Sales & Revenue
Should Your Restaurant Require Reservation Deposits?
SevenRooms
5 min read
Dec 19, 2022
SevenRooms
5 min read
Dec 19, 2022
Being ghosted hurts. Especially when you’re a restaurant operator dealing with constant no-shows or last-minute cancellations. And with more than 20% of diners failing to show up for tables, it’s no wonder why restaurants have stopped holding reservations for free.
If you’re interested in charging reservation deposits but don’t know where to start, you’ve come to the right place. In this article, we’re going to explore different ways to successfully implement restaurant reservation deposits to help you protect your bookings and generate incremental revenue.
Before the pandemic, consumers expected to book reservations for free. But once COVID-19 hit, capacity restrictions forced restaurants to charge reservation deposits to maximize limited seating and protect their business. Today, reservation deposits have become mainstream and restaurants are finding different ways to secure revenue before guests even walk in the door. Implementing reservation deposits can help your restaurant alleviate revenue loss, reduce no-shows and prevent casual bookings.
Reservations help make service predictable. When you know how many people to expect, you can order inventory and staff up accordingly. When guests don’t show up, it can lead to wasted food and added payroll costs – not to mention lower staff retention. In turn, this leads restaurants to increase menu prices, tighten purse strings and even let staff go. Reservation deposits cushion your restaurant from these kinds of losses by incentivizing guests to show up and recouping a fraction of a cover’s bill if they don’t.
No-shows hurt business by cutting into profits. And, when your restaurant holds a table for a party that cancels their reservation last minute, you may have to turn away walk-ins. You lose money by keeping a table open for guests who aren’t going to pay for a meal.
Deposits are proven to reduce no-show rates. By creating a monetary incentive for diners to maintain reservations, they’re more likely to show up.
Take inspiration from California wine country’s Long Meadow Ranch, which spans five properties. Scenic St. Helena is home to Farmstead, a site that includes a restaurant that offers wine tastings. With wine tastings averaging around $90 across Napa Valley, it has become customary for wineries to require prepayment or impose fees for no-shows and late cancellations. However, it wasn’t until pandemic-related capacity restrictions took effect that Farmstead sought to curb costly no-shows. After implementing reservation deposits through SevenRooms, Farmstead reduced no-show rates from 15% to 1%.
When guests are invested in their reservations, you’ll prevent casual bookings from people who don’t intend on showing up. Some diners reserve tables at multiple restaurants on the same night to keep their options open, and fail to call them off. Deposits disincentivize this behavior.
There is no one-size-fits-all approach to reservation deposits. Here are several ways to go about them.
This approach is the most classic take on a deposit. It involves charging a fee, either per person or per party, in order to make a booking. The deposit can either be refunded when the party checks in or applied to the bill.
Choose an amount that is significant enough to deter no-shows, but not equivalent to a meal so guests don’t feel ripped off if they’re charged. At SevenRooms, we typically see restaurants charging between $15 and $50 for a deposit.
Another option is to require meals to be prepaid in order to hold a table. This approach works best for prix fixe or multi-course menus, such as a chef’s tasting menu. You can add on prepaid wine pairings to generate even more sales.
Restaurants that ask for deposits typically retain the deposit if guests cancel without enough notice or simply don’t show up. Make your deposit refund policy clear during the booking process to avoid angry calls from customers.
Pro Tip: Create a refundable grace period to give yourself enough time to refill those tables.
You may be concerned that you’ll get pushback from guests or see fewer reservations if you introduce deposits. However, when you implement deposits thoughtfully, the benefits will outweigh these initial concerns.
Find a direct reservations platform, like SevenRooms, that makes it easy to collect secure online payments for deposits. The right tool will remove friction from the deposit process and help you generate more revenue through upselling and cross-selling.
It’s okay to be nervous about implementing a deposit-based reservation system. The best way to introduce deposits is to ease into them.
Experiment with adding deposits for certain tables or seating times. Or, if you run multiple venues, try them at one location, iterate and then roll out the policy at all of your venues.
After you’ve gotten comfortable with deposits, you can implement them however it makes sense for your business. There’s no rule that says if you decide to introduce deposits you have to implement them all of the time. In fact, a smart approach is to require them selectively.
For example, you could choose to require deposits for prime times, such as weekends and holidays only or for larger parties, for which no-shows can really hurt. Another option is to ask for deposits to hold tables in specific areas of your restaurant, such as private dining rooms or your coveted rooftop terrace.
Avoid angry reviews from customers by making your deposit policy clear. Make it an integral part of the booking process instead of hiding it in the fine print. Let guests know what they’ll be charged to hold a spot, and what the consequences are if they don’t show up or cancel at the last minute. This strategy will help you avoid surprising guests if you hold their deposit when they don’t come to their booking.
The right tools can help you not only remove friction from deposit requirements but also generate incremental revenue during the booking process. With SevenRooms, in addition to collecting deposits and charging no-show fees, you can sell prepaid add-ons to reservations, such as a Champagne toast, birthday cake or rose bouquet.
By adding reservation upgrades like birthday cakes and bride-to-be goodie bags to their reservation process, Mangos Tropical Cafe in Miami drove $29,000 of incremental revenue in 2022 alone.
Additionally, Long Meadow Ranch based in California doubled their average guest spend and increased crossover bookings between its hotel and restaurant by making all bookings and offers available on one landing page.
These restaurants are masters at preventing revenue loss and reducing no-shows. Check out their deposit policies for inspiration. All of these venues use SevenRooms’ direct booking reservations platform.
Duck & Waffle gives diners stunning views of London 24 hours a day from 40 stories up. To protect the business from no-shows, Duck & Waffle charges a £30 per person deposit that serves as a minimum spend and is applied to the final bill. This deposit isn’t refundable if the party becomes a no-show or cancels with less than 48 hours’ notice.
Rooftop bars and restaurants have some of the most desirable tables in New York City. The Crown is one of these hotspots, especially on weekends. They charge a $100 per person deposit on weekends to ensure the business doesn’t lose out on revenue during its busiest time.
Housed in the luxurious Jason Hotel in Nashville, Yolan is an Italian restaurant run by a Michelin-starred chef. Yolan implements a number of deposit strategies.
For its a la carte menu, the restaurant requires a $25 per person deposit on the credit card on file, which is deducted from the final bill.
To secure a tasting menu booking, guests need to fully prepay. They can indicate dining restrictions and even add a wine pairing during the booking process. The most discerning diners can also book a premiere dining experience at a table nestled in the restaurant’s kitchen. Guests must prepay for this rare experience for four people.
Twenty years ago, asking a guest to put a deposit on a reservation might have been a tough sell, but today guests are willing to pull out their credit cards for booking restaurants they love. Keeping your deposit policies transparent and creating a smooth booking process ensures you’re consistently delivering an excellent guest experience while protecting your bottom line.
At SevenRooms, our direct reservation platform makes it easy to implement reservation deposits. Find out more and book a demo today.
A reservation deposit is when a restaurant requires guests to pay to book a table. This deposit is either applied to the meal, refunded when the party arrives or kept if the party fails to show up.
Restaurants can require deposits to hold a reservation. Doing so helps reduce no-shows, which hurt restaurants’ profits.
Reservation deposits work by restaurants collecting advanced payment from guests in order to make a booking. Typically, the deposit is applied to the bill or refunded when guests check in. If guests don’t uphold a reservation, the restaurant keeps the deposit.
