Credit card details: Why take them?

Introduction

In December 2015 on the back of a particularly bad run of late cancellations and ‘no shows’ we took the decision to start taking credit card details in order to secure table reservations at our restaurant Norse.  What follows is some of the reasoning behind that decision, the factors you need to consider and some of the results we have experienced.  I hope this helps some other restaurateurs clarify the decision in their own minds…….it’s a big one.

Background

I am a big fan of Danny Meyer‘s book ‘Setting the Table‘.  When I decided to open a restaurant that would operate in our day-time cafe’s space during the evenings I needed to do some background reading and Danny’s book was the first thing I picked up.  I liked a lot of what I read.  When we are throwing a new idea around at the restaurant or we have a difficult decision to make about something that has happened or needs to happen then we will often ask each other WWDD – What would Danny Do?  Usually it solves the problem, the decision is often relatively easy once you remove the emotion and look at it from someone else’s perspective.  I know that the Union Square Hospitality Group take reservations and no doubt secure with credit cards, they are very high end restaurants and from what I can tell that is the norm in their market.  ***as an aside they are removing tipping/service charges from their restaurants at the moment, which could be an interesting blog for the future.***

When we started to discuss the idea of asking for credit card details the concept jarred with me and especially with the sense of offering hospitality that runs as the spine through ‘Setting the Table’.  I noticed recently that outspoken chef Gary Usher of Sticky Walnut and Burnt Truffle, had a bit of a twitter rant (I understand this is not that rare, he’s good value and wears his heart on his sleeve!) about no-shows at his restaurants.  When people commented about taking credit card details he was quick to say he’d prefer to work on trust.  I understand and respect that.  We considered our options for a long while until in November 2015 we had a really serious run of late cancellations and no-shows in a short period of time.  At this point my thinking had to change.

Another philosophy that Danny Meyer espouses is putting your team first, look after your people and you won’t have to worry about the guests – that will be dealt with in turn.   I realised that the situation with no shows and late cancellations was not only damaging my business but it was getting to the point where my team’s livelihoods were being put in danger and that had to be dealt with.  Giving and receiving hospitality is a two way street that is built on mutual respect and while the vast majority of our guests understand that there is a small but significant number who weren’t keeping their side of the bargain.

So, Why do it?

Well, I’m happy to share our stats with you:

Comparison of two 13 week period before and after the introduction of the requirement for credit card details

Average spend per head at Norse over two 13 week periods before and after the introduction of the requirement for credit card details

At first glance the stats look relatively similar, the main difference being an increase in ‘guests seated’ that comes from a small decrease in cancellations and a slightly larger decrease in guests failing to arrive for their reservations.

One point to note is that time of cancellation is difficult to track via back office software – but anecdotally the incidence of late cancellations (within our 48hr cancellation window) has been considerably lower than when no cancellation fee was in place.  This has given us more opportunity to re-sell tables.

I have included the average spend per guest from the two periods to give an indication of the type of restaurant Norse is to those who have not visited.  It will also allow a rough calculation of the total cost of no shows in each period.

Norse guests charged a cancellation fee since introduction of the requirement for credit card details

You can see from this statistic that we are using the ability to charge guests as an absolute last resort.  This booking was a party of twelve that cancelled on the day of their booking (a Saturday evening), we were able to re-sell 6 of the seats so a charge of £300 (£50 per guest) was made for the remaining six guests.  We have charged 6 guests from a total of 1570 bookings in this period – it’s less than 1%.

Comparison of No shows for Norse over two 13 weeks periods before and after credit card details were required.

I think this statistic is the bottom line of this blog and the process we’ve undertaken in changing the way we take bookings.   A difference of £2743 over a 13 week period is a huge amount of money to a small restaurant – extrapolated over a year it comes to just short of £11,000.  Thanks to our new system we’ll have the opportunity to earn this.

I say we have the opportunity to earn the revenue because it is exactly that – we still need to fill the seats.  If you own a restaurant and you are reading this you may be wondering; ‘How many reservations have they missed out on because a credit card has been required?’.  Unfortunately I can’t give you that information, especially for guests that book online, see the policy and leave.  I’ll never know.  My team have said the number of guests that refuse the system over the phone is relatively small and we haven’t noticed any huge decrease in the number of bookings.

