Should You Implement a Restaurant Deposit Policy?
If you’re feeling frustrated by no-shows and last minute cancellations, you’re not alone. This is an issue that has always been a problem in hospitality, but with rising costs in all areas squeezing profits ever tighter, lost revenue due to casual reservations can have a devastating effect on your business.
If this is something you are having trouble with, it may be time to consider implementing a restaurant deposit policy.
Taking deposits for restaurant reservations has been shown to reduce no-shows, and the associated costs to the business. It helps you to protect your income by asking customers to make a small financial commitment to turn up.
A restaurant deposit is a payment required to make a reservation at certain restaurants. Deposits can work in a variety of different ways. They can be:
- A small non-refundable fee
- A payment to be taken off the bill, or refunded
- Early payment for drinks
- Full payment for pre-orders
The idea of restaurant deposits can be a contentious subject, as some customers see them as an inconvenience. However, allowing for continued no-shows and cancellations can be a major blow to your bottom line, especially if you’re a smaller venue with limited capacity.
That’s because, as you may have experienced, cancellations and no-shows can lead to:
- Wasted stock
- Fewer tips for servers
- Overstaffing the restaurant for the number of customers
- Missed business from other customers who could have had the table
- Less profits
At Access Hospitality, we’re often asked how hospitality software can help with taking deposits in restaurants. We talk our customers through our restaurant booking software packages and look at how a reduction in no shows can impact on revenue.
In this article, we’ll examine both the advantages and drawbacks of restaurant deposits, before giving you some top tips on how to start taking deposits in your restaurant.
Advantages of taking a deposit for restaurant reservations
While, as we said, some customers may be sceptical of restaurant deposits, there are several reasons that make taking deposits highly beneficial for restaurant owners.
Combating No-Shows
The most obvious advantage is that taking restaurant deposits allows you to reduce lost revenue due to no-shows.
Research shows that 19% of British people have failed to arrive for a restaurant reservation at one point or another. That’s almost one in five people. Further, this year alone, 5% of confirmed bookings resulted in no-shows in January and February alone. That loss of custom cost each restaurant £1,325 on average.
Evidence shows that customers are more likely to show up when they’ve already financially invested. And if they still don’t, then the deposit means you can recover some of the lost cost.
Better Planning
Taking deposits for restaurant bookings also allows you to better manage your staff and plan your shift. Multiple no-shows in a single evening could mean you end up being overstaffed and paying unnecessary wages.
With bigger reservations especially, you’re likely to need to have more staff working, and to buy greater quantities of food. Taking a deposit and reducing the chance of no-shows lets you make more informed decisions about staffing levels and leaves your kitchen with less food wastage.
Opportunities for smoother service
If you want to make things even smoother on a busy shift, you can also take food orders and full payment upfront, which can be more common on popular calendar dates such as around Christmas and Mother’s Day, for example.
A restaurant pre-order system enables you to take and manage orders and payments before customers even step foot on your premises. They can simplify the whole process and even include features such as taking allergen information and filtering out menu items that customers may not be able to eat.
Approaching orders in this way means that you can allocate staff and purchase stock even more accurately, as you already know what you’re making and who you’re serving. Such a large upfront payment will be even more of an incentive for customers to turn up.
The drawbacks
Of course, while restaurant deposits may seem like a surefire way to minimise the risks posed to your business by no-shows, there are still a few drawbacks. You should always consider both sides when determining the best approach to take for your restaurant.
Customer Deterrent
Regardless of what kind of deposit you consider implementing, there are always going to be some customers who are put off by the prospect of paying money in advance.
Customers who aren’t 100% committed to dining with you, or even just people who are sceptical may choose to take their business elsewhere when they find out it’s necessary to pay a deposit.
While unlikely, it may also lead to agitated (potential) diners questioning your staff about why they need to pay a deposit. Knowing the type of clientele you attract will help determine if this could be an issue for you.
More Luck With Walk-Ins
For that and other reasons, you may decide that you’ll have more success with walk-ins.
If you’re a larger, more popular restaurant, reservations aren’t always a necessity. If you’re able to draw in customers consistently all year around at all times, then toying with reservations and running the risk of losing customers who are put off by the deposit just may not be worth it.
Extra Admin
Money aside, you also have to consider that taking deposits for restaurant reservations will also lead to you having to do more administrative work. Whether that’s an extra job for you as the owner or one of the staff, it’s an important part of the process and one that can be time-consuming.
How to start taking restaurant deposits
If you’ve decided your best move is to take a deposit for restaurant bookings, then there are numerous ways you can go about it.
Decide on the deposit type
The first thing you should do is decide on what kind of deposit you want to take.
Are you charging a non-refundable fee that guarantees diners a place? If so, be aware that some may be put off by the prospect of paying more money just for a place and not getting any money back out of it.
You could also offer diners something for their deposit. Perhaps the deposit could be put towards drinks or taken off the overall bill. This allows you to charge slightly more for the deposit but will also leave customers feeling more positive when it comes to paying the bill.
Pre-paid pre-orders are also an option and one that might work well for larger groups. Again, it may put off some potential diners who don't want to feel tied to their choice, but it will also benefit you greatly in the long run when it comes to staffing and food preparation.
Decide when to take deposits
If you’re still not completely sold, you could also consider taking deposits at peak times and forgo them the rest of the time so as not to discourage other customers.
For instance:
- Friday and Saturday nights
- Special occasions and holidays or
- When there’s a request for private dining areas.
These are generally times that are likely to cause the biggest losses if no-shows happen, as they’re when you’re most likely to be busy.
This way, you still have some level of protection when you need it the most, but you can mitigate some of the drawbacks of implementing a restaurant deposit policy.
Be Transparent
Once you’ve decided on when and how you’re going to take a deposit for a restaurant reservation, you should be as transparent as possible about what you do with the money. Whether it’s going on drinks, food, or is non-refundable, the customer needs to know before they pay.
You should also be very clear about what the consequences will be if they don’t show up (like no-shows and late cancellation fees). Otherwise, you could open yourself up to criticism and bad reviews.
Regular Communication
18% of diners don’t show up to their bookings simply because they forget they made a booking, or when they booked it for.
This happens because a lot of restaurants don't send our reminders. So, whether you’re using hospitality booking software or going the classic route of writing down reservations you take over the phone, don’t forget to take down a customer's details and send out email reminders closer to the time.
It may seem unnecessary, but it will make your customers more likely to show up, or failing that, may prompt a cancellation before the day if their plans have changed, which is better than having an empty table in your restaurant.
Pre-Order System
There is a variety of booking software available that helps streamline the reservation process. A restaurant reservation system lets you collect pre-payments and deposits and manage all bookings from one place.
The whole process of booking a reservation becomes incredibly easy thanks to hospitality booking software’s host of features. Customers can book reservations directly through Google, and the integrated system will transfer all the details over to you. Table management functions allow you to digitally organise your restaurant into the best configuration for your upcoming shifts, including the ability to put notes, booking types, customer tags and deposit codes on each table.
If you still feel unsure about whether or not you should start taking deposits for restaurant reservations, reach out to the team at Access.
We have decades of experience delivering management solutions that streamline the customer service experience. We can give you further insight into our restaurant booking system, Access Collins, and together we can discuss whether it would be a good fit for you and your team.
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