The Most Expensive Restaurant Table Is an Empty One

Twenty-eight percent of people in the U.S. made a restaurant reservation in the past year and didn’t show up for it, according to OpenTable. A diner bailing on a restaurant reservation is known in the industry as a “no-show,” and it can have a financial impact on restaurants.

If 100 people dine at a restaurant with a $100 check average per person, the total revenue is $10,000 that day. But if just six people cancel, revenue drops to $9,400 — a six percent decrease. Given that full-service restaurant profit margins are typically three to five percent, according to Toast, this six percent loss has a significant impact on profitability.

Atlanta is far too familiar with the issue because it has a higher-than-average number of no-shows, along with Dallas, Las Vegas (considered the worst in the country), and Philadelphia.

The price of a no-show table

Cancellations and no-shows have an impact on food costs, food waste, labor costs and disruption to operations for restaurants. On slow nights, a restaurant might stay open waiting on a late reservation. If that reservation does not show up, staffing and food waste can cost the restaurant more than the profit that the table was going to bring in. Similarly, on busier nights, no-shows and last-minute cancellations limit the opportunity for others to book a reservation, keeping the restaurant from serving someone else.

While the restaurant takes a significant hit, diners are now more likely to also be impacted.

Restaurants like Lazy Betty have opted to enforce a penalty for late cancellations and no-shows. While the tasting menu is $225 per person, a $100 per person penalty will be charged if canceled 72 hours or less before the reservation, if the number of guests decreases, or if the party does not show up.

“We are a tasting menu, so everybody gets about the same thing to eat. We staff, order food, and plan for exactly how many people are going to come in,” says chef Aaron Phillips, co-owner of one-Michelin-starred Lazy Betty.

“We might only do 50 to 100 covers a night,” says Phillips, where a cover refers to a diner. “So, if a [table of five] cancels, that’s five to 10 percent of our total. It basically takes away our ability to profit because we’ve already hired staff for that day, bought and prepared the food, set the table, and made arrangements.”

Other restaurants opt for charging a deposit upfront or requiring prepayment.

OpenTable has a rule where if a diner no-shows four times in a year, their account is deactivated. Also, restaurants can see and keep notes on diners — to see their cancellations and no-show history.

Just Veritas

“At the end of the day, we don’t want to hurt our guests. We want them to come back. We just need them to work with us,” says chef Santiago Gomez at Palo Santo.

His restaurant sees an average of 30 cancellations per month out of an average of 1,800 reservations. The cancelations amount to nearly two percent of their monthly reservations — that number may seem minuscule, but considering a typical restaurant profit margin of three to six percent, the impact can be significant.

Reservation platforms like Resy and OpenTable help restaurants manage no-shows and cancellations by notifying waitlisted guests, allowing them to book at the last minute. In some cases, restaurants may also call diners directly or seat walk-ins. However, this isn’t always possible.

“Some nights, we don’t have a waitlist and are left waiting for the reservation to show up,” says Gomez. “It can be a loss all around.” For restaurants like Lazy Betty, which offer tasting menus, a no-show that can’t be filled often also leads to food waste.

Reservation platforms are expensive

When Gomez moved to Atlanta from Miami to open Palo Santo on the Westside with his business partners, Eduardo Rivera and Felipe Rivera, choosing a reservations platform became an important business decision for them. For Palo Santo, signing up with OpenTable involved a sign-up fee of $499 a month and a $1 charge for every seated diner in a reservation that came through the reservation app. On average, this adds up to a cover fee of as much as $3,000 per month. Additional fees apply if the restaurant wants to increase visibility to diners and add special experiences or private events.

With a little over half the reservations being booked less than a day ahead, Chef Gomez looks at the reservations the day before. Based on the numbers, he confirms the staff needed and ensures he has the right amount of food. The morning of, the staff preps the food based on the expected guests. The hosts, servers, bartenders, and cooks are staffed accordingly, and reservation cancelations are an expected part of the formula.

Multiple bookings can cost a restaurant

Booking tables in multiple restaurants is also a trend that Gomez and Phillips are seeing, especially around the holidays. As the dinner date gets closer, diners will cancel the reservations they don’t want.

“It affects the business because when we forecast, it could be a false forecast,” says Phillips.

Restaurants are taking steps to avoid no-shows and cancellation fees for diners. They send reminders through text messages and email and call them to confirm.

“If somebody buys a ticket to a sporting event, they cannot cancel their ticket just because they don’t want to go anymore,” says Phillips. “They cannot buy tickets to a baseball game, a soccer game, and a football game and then decide at the last minute that they just want to go to the baseball game and cancel the other two. No, they have to go sell their tickets, and they’re responsible for financially offloading the tickets.”

“For restaurants, it’s kind of an unfair system already,” he says.