It’s not an easy decision to make and implementing the new policy also adds some friction, here are some things that you might want to be ready for:

Get ready for some awkward conversations

There are going to be some awkward conversations.  Guests are going to get angry, especially if the terms of your cancellation policy are not to their liking.  Our cancellation policy is as such:

‘You can make changes to numbers or even cancel the table up to 48 hours in advance. If you need to make changes within this period we’ll try to resell your table but if we can’t a cancellation fee of £50 per guest may be charged.’

It is worth mentioning at this point that we are judging situations on a case-by-case basis.  For example, if the booking is mid-week when the restaurant is often not full or we haven’t needed to get staff in specifically for the table that has cancelled then we will not make a charge.

If a couple cancel a table but it is rebooked or used later in the evening for a walk-in then we will not make a charge.  This isn’t about scamming people or making as much money as we can, it’s about a reasonable way to manage a business that has limited capacity and that capacity can only be used at a specific date or time.

We have had plenty of rough conversations.  The majority of guests can be reasoned with and usually will provide card details but some won’t.  You will lose some potential bookings.

Be aware of who is going to be dealing with this change

My business operates as a cafe during the day so that team end up covering the phones and taking the majority of the bookings. It is a challenge for them and one that I know I didn’t train them well enough to handle.

We started with a script because I thought that guests should be fully informed of the ins and outs of the reasoning and the terms and conditions.  This was unwieldy, came across badly and the team were very uncomfortable with it.  They evolved it into a much more simple process that we use today.  One of the many occasions where I have made a bad call for the right reasons but the team have saved me!

We did talk about common complaints once the system had been in place for a short while and have a list of frequently asked questions with responses available to the team.

Taking a reservation is a longer process

You will need to allow your team more time to take reservations, especially in the early days where extended discussions about the policy may be required and also whilst guests become used to having their card details to hand.

Impact on review sites

Thus far the impact on review sites for Norse has been relatively limited.  We’ve had one guest mention the system in a negative fashion on TripAdvisor (even though they felt no negative effect in terms of a charge).

Screenshot of TripAdvisor review talking about Norse now requiring credit card details to book a table

One person has also reviewed us negatively on Facebook, this discussion got a bit heated on both sides so required some investigation and there was an opportunity to improve our process.  I wasn’t the person on the phone, but that said it could very well have been me if I’d picked up that call.

Negative Facebook rating from a custom who did not want to provide her credit card details to book a table at Norse

All you can do with these reviews is deal with them in an honest and frank fashion, addressing any concerns that other potential guests may also be feeling.

I am sure that once we need to apply a cancellation charge on a table for a no-show then it will only be a matter of time before we get a truly bad review – we’ll just have to suck it up!

It’s not all bad though.  There are a couple of benefits to taking credit card details above and beyond minimising lost revenue, these are:

Peace of Mind

Peace of mind is the biggest benefit of the results that taking credit card details provides.  It’s a genuine weight off of my mind as the owner, and also the rest of the team, to know that we can plan efficiently in terms of ordering/prep and also labour.  This industry operates on tight margins and it was always deeply frustrating when a few tables wouldn’t arrive during Friday and Saturday evenings and you knew that any potential profit for the evening or even the week disappeared.

More tables for regulars

I think it is a reasonable argument to say that the decrease in no-shows and also the more robust cancellation policy means that there are more advance tables available for guests that are committed to eating with us – be they regular customers or visitors that have made a special trip.

Summary

Taking credit card details is not the solution for every restaurant.  It adds complexity when taking reservations and can create friction with potential guests at a time when you are trying to accommodate their visit to your restaurant.

From our perspective though the results cannot be argued with. We have a great team who are experienced, able to take the initiative  and make judgement calls based on the situations that arise and this helps to mitigate the potential risks that such a policy can include.

We’ll be continuing to require credit card details to secure bookings for the foreseeable future.  If you have any comments on this post I’d love to read them below and respond.  If you have any other questions about the process we undertook or just want to bounce ideas around about the topic then do get in touch via email info@paulrawlinson.co.uk and I’ll help if I can.

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The full infographic detailing the changes pre and post credit card details system at norse restaurant in Harrogate

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