If you own or manage a restaurant, you undoubtedly have to deal with one of the most annoying and disruptive phenomena of the industry: customers who don’t honor their reservations and simply fail to show up with no warning. For restaurants in general, and small establishments in particular, a no-show represents a missed opportunity to seat other guests – or a tableful of other guests – which is a painful blow, particularly if it happens night after night. This has been a problem since the beginning of time – well, since restaurants have been taking reservations in advance. Now, however, there are solutions, so, if you’re interested in learning how to handle the no-show scourge, read on.
No-Shows Can Really Hurt Business
It’s probably happened to you before — you’re expecting a party of five for dinner, and they just don’t show up. Now you have an empty table and you’re relying on walk-in guests to come and fill the space of what should have been a guaranteed table. When it happens a couple of times it’s frustrating and annoying; but when it starts happening over and over again, it becomes a cause for concern, and one that affects your profit margin.
The no-show rate on an average night can hover around the 20% mark. This often means empty chairs and unused place settings… and a big financial blow to the precariously thin profit margins that are only too common in the restaurant industry. Over the years, technology has helped streamline the reservations process, with companies like OpenTable, Tock, and Resy helping to shift the booking model from phone calls, to smartphone screen swipes and mouse clicks. However, the prevalence of no-shows is the unintentional byproduct of this new efficiency.
No-Show Stats Tell the Story
A survey by a restaurant booking system in the United Kingdom calculated that British restaurants are losing about £16 billion a year due to no-shows. And, in an article entitled “OpenTable Spotlights Impact of No-Shows on the Restaurant Industry,” the OpenTable website discusses how U.S. restaurants are handling similar no-show statistics. “About 70 percent [of diners] are really great. They’ll call, even if it’s the last minute,” says one restaurateur. “Then there’s the other 30 percent. They make multiple reservations across the city as part of a strategy; then they just make a decision at the last second and don’t notify the places they didn’t choose.”
No-shows drain revenue every time a reservation is missed, and scrapping reservations has become way too common. For many restaurants, no-shows – and the variability and unpredictability attached to the phenomenon – pose a serious threat to business. As another restaurant manager put it, “It’s hard on the kitchen and hard on the clients. Every day you look at the book and you check the weather, trying to find some clues about potential no-shows. It really is a day-to-day process. There is no formula.”
Technology Helps Curb No-Shows
The advent of restaurant-reservation apps seemingly exacerbates the no-show problem but these systems also offer new tactics that help restaurants handle reservations in a more efficient and money-smart way. Restaurateurs have begun to take a tougher stand on the issue, whether through pre-paid ticketing systems like Tock, taking a credit card number over the phone, or confirming reservations in advance and rewarding those who honor their set times.
For example, OpenTable’s terms and conditions spell out for diners that they must cancel no less than 30 minutes before their dining time to avoid being logged as a no-show, and the company has a four-strikes-and-you’re-out policy. The company claims that its no-show rate is roughly 20 percent lower than the no-show rate for diners who book via phone. OpenTable believes that this lower rate is helped by making it easy to modify or cancel a reservation with just a few taps on a phone or tablet. In addition, OpenTable believes that their email and mobile reservation reminders also help stem the no-show tide. To help refill tables freed up due to last-minute cancellations, OpenTable’s technology allows them to immediately offer the newly available tables to its millions of users.
Are Blacklists the Answer?
The Australian booking site, Dimmi (the largest such site Down Under), took drastic measures in their quest to handle no-shows by putting close to 40,000 diners on a blacklist for being no-shows. The extreme measure seems to be working, as Dimmi has seen a 25 percent drop in no-shows since implementing the policy. And, in an article entitled “Reservation No-Shows Are Forcing Chefs to Create Customer Blacklists,” the website Munchies discusses how restaurants in the Netherlands are coming to the same conclusion – there is just no other solution. “Most restaurants have a couple of no-shows on a Friday or Saturday night, and they’re losing a few thousand dollars on their busy nights. If a restaurant is only making 3 percent [profit] from their business, anything and everything impacts their revenues and hits them really hard,” Dimmi CEO Stevan Premutico says, defending the need for a blacklist.
