Business

Can a restaurant charge a fee for canceling a reservation?

As the cost of living skyrockets, one woman said the “shady” city is full of hidden costs, including when she was recently slugged $100.

Welcome to Sisters In Law, news.com.au’s weekly column solving all of your legal problems. This week, our resident lawyers and real-life sisters Alison and Jillian Barrett from Maurice Blackburn advise on whether restaurants can charge a cancellation fee after booking.

Question:

I live in Sydney and love to go out for lunch or dinner to try out new restaurants. I’ve noticed that more and more restaurants are charging $50 to secure a booking which won’t be charged unless you don’t turn up or give 12 hours’ notice to cancel the booking.

The problem is, with Covid still being very prevalent, it’s not always possible to know if you are going to have to cancel until hours before.

Recently, I booked a table for six and at the last minute two people had to cancel because they got Covid. The restaurant charged me $100 for their no-shows even though I called them and apologised as soon as I found out.

Sydney has always had a reputation for being a money-grabbing place to be, but this feels shady even by Sydney’s standards! Is it even legal? – Rose, NSW

Answer:

This practice of restaurants charging booking fees to secure a reservation is becoming more and more common, especially since the pandemic.

The purpose behind a non-refundable fee is to cover a portion of the restaurant’s loss if the booking is canceled at the last minute or in the event of a no-show.

Without this fee, if a diner were to merely change their mind about going to the restaurant, there would be little incentive for them to give the restaurant sufficient notice of their cancellation, and the restaurant would lose money by holding the table waiting for the diners you arrive.

In some situations, cancellation fees like this can be lawfully charged by a venue.

When you make a booking, you are entering into a contract with the venue, even if it is not written or booked online. A phone booking is a verbal contract.

As such, every contract includes terms and conditions which the Australian Consumer Law says need to be fair.

Like many areas of the law, there is a lot of gray and what is ‘fair’ depends on the specific situation.

Different venues have varying types of cancellation policies, and some don’t have one at all, so you should carefully review any terms and conditions before making a booking and make a note of any relevant deadlines for cancellation.

If the restaurant does not advise you about their cancellation policy or make it clear to you (either in writing or, if you called to make the booking, then over the phone), then the contract would likely be considered unfair and not enforceable, hence you would be entitled to a full refund.

The other aspect to these booking fees that could make them unlawful is the amount being charged on cancellation.

The non-refundable amount should only reflect the restaurant’s reasonable costs thrown away and should not be excessive.

Anything other than this may be seen as an unfair contract term or a penalty, which would not be enforceable.

By way of example, recouping the cost price of a small amount of food ordered to prepare a meal may be seen under the law as reasonable, whereas charging the full menu price of a three-course meal for every guest would likely be unfair as it would likely exceed the cost of the meal.

Another factor to consider is the time frame provided by the restaurant to cancel the booking without penalty.

Given restaurants need to pre-order supplies and prepare for dinner service in advance, 12 hours as mentioned in your question may be a reasonable time frame to impose a non-refundable policy.

That said, if you had booked out the entire restaurant for an event, then a longer period stipulated by the restaurant could be seen as reasonable, as would a higher cancellation fee.

Another factor taken into account when considering whether the cancellation policy is reasonable is the restaurant’s ability to minimize its losses by, for example, rebooking other customers.

As to what to do if you find yourself in this situation again, obviously these sorts of disputes are always better resolved by liaising with the restaurant directly.

Assuming you were made aware of their policy, on cancellation you may be able to negotiate something that suits you both, particularly if they want to keep you as a customer.

In that regard, you could specifically request that they provide you with a credit for the cancellation or re-book using the booking fee for another date. You could perhaps even offer to purchase some additional food to takeaway for the guests who were unable to attend.

It is best to have all verbal communications followed up in writing and ensure you keep records.

If you’re not happy with the restaurant’s response, you can threaten to and then ultimately escalate the issue by making a complaint to NSW Fair Trading and the Australian Competition and Consumer Commission (ACCC).

They will assess your complaint and decide if they can assist you in reaching a resolution with the restaurant.

If you can’t, then your rights under the Australian Consumer Law outlined above can be enforced if you progress the matter to the NSW Civil and Administrative Tribunal.

If when you made the reservation you were asked for credit card details, but not told that your card would be charged if you cancelled, it may be considered an unauthorized transaction.

In this case, you should contact your credit card provider and request a “chargeback” for “services not rendered”. The provider will investigate and run the dispute for you.

At the end of the day, don’t forget that consumers have incredible power to influence, including by choosing whether or not to dine at restaurants that have these types of cancellation policies.

This legal information is general in nature and should not be regarded as specific legal advice or relied upon. Persons requiring particular legal advice should consult a solicitor.

If you have a legal question you would like Alison and Jillian to answer, please email [email protected]

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