Oops, I Forgot to Cancel My Dinner Reservation! Should I Be Penalized?

Did you catch that article in The New York Times last week on the latest restaurant trend: adding cancellation fees to the menu? It’s gotten the foodies up in arms – and knives and forks – everywhere.

It used to be that to book a table you just called up and made a reservation. The restaurant trusted you’d show up. You did; you had a fine time; and all was well. But with the increased ease of impersonally booking reservations through online services such as OpenTable some folks find it painless simply not to show up. So some restaurants now require a credit-card number to confirm a reservation. If you don’t cancel with sufficient notice, you pay a fee, which may be as low as $40 or as high as $200 per guest, according to the Times.

I get the problem. Restaurants typically operate on thin margins and tables are inventory that spoils if people don’t show. On the one hand, going out to eat is supposed to be a way to relax with family, friends or colleagues – to luxuriate in what the Times called “the sweet embrace of hospitality.” The new cancellation policy risks reducing that embrace to a twisted arm. On the other hand, if restaurants lose control over their most important inventory – their tables – service suffers and business is lost.

How, then, to resolve the conundrum? Having started my first business when I was 11 – selling summer produce I grew myself in my Michigan backyard – I know the pain caused by spoiling inventory. And having been an original investor in Dinner Broker (an early competitor to OpenTable), I’m sympathetic to service providers whose customers prey on the trust on which “brokers” (such as restaurants) rely. So I’m a bit more sympathetic to restaurant owners and their reservation-makers than too-lazy-to-cancel clients. When we as consumers wield disproportionate power, I have no issue with restaurateurs trying to “encourage” the courtesy of canceling a reservation.

I’m a fan of the Golden Rule in business, as in life. Restaurant patrons who don’t take the minute or two it takes to cancel seem to think they have no obligation of courtesy. After all, especially when we’re the consumer, we wholeheartedly believe  the customer is always right. But what about when we act thoughtlessly?

Anyone who has to make payroll, manage inventories or meet deadlines will find the familiar “Do unto others…” version a far better one to live by. In my view, the marketplace – both businesses and their customers – would be easier, saner and more efficient if participants didn’t see commerce as simply a hardball trade between people with uneven power, each maximizing her own utility at each dynamic moment.

In that harsh view of business-as-a-transaction, it’s the relative scarcity of either the medium of exchange (money) or the desired goods and services that not only determines the price, but too often the courtesy of the parties. But when a business has the advantage of scarcity or other power, it’s still bad business to treat customers poorly. And when customers have the edge, it’s similarly unwise.

Those whom we might be tempted to ignore or to take advantage of usually end up in some sort of position to respond in kind down the road. Rarely are transactions not somehow serial in nature. The marketplace is a long-running HBO series, not merely isolated episodes. Everything is connected. How we treat those with the least influence will ultimately impact our ability to move those with the most.

I, for one, will think of that the next time I grumble when OpenTable asks for my credit card number to hold a reservation. What do you think?

By Joel Peterson