Trend Watch: Are Prepaid Restaurant Reservations the Future?

More and more luxury restaurants are requiring patrons to pay in advance. Will mainstream restaurants follow suit?
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Luxury restaurants, like 42 Grams in Chicago, have adopted a pre-paid reservation policy in order to reduce cancellations. (Photo: 42 Grams)

For a few years now, some high-end restaurants have been experimenting with a new way of reserving tables — one that requires payment in advance.

The prepayment trend gained steam as big names in luxury dining, like The French Laundry in Napa, and newer players, like 42 Grams in Chicago, began requiring that all reservations be paid for in advance. Could it trickle down to more mainstream dining establishments?

Here’s how prepayment works and why it’s making inroads.

Related: 15 Menu Tweaks that Can Increase Profits

What caused this?

Call it the OpenTable effect. No-shows have always been a problem in the industry, but the ease and popularity of making online restaurant reservations has led to a rise in people skipping out. (According to some estimates, 20 percent of reservations get canceled at restaurants in big cities.)

Some diners make two reservations for the same night and cancel one based on what they feel like eating when the time comes. Others just change their plans and think nothing of canceling at the last minute.

Cancellations can have major consequences for restaurants. When they occur last minute, managers whose restaurants don’t rely on walk-ins usually can’t open up those slots to new diners. This effectively throws away money because tables aren’t filled and food goes to waste. When margins are already incredibly thin, even one less table has an impact, especially if you’re operating very few tables.

Restaurants have been trying a multitude of strategies to combat this for years, from calling and emailing to confirm ahead to requiring a credit card at booking and charging fees for canceling on short notice. Prepaid reservations are one of these strategies.

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How does it work?

Prepayment works in two ways. Some restaurants effectively turn a special dinner, such as a themed prix fixe tasting menu, into an event for which diners buy tickets, just as they would for a concert or game. Others require a partial or full deposit to secure a table or book a regular tasting menu.

Some restaurants require prepayment only for tasting menus, others require it for everything.

In 2014 Chicago chef Grant Achatz devised an online platform to sell seats at his restaurant, Next, after he noticed he was getting many no-shows. Eventually, he co-founded Tock (along with the co-owner of his restaurant group, Nick Kokonas, and former Google engineer Brian Fitzpatrick), a first-of-its-kind software that is now used in nearly 200 restaurants for all forms of prepaid reservations.

Restaurants can opt to have diners pay for their meals in full or put down a deposit, as well as reserve and pay for special events, private dining and even cookbooks.

“This enables restaurants to actually sell,” said Kyle Welter, Tock’s director of marketing.

What are the benefits and drawbacks?

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According to some estimates, 20 percent of reservations get canceled at restaurants in big cities. (Photo: Iakov Filimonov/Shutterstock)

The biggest draw for chefs and restaurant owners, of course, is a reduction in cancellations. Welter said Tock’s users have cut their no-shows down to less than 1 percent, on average.

Alexa Welsh, who co-owns 42 Grams, a Michelin-starred restaurant in Chicago, with her chef husband, Jake Bickelhaupt, requires diners to buy reservations and pay an all-in price of $391.03 that covers the cost of the tasting menu, tax and tip. She said knowing how many guests the restaurant will have in advance has been a boon for business.

“When it comes to ordering, it means chefs can be much more precise and keep food costs and waste incredibly low,” Welsh said.

Adding a 20 percent tip to the cost also means servers don’t have to worry about getting shorted on tips.

Welter added that prepayment also helps restaurants increase efficiency and shorten wait times for guests when they arrive.

Of course, it can discourage some diners. “The system doesn’t favor people who for any number of reasons can’t commit to a reservation too far in advance,” Welsh said.

Related: 5 Tips for Improving Your Restaurant’s Inventory Accuracy

What’s in the future?

So will we all be paying for reservations in the future, even at casual restaurants? Welsh thinks probably not.

“By virtue of their format and revenue model, pay-in-advance systems probably won’t go mainstream,” she said. “Destination, tasting-menu format, ‘high end’ restaurants operate differently than fast casual and high-volume restaurants. The latter typically feature a la carte menus and rely on walk-ins and guests arriving spontaneously.”

But for special events, chef’s table reservations and prix fixe menus, prepaid and deposit reservations can work for smaller restaurants, according to Welsh. “We see more and more restaurants offering unique menus and experiences,” she said.

Prepayment may treat these menus and experiences more like the special occasions they are.

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