rent on their space.

Those restos that survived COVID are, not surprisingly, taking assertive measures to discourage last minute cancellations.

Fighting back

Many restos are fighting back against no-shows using a battery of techniques. The most prevalent is requiring a credit card number when a reservation is made. And applying a reservation ‘guarantee’ fee of anywhere from $25 to $100 per guest.

The fee is applied against the diner’s bill when they finish their meal and settle up. Diners may usual cancel without penalty up to 12 hours before the time of the reservation. That gives the resto a fair chance to ‘re-sell’ their tables to  would0be diners who call at the last minute for reservations.

The fairest way?

Resto operators say the only alternative to requiring reservation fees is to raise their menu prices. And nobody – whether they keep their reservations or not – likes that idea. And the reservation fee is a ‘kinder, gentler’ way to ‘manage’ customers. It’s really just a guarantee that you’ll show. Not an additional fee on your final bill. And the resto people say they hope the new tactic shifts diners’ mindsets in a subtle but important way.

“You’re making a reservation like going to a show or any experiential moment,” explains Columbia Business School Restaurant Management Professor Stephen Zagor. “You’re buying that access, and they’re selling you a prepaid ticket.”

Useful against dine-and-dashers?

Another plus attached to the reservation fee system is that it will doubtless discourage dine-and-dashers. Who would run out on a tab when they’ve already made a substantial deposit on the meal?

My take

Sorry, Zagor, old boy. I don’t agree with your rationalization of reservation fees as a being ‘like going to a show’. I think most honest folks will rail at the demand for an upfront deposit for the privilege of eating off a white table cloth.

And no one wants to pay for a ‘privilege’ they used to get for free.

Full disclosure: I haven’t dined at a white table cloth establishment for more than a decade. After  several previous decades doing so a few times a year, the ‘sine wore off’. And let’s face it, most of us need every cent we can get our hands on, just to make ends meet.

My questions to you:

When was the last time you patronized a fine dining establishment?

Are you planning to dine at one again soon? Ever?

Would you put down a deposit to qualify for a reservation at any resto?

Muse on that…

~ Maggie J.

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