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No-shows take big bite out of restaurants’ profits

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Hostess Elizabeth Swartz greets diners at Foreign Cinema in San Francisco, Calif., on Thursday, March 16, 2017.
Hostess Elizabeth Swartz greets diners at Foreign Cinema in San Francisco, Calif., on Thursday, March 16, 2017.Scott Strazzante/The Chronicle

Every night at her Eastern Mediterranean restaurant in the Mission, Azhar Hashem plans for 10 percent of the people who have made reservations simply not to show up. Most nights, she’s close to her expectation.

Hashem is the owner of 10-month-old Tawla, and like many of her peers, she often deals with last-minute cancellations and diners who don’t honor their reservations. That can mean empty chairs in her 62-seat dining room, a significant hit when it comes to the razor-thin profit margins of the restaurant industry.

“Especially for a place our size, a no-show means a missed opportunity to bring in another guest to dine, which is important when the restaurant is so small,” Hashem said.

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For almost as long as guests have stood them up, restaurateurs and reservation services alike have sought out solutions. Now, with the continued development of new technology, new tactics are being employed, from requiring partial or full payment in advance of dinner all the way to more extreme measures like blacklisting chronic no-shows.

The temporary dining space for one of chef David Barzelay's Lazy Bear underground dinners in San Francisco, Calif., on Monday, June 9, 2014.
The temporary dining space for one of chef David Barzelay's Lazy Bear underground dinners in San Francisco, Calif., on Monday, June 9, 2014.Sarah Rice/Special to The Chronicle

Over the years, technology has helped streamline the reservations process, with companies like OpenTable and Resy that shifted the booking model from phone calls and little black guest books to screen swipes and mouse clicks.

Yet an unintentional byproduct of this new efficiency is the prevalence of no-shows, according to Bay Area restaurateurs.

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“About 70 percent (of diners) are really great. They’ll call, even if it’s the last minute,” said Gayle Pirie of Foreign Cinema. “Then there’s this 30 percent. They make multiple reservations across the city as part of a strategy, then they just make a decision at the last second and don’t notify the places they didn’t choose.

“It’s hard on the kitchen, hard on the clients,” she said. “Every day you look at the book and you check the weather, trying to find some clues about potential no-shows. It really is a day-to-day process. There is no formula.”

Last month, online Australian booking site Dimmi — the country’s largest, with 4,000 restaurants on the platform — made global headlines when it put nearly 40,000 diners on a blacklist for being no-shows. The policy seems to be working: Dimmi has seen a 25 percent drop in no-shows since.

“They’re essentially just trying to eliminate no-shows,” said Nick Kokonas, the founder of Tock, a Chicago reservation ticketing service used by several high-end Bay Area dining destinations, including San Francisco’s Lazy Bear and Healdsburg’s Single Thread.

Through Tock, a diner will pay either a portion or the entire cost of the upcoming dinner, sometimes months in advance, as part of making a prepaid reservation. It’s a system closer to theater or concert tickets than traditional dinner reservations.

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Kokonas sees the older reservation platforms as outdated, even debilitating, in today’s dining environment. For example, restaurants overbook to account for the potential no-shows, and when the no-shows are fewer than anticipated, some diners are left without accommodations.

“Overbook and have a bar to wait in. That’s the business model now,” Kokonas said. “That’s bad hospitality.”

According to Kokonas, the no-show rate for businesses using Tock is a mere 0.64 percent. Part of that success may be that it is favored by high-end restaurants where meal costs almost always reach triple digits. This year, several of the Bay Area’s top fine-dining destinations are making the switch to Tock, led by the Restaurant at Meadowood in St. Helena, where tickets range from $90 to $500 per person, and Atelier Crenn in San Francisco ($325 per person, after April 17).

However, the major online reservation service remains OpenTable, a San Francisco company started in 1998 and purchased by Priceline in 2014 for $2.6 billion. That acquisition has proved problematic; last year, Priceline had a $941 million write-down of OpenTable.

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OpenTable has a “four strike” policy: If a user is a no-show for four reservations within a 12-month period, the account is terminated.

The company also reports that its national no-show rate is approximately 20 percent lower than the no-show rate for diners who book via phone.

The National Restaurant Association encourages business owners to require credit card confirmations to facilitate reservations, with the idea that a small cancellation fee will reduce no-shows.

Penalty systems, or charging a diner a fee for skipping out on a reservation, prove effective — but require a delicate balance. Tawla’s Hashem said cancellation fees can leave a bad impression on potential diners; requiring a diner to input a credit card number may also dissuade them from even making a reservation.

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“We apply it judiciously for groups of five or more since, it's hard to be able to fill a table for a large group last minute,” Hashem said.

At Tawla, if the cancellation fee is assessed, it is usually put toward a gift card to be used at the restaurant at a later date.

“Most restaurants don’t want to require a credit card or prepay for a meal, so it’s not surprising that we’re not seeing a trend on our site toward more restaurants opting to require a credit card at the time of booking,” Alyssa Faden, a member of OpenTable’s public relations team, said via email.

The National Restaurant Association advises restaurants to make the cancellation process easier for diners, going so far as to recommend outsourced reservation services. But last-minute cancellations can be just as problematic as no-shows; OpenTable users have until 30 minutes before the booking time to cancel a reservation.

Foreign Cinema’s Pirie said there is no real solution to the no-show issue, at least in the foreseeable future. It has always plagued restaurateurs — and most likely will continue to do so.

In what she describes as a perfect storm of accessibility, efficiency and an absence of human interaction, Pirie said diner etiquette is no longer what it once was.

“With the de-socialization of society, it’s completely easy for people to not worry about no-showing,” she said. “They don’t even want to cancel a reservation on the phone because they don’t want to deal with a person. It’s society. Everybody is so isolated.”

Justin Phillips is a San Francisco Chronicle staff writer. Email: jphillips@sfchronicle.com Twitter @JustMrPhillips

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Justin Phillips joined The San Francisco Chronicle in November 2016 as a food writer. He previously served as the City, Industry, and Gaming reporter for the American Press in Lake Charles, Louisiana. In 2019, Justin also began writing a weekly column for The Chronicle’s Datebook section that focused on Black culture in the Bay Area. In 2020, Justin helped launch Extra Spicy, a food and culture podcast he co-hosts with restaurant critic Soleil Ho. Following its first season, the podcast was named one of the best podcasts in America by the Atlantic. In February, Justin left the food team to become a full-time columnist for The Chronicle. His columns focus on race and inequality in the Bay Area, while also placing a spotlight on the experiences of marginalized communities in the region.

He can be reached at jphillips@sfchronicle.com.