Cancellations cost many business owners hundreds if not thousands of dollars each year. Many restaurants have been trying to find ways to avoid losses that otherwise would be incurred due to customers cancelling reservations or otherwise over reserving space and then at the last minute changing plans. As all good business owners know this affects not only revenue from the loss of sales, but also from a staffing perspective. If you have a large group booked, you staff for that group. If they don’t show there is of course a loss.
Currently there is no authority concerning the implementation of a restaurant cancellation fee or “no-show” fee. However, such a fee implicates certain contract principles which are important for owners to keep in mind when charging such fees. When a customer seeks to make a reservation, a contract is formed. The restaurant offers consideration of a reserved seat and the customer offers consideration of attending the reservation to dine. If both parties assent to the terms and the terms are definite, the contract is formed. Should the restaurant wish to add a term, a cancellation policy, the customer must assent to its inclusion.
In the reservation context, the contract formed is likely definite if it includes the terms of the reservation and the cancellation policy. However, to ensure a court can “determine the scope of the duty,” the restaurant should include terms such as when the customer must call and cancel their reservation to not incur the cancellation fee, and it is always good to either have this posted on a website or send confirmations via email so as to make sure there is a clear indication of the rule.
All restaurants should inform persons calling for a reservation about the policy. Those making online reservations should have to accept the terms of the cancellation policy at the time of booking the reservation. The customer should be told the amount of the charge for a late cancellation and when the customer may cancel to avoid the charge.