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A Boston restaurant owner made headlines after confronting a customer for disputing a cancellation fee, prompting a heated discussion about why it costs money even when you don’t make it to dinner.
It’s Friday night and you have the evening free to do whatever you’d like — dinner, bowling, maybe even visit a hot new bar. But depending on where you live, you might find your options limited unless you have a reservation.
And if you have a last-minute emergency and can’t make a reservation? Well, you might be paying for your meal anyway.
Reservations are hardly a new concept. But during the pandemic, they became more essential as businesses faced capacity limits. While some of these restrictions have been lifted, so-called “reservation culture” seems here to stay with some places even asking for a card upfront and charging a fee if you don’t cancel in advance.
Data from Yelp in 2023 showed that while diners are now starting to make more same-day or day-before reservations than they were in 2022 (when most reservations were made over three days out), they’re taking earlier spots and the competition for weekend slots is still fierce. It’s to the point that some New Yorkers are buying “subscriptions” to get standing reservations at some popular spots, sucking much of the spontaneity that once came from a night out on the town, especially when it comes to dining out.
“It’s aggravating as a customer,” said Kimberly Eddleston, Schulze Distinguished Professor of Entrepreneurship and Montoni Research Fellow with the D’Amore-McKim School of Business at Northeastern University. “Profit margins have been absolutely squeezed. It’s awful. Supplies have gone up, labor has gone up, and they really can’t pass the cost onto their customers. … So a lot of it is making the menu smaller, limiting ingredients, which helps with your costs … (But) you need to have those seats filled.”
Eddleston said she’s seen some places take a first-come, first-served approach. In Newport, Rhode Island, a popular tourist destination, Eddleston said many places don’t take reservations in the summer months, knowing they’ll be able to fill their dining rooms with visitors.
This is frustrating for consumers because it means they sometimes have to show up early in hopes of being seated or on the flip side, planning days in advance just to go out to dinner.
“It’s certainly hurting the ability to be spontaneous,” Eddleston said. “I do like when businesses … keep a few slots open to add a little bit of flexibility. (It’s) very, very smart for business.”
Using reservation systems also means customers could get hit with a fee if they need to change their plans.
Recently, a Boston restaurant owner went viral for confronting a would-be customer for disputing a $250 cancellation fee with his bank. The customer said he had to cancel his reservation after being hospitalized; when he contacted the restaurant, they said to take it up with his credit card company, which he did.
The exchange sparked a heated online debate about cancellation fees and whether they’re reasonable. While reservations and cancellation fees prevent businesses from losing money, it can also cause ill will between customers and the business.
Eddleston said these policies are not in place to harm customers, but to protect businesses and ensure the space they save for these customers will actually be filled. This is especially true now at a time when the costs of operating a business are high and many places face staffing shortages. Staffing decisions might have been made around the number of reservations on a given night, and adding a cancellation fee ensures the business doesn’t lose that money when someone doesn’t show.
“It’s awful when … they could have had someone else fill that seat,” Eddleston said. “Holding it for someone is a cost. You should be able to pass on those costs to the customer.”
However, Eddleston said businesses should be clear about their cancellation policy and should use their cancellation policies sparingly. It’s one thing if someone cancels for no reason, but not enacting a fee if someone cancels over an emergency is a good way to build up a customer base, she said.
“Even if you create a cancellation policy, you need to use discretion,” she added. “I do know businesses that have them, but very rarely actually act on them. For example, what happens if someone gets in a car accident, and they call you frantically? Are you honestly going to charge them the cancellation fee? A regular customer who has never done that to you? Would you want to actually ruin that relationship and goodwill? Usually a good cancellation policy gives clear guidelines. … But then you’ve got to have discretion.”
And it doesn’t seem like this will be changing anytime soon. Eddleston said that with profit margins still tight, many businesses may keep relying on these systems to help them keep costs down.
“Businesses that normally didn’t have things like cancellation fees (realized) they can do it,” she said. “If someone doesn’t fill that spot, they’re losing money and it helps them with planning. It’s easier to make predictions on supply and demand. … Unfortunately, I don’t know if it’s going away.”