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Avoiding the pitfalls of credit card reservations

Avoiding the pitfalls of credit card reservations

Question:

We have implemented a policy that all reservations on Fridays and Saturdays must be guaranteed with a credit card.  What we tell the guest is that if they make a reservation for 10 and only 8 show up we will charge them $15 for each guest who does not show up.  It is amazing how our no shows have dropped dramatically and we get very little push back from guest.  What are your feelings on this?

– Bill Kunz, Owner, Hwy 61 Roadhouse & Kitchen, St. Louis, Missouri

Answer:

Credit card guarantees can be good motivators for guests to keep their reservations. But like any policy, it needs to be carefully and intelligently implemented and enforced. Your policy is obviously working if no shows are down and guests are not arguing the charge. It seems you were very smart in setting the guarantee price at fifteen dollars—enough to motivate someone to keep his commitment but not too much to start an argument or attempted chargeback.

There are some common pitfalls associated with policies like these:

Lost reservations

While the credit card guarantee may help reduce your no-show rate, make sure that you aren’t losing tables that balk at the commitment of providing a card. Or if you are, make sure it’s at a rate you’re OK with.

Dissatisfaction

The 10-top that becomes an 8-top may fully understand the $30 addition to the check and consequently may not complain about it. But make sure the experience of paying for their flaky friends doesn’t drive them to a competitor with a looser policy for their next night out. My advice is if you have a guarantee in place, apply it to the party as a whole (in this case charging $150 if the entire 10-top is a now show) rather than individual guests as part of a larger party.

Chargebacks

Telling guests you have a credit card guarantee in place is easy; enforcing it is more challenging. Many guests successfully avoid actually paying these guarantees through chargebacks, canceling a card (or claiming it was lost) before the reservation time, or arguing that the policy is unclear or unfair. Vetting your policy and its placement on your website and reservationist script with your attorney helps. Using a third-party reservation software can also work. Many guests pay uncomplainingly, but be ready for a few fights.

Finally, don’t forget the basics. Calling guests to confirm their reservations, being flexible with party size, waiving the fee when appropriate (for example a regular who was confused about the time and apologizes) can go a long way toward good practice.

More on no shows here.

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