92% of Michelin-starred restaurants require a credit card deposit

“No-shows” are a plague for restaurateurs. Customers who book a table and cancel at the last minute or don’t show up greatly impact restaurant profitability. More and more establishments are now asking for a credit card deposit, i.e., securing a sometimes very large amount on the customer’s credit card when booking. This article presents the results of research conducted among 39 Michelin-starred restaurants in 18 countries. This research reveals a wide range of practices. One Danish restaurant even asks for €2,000 per person when booking.

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The problem of no-shows in restaurants

A no-show is when someone doesn’t show up for an appointment. For a restaurant, this means an empty table that cannot be reallocated to another customer. It’s a dry loss for the restaurateur. No-shows are particularly problematic in the restaurant business, where product orders and staff planning are based on the number of customers who have made reservations. In addition to the loss of earnings, there are also losses to absorb. A limited number of no-shows can destroy the profitability of an entire department. Some restaurants are very transparent about this, such as Labyrinth in Singapore, which explains on its booking module: “Cancellation fees reflect the cost of food, drinks, and staff that we have incurred in anticipation of the booking, as well as the loss of earnings associated with the empty table.”

A limited number of no-shows can wipe out the profitability of an entire service.

The higher the menu price and the larger the number of guests, the greater the financial risk of a no-show. With raw material inflation and rising wages, no-shows have become unbearable for restaurateurs. Since 2022, there has been a profound change in reservation practices. Asking customers for a credit card deposit at the time of booking has become standard practice.

92% of Michelin-starred restaurants ask for a credit card deposit

Research into 39 world’s top 100 restaurants shows 92% require a credit card deposit. Some even charge penalties above the menu price for no-shows. And 1/3 of these restaurants expect customers to pay for the entire menu in advance. All that’s left is to pay for drinks on the day.

Credit card deposits can reach staggering sums. While Enrico Bartolini imposes a flat-rate charge of €500 (and a penalty of the same amount for cancellations made 72 hours or less before the day of the reservation), the prize goes to Alchemist in Copenhagen. This highly conceptual restaurant charges a prepayment of DKK14900 (€2000) per guest. This corresponds to the price of the menu, and, understandably, a no-show would have an intolerable impact on the restaurant’s financial equilibrium.

Our research found only 3 Michelin-starred restaurants that did not require a credit card deposit. These were restaurants with “reasonable” prices given their ranking: Lido84 (most expensive menu at 150€), Fu He Hui (110€), and Maito (92€). Above €150, however, 100% of restaurants require a credit card deposit.

1/3 of Michelin-starred restaurants ask for prepayment of the menu

We note that a third (14 restaurants out of 39) require full prepayment of the menu. This means that where a choice exists, the menu must be selected when booking. This principle applies to establishments with prices ranging from €90 to €370 per person. There is no minimum amount for this rule.

It is interesting to note that, in some cases, establishments adapt their semantics. They no longer speak of “reserving a table” but of buying “a ticket” or “a seat” (see the example of Alchemist in Copenhagen below). Some even go so far as to explain that they are modeling their practices on those of show business.

Credit card deposit: to be handled with care

Requesting a credit card deposit is not a decision to be taken lightly. While it eliminates the risk of no-shows (1% maximum versus 10% to 30% without), it also has certain disadvantages.

The first disadvantage is, of course, that the amount requested can be a disincentive for customers. Impulse purchases will be less common, and the average ticket is likely to suffer as a result. The pros and cons must be weighed carefully, and the financial impact of no-shows must be weighed against the possible drop in average ticket sales.

The financial impact of no-shows will have to be weighed against the possible drop in average ticket sales.

The other disadvantage is for the consumer. In some cases, they have to choose their menu months in advance. In terms of flexibility, this is not optimal. Once again, this can put the brakes on impulsive purchasing decisions that would otherwise have benefited the restaurateur

Conclusion

Since 2022, Credit card deposits have been the norm in restaurants. Faced with high operating costs made even more expensive by inflation, no-shows jeopardize the financial equilibrium of establishments already under pressure.

Credit card deposits have become increasingly popular with reservation-based restaurants. Third-party reservation services such as Zen chef have made this new feature available at a modest cost (€2,000 per year). It reduces the no-show rate to around 1%, de facto eliminating their financial risk.

However, not all establishments are suited to this mode of operation. Those that attract a transient clientele, and non-starred restaurants in particular, need to research the advantages and disadvantages of this system and bear in mind that credit card deposits can act as a deterrent

List of restaurants researched and prices charged

By Pierre-Nicolas Schwab Dr. Pierre-Nicolas Schwab is the founder of IntoTheMinds. He specializes in e-commerce, retail and logistics. He is also a research fellow in the marketing department of the Free University of Brussels and acts as a coach for several startups and public organizations. He holds a PhD in Marketing, a MBA in Finance, and a MSc in Chemistry. He can be contacted by email, Linkedin or by phone (+32 486 42 79 42)