The Pre-Pay Approach to No-Shows
The online reservation system, Tock, allows diners to put a deposit down for dinner. This approach has a two-pronged advantage: It helps make restaurants more efficient, so chefs can plan ahead, and it cuts down on no-shows. Tock’s approach to restaurant reservations is to present dining out as an experience: making a restaurant reservation in advance is similar to buying a ticket to a concert or to a Broadway show. Through Tock, a diner will pay either a portion or the entire cost of the upcoming dinner, sometimes weeks in advance. If guests need to change their reservation, they can, with prior notice — but tickets are non-refundable for unexplained no-shows. According to Nick Kokonas, founder of Tock, the no-show rate for businesses using Tock is a mere 0.64 percent.
Take Down Credit Card Info
Taking credit card information is a controversial approach among restaurant owners, mostly because many customers are wary of providing their credit card over the phone and can be turned off by a reservation policy that requires it. However, taking down a customer’s credit card number, and charging a fee for not showing up, can mean recouping some expenses for a restaurant. This draconian approach may not work for all restaurants, so if you’re going to try it it’s important to explain to guests exactly what your rules are and how they may be penalized for not showing up. If you’re still nervous about trying this policy, you can implement it for larger groups only – say tables of six diners or more (where a no-show can be even more costly). Many customers agree that stricter rules for bigger group reservations are more reasonable.
Overbooking – Worth it?
Restaurant owners who are getting desperate about no-shows have also begun to overbook their tables. But overbooking is risky business and if, on a given night most diners do show up you’ll be in a fix and service will suffer. Guests won’t be impressed with long wait times if they’ve taken the trouble to book and show up. Similarly, the news that they need to vacate their table earlier than expected to accommodate other diners won’t be received positively, and it may even discourage repeat business. The customer experience is likely to suffer and the restaurant’s reputation risks taking a knock too. Or, as Tock’s Nick Kokonas says, overbooking is just “bad hospitality.”
The Walk-In Model
Over the years, some restaurants have adopted a “walk-in-only” policy as a way of protecting themselves against no-shows. In 2010, The New York Times, reported on the increase in the number of walk-in only restaurants. The article discusses at length how many potential diners find the policy inconvenient at best and infuriating at worst. However, while a no-reservation system may anger some potential customers, it does have its advantages and is well-suited to certain types of eating establishments.
Not accepting reservations works best for restaurants with mid- to low-priced menus, as customers at higher-end restaurants are likely to bristle at being told to wait hours for a table. Many trendy casual restaurants are embracing the no-reservation approach and using it as a marketing tool. With no reservations required, people don’t feel excluded, and they find it rewarding when they (finally) get to the head of the line.
Interestingly, walk-in-only restaurants are making higher profits than if they were to accept reservations. Table turnover tends to be quicker, without the time lag between reservations, and with the ability to seat guests immediately. For restaurants that have small margins, this change in revenue has a big impact. Older customers and younger ones who, for example, have to hire a babysitter and need to know when they’ll get in and out, may eschew no-reservation restaurants, but in many other cases, walk-in-only restaurants have found a way to attract crowds and make profits.
Handling the No-Show Quandary
Many veteran restaurateurs believe that there is no real solution to the no-show issue, at least in the foreseeable future. It has always plagued restaurants, they say, and most likely will continue to do so. The National Restaurant Association, on the other hand, believes the solution is within reach and the organization offers helpful suggestions. The site recommends that restaurants make it easier for people to cancel. Diners get frustrated when they call to cancel, and the phone goes unanswered, so restaurants should consider using an outsourced reservations service like Table Maestro to help with phone calls. The carrot-and-stick approach might also work to prevent no-shows. You can, for instance, reward customers who honor their reservations or offer incentives for off-peak times. OpenTable awards Dining Rewards points via their app that users can redeem for dining certificates valid at any OpenTable restaurant, and you can implement a similar program for your loyal diners who honor their reservations.
Even if no-shows do happen, all is not lost, as there are apps created to contact customers near restaurants to offer them last-minute deals. Leloca, for example, alerts users to available last-minute tables and charges restaurants minimally for every customer it brings in; similarly the Rezbook’s “Right Now” feature allows restaurants to spread the word about immediate availability.
No-Shows: Don’t Let Them Break You
No-shows are a challenge for restaurants but there are ways to combat the unfortunate phenomenon. The walk-in-only approach seems to be gaining traction and, if you find that more and more of your reservations fall through, it might be worth thinking about whether offering reservations is a benefit or a hindrance to your restaurant. Take a look at other restaurants that are similar to yours in terms of style and niche to see what they’re doing about reservations. A missed restaurant reservation can be costly for your business, and taking matters into your hands can make a huge difference to your bottom line.