Saturday, second sitting, a table of four booked at half past eight. You turned away two walk-in couples at eight because the table was held. At quarter to nine you ring and it goes to voicemail. At nine you give the table up and seat two people from the bar who order a starter to share and leave at half nine.
The four covers were worth about £190 at your average spend. You recovered perhaps £35. That gap is what a no-show costs, and it happens on the night you can least absorb it.
Count it properly before you decide what to do about it
The temptation is to count the lost revenue. The number that matters is the lost contribution, which is the revenue less the food and drink cost you did not incur, because you did not cook it.
If four covers at £47.50 each would have produced £190 of revenue at a 70% gross margin, the contribution you lost is about £133. Your staff were rostered, your rent was the same, your gas was on. That £133 goes straight off the bottom of the night, and on a site doing 160 covers a week it does not take many Saturdays to become the difference between a good month and a flat one.
Then count the frequency. Look at your bookings for a month and separate genuine no-shows from late cancellations you could have re-sold. They are different problems. A cancellation at four in the afternoon on a Saturday is recoverable if you have a waiting list and a way to contact it. A no-show is not recoverable at all, which is why the deterrent has to sit in the booking rather than in the cancellation.
Card holds and deposits are different instruments
A deposit is money taken at the time of booking and either deducted from the bill or forfeited. A card hold, sometimes called a no-show fee guarantee, takes card details and authorises a charge only if the party fails to turn up or cancels inside the notice period.
Card holds are less abrasive, because the customer pays nothing at the time, and they are generally what a bookings platform will offer you. They are also technically more demanding than people expect. Under the Payment Services Regulations 2017, strong customer authentication requirements mean the customer normally has to authenticate at the point of setting up the mandate, so the card details must be captured through a compliant flow rather than written on a pad by the phone. Taking card numbers over the telephone and keeping them in a book is a data protection problem and a card scheme problem at the same time.
Deposits make sense where the commitment is larger: parties above a certain size, tasting menus, private dining, Christmas, New Year's Eve. For a table of two on a Wednesday they are usually more friction than they are worth.
The terms have to be fair, not just stated
Part 2 of the Consumer Rights Act 2015 governs unfair terms in consumer contracts. A term is unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties' rights and obligations to the detriment of the consumer. The illustrative grey list in Schedule 2 specifically includes a term requiring a consumer who fails to fulfil an obligation to pay a disproportionately high sum in compensation.
The practical translation is that a no-show charge should reflect what the table actually costs you, not what you would have liked to earn from it. Charging the full value of a hypothetical bill is hard to defend. Charging a per-head figure roughly equivalent to your lost contribution is straightforward to defend, and it is what most well-run policies do.
Two further requirements. The term must be transparent, expressed in plain and intelligible language, and it must be brought to the customer's attention before they book rather than buried in a link. And you have to apply it consistently, because a policy enforced only against people you do not recognise is a policy that will eventually be discussed publicly.
The VAT is not what most operators assume
There was a long-standing view that a forfeited deposit was compensation and therefore outside the scope of VAT. That view is no longer correct.
Following a line of European court decisions, HMRC revised its policy with effect from 1 March 2019, and confirmed the position in Revenue and Customs Brief 12 (2020). Where a customer pays for a service and then does not use it, the payment remains consideration for a supply and VAT is due. Retained deposits and cancellation charges for services the customer chose not to take up are generally taxable.
So if you take a £20 per head deposit and the party does not turn up, you keep £20 per head, and one sixth of it belongs to HMRC. That changes the arithmetic of setting the figure, and it also means you should be issuing the right paperwork rather than treating the money as a windfall that never touches your books.
A separate point on timing: receiving a deposit creates a tax point for VAT purposes when you receive it, so a deposit taken in December for a booking in February sits in the December quarter. On a Christmas season with large pre-paid parties, that is a real cash flow event.
There are situations where a charge is genuinely compensatory and outside the scope, but they are narrower than they used to be and the analysis turns on the specific terms. If deposits are a material part of your revenue, this is a question for your accountant rather than for a forum.
Write it so a reasonable person would sign it
The wording is what decides whether this costs you goodwill. The policies that work read like an explanation and the ones that fail read like a warning.
- Say why. One sentence. A table held is a table nobody else can have, and a small kitchen cannot absorb it. People accept this readily because they understand it.
- Give a clear, generous notice period, make cancelling genuinely easy with a one-click link in a reminder message, and send that reminder the day before. Most no-shows are people who forgot, not people who decided.
Then look at what the policy does rather than what it collects. A deposit scheme that eliminates no-shows and never charges anybody is working perfectly. If your no-show charge is producing meaningful revenue, something about the notice period or the reminders is wrong.
Where this shows up in the game
Restaurants and fine dining are part of Business Baron's full game, and cafés and pubs are in the free game. The fixed cost base leaves the account whether or not anybody came in, so an empty table on a Saturday is money already spent. Taking a deposit is a lesson most players learn from chasing debts, and it applies here too.