Legal advice: Charging for 'no show' diners
Why charging a 'no show' fee can be food for thought.
By Lucy McNamara and Briony Edwards of thePublican.com's team of legal experts from London solicitors Joelson Wilson.
If you have a restaurant attached to your pub and you charge (or you are thinking of charging) "no show" customers a cancellation fee when they fail to honour a dinner reservation, be wary of the amount you charge.
Charging an exorbitant amount as a way of recovering any loss could be unenforceable. The fact that you are charging a fee in itself is not illegal, however, it is important to ensure that the amount you charge is not disproportionate, as this could be classified as a penalty, making it unlawful.
Where the amount demanded for the breach of a contractual promise is disproportionate to the actual loss suffered as a result of the breach or broken promise, this is considered to be a penalty. In other words, if you charge £1,000 for a cancelled table, when your gain would have been equivalent to the cost of a pie and chips, you are charging a little too much!
The amount you charge must be a genuine pre-estimate of the loss which you think you will suffer if your customers do not turn up. If it is a genuine estimate, the courts are likely to feel the same and the charge would be considered lawful and enforceable against your customer.
So what is a genuine estimate and how can this be calculated? This is where you have to do some serious soul searching. The price that you consider to be a reasonable amount per person must be an honest reflection of the loss which you think your restaurant would suffer if a guest failed to honour their reservation.
Is your restaurant more curry 'n' chips than Cordon Bleu? If the amount seems extravagant in comparison to the greatest loss that you can imagine, it probably is.
Remember that a loss must be suffered in order to legitimately require the payment. If your restaurant does rebook the table, no loss is incurred and it would be advisable not to penalise those who cancelled by requiring a payment. If your restaurant was unable to fill the table, however, you would be within your rights to require the guest to pay for the cancellation.
If you have a policy of taking customers' credit card details at the time a reservation is made, it is recommended that any cancellation fee is stated to be discretionary on the part of the restaurant and that the restaurant reserves the right to charge guests in the event that they cancel and you fail to rebook the table.
