Shane Delia of Maha vented his frustration on no-shows and tweeted that he’s implementing a policy to charge no-shows.
Here’s a look at the law around around taking (and keeping) a deposit for a restaurant booking.
Update: we’ve published a new Small Plate after the bank fees litigation finally finished.
A deposit is a kind of security – a payment made to indicate the payer’s commitment to the transaction or agreement. It’s a good mechanism for a seller to indicate the seriousness of the transaction or agreement.
When a restaurant charges a deposit to book, it creates a contractual promise on the diner to turn up to the restaurant, eat, drink and be merry. Failing to show up is a breach of that promise and the restaurant can seek to recover its losses by keeping that deposit.
A booking without a deposit doesn’t create a contract. It’s seen as a courtesy between the restaurant and the diner.
How big a deposit?
For restaurants, one rough estimate of the loss is food revenue plus the beverage profit which would have been made if the table showed up, ate, drank and paid. Wage, rent and food costs are largely fixed.
There’s an argument that taking too large a deposit, or keeping it on too conditions which are too strict might constitute a contractual penalty (like some bank fees) or be an unfair contract term under the Australian Consumer Law. Both of these hinge on concepts of unconscionability, imbalance of power and the ability to avoid losing the deposit. Those questions untested by courts. They probably fall in the restaurant’s favour.
Taking deposits for restaurant bookings
Write the rules
It’s critical to explain why you’re taking the deposit and the rules on when you’re going to keep it. For example:
- How late can the table cancel?
- What happens if the party size changes?
- Will you call or SMS to confirm the table before taking the deposit?
Make the rules known
Make sure those rules are known to the customer. Consider:
- Write a script for staff to read over the phone while taking the deposit;
- Send the rules in a confirmation email once the booking is made; or
- Refer guests to full terms and conditions on your website.
Vue de Monde has its reservation policy on its website.
Get the rules checked. Last thing you want is a hole in your policy which causes both a PR nightmare and an inability to hang on to those deposits. Get some advice from Whites Legal.
Dealing with complaints
Will someone complain that you took their money? Perhaps. Probably through a complaint to their bank or credit card provider. Be warned that some credit card providers will strip the payment from you if you don’t have a signature or PIN authorisation. The bank then puts the onus on the restaurant to prove that the customer agreed to making that payment.
Thanks to Shane for the tweet that inspired this post, and no thanks to the no-shows at Maha that caused him the stress to implement the policy.