the FTC has significantly increased the threshold for no-show penalties. Reservation-based restaurants can charge up to 40% of the reservation. see also the penalty rules for restaurants and wedding venues.
no-show penalties are now up to 40 percent
a recent announcement from the KFTC has a lot of people wondering. the new rules are designed to protect reservation-based restaurants, such as omakase and fine dining, from the harmful effects of no-show penalties. today, we're going to take a closer look at the new no-show penalties and the refund policy for canceled reservations.
table of contents
- what the old deposit system was like
- the new no-show penalty threshold
- what is a reservation-based restaurant
- cancellation refund policy
- changes to wedding venue penalties
- frequently asked questions
what was the old deposit system like?
historically, restaurants were only allowed to take a deposit of up to 10% of the total bill. A deposit is an amount that a customer pays in advance to secure a reservation, and is either deducted from the bill or returned at the time of the actual visit.
however, if a guest no-showed, this deposit acted as a penalty for the restaurant to keep. The problem was that 10% was too small a percentage of the actual loss to the restaurant, especially for omakase and fine dining, where high-end ingredients must be prepared in advance.
the new no-show penalty standard
the KFTC has introduced new measures to prevent restaurant no-shows. According to the revised Consumer Dispute Resolution Standards, restaurants will be able to collect up to 20 percent of the reservation amount. that's double the previous 10 percent.
more notable is the case of large orders or group reservations. for example, if you order 100 rolls of kimbap, you can take up to 40 percent of the total cost of the order, which is 160,000 won out of 400,000 won.
what is a reservation-based restaurant?
a new concept added in this revision is reservation-based restaurants. this includes omakase and fine dining establishments that accept reservations in advance and prepare ingredients and food accordingly.
reservation-based restaurants can receive up to 40 percent of the reservation fee, which is higher than regular restaurants. If four people make a reservation for an omakase that costs 100,000 won per person, the restaurant can receive up to 160,000 won out of a total of 400,000 won.
this standard is based on the fact that the typical cost of goods in the restaurant industry is around 30%. The higher deposit rate is due to the fact that the restaurant has to prepare high-quality ingredients in advance, and a no-show is a big loss for the restaurant.
cancellation policy
sometimes you have to cancel your reservation for personal reasons, and the amount of your refund will depend on when you cancel.
if you cancel at least an hour before your reservation, you'll get a full refund, but if you cancel within an hour, you'll only get 25% of your deposit back, and no-shows are non-refundable.
reservation-based restaurants are a little stricter. you need to cancel a day in advance to get a full refund, and if you cancel up to an hour in advance, you'll get 50 percent of your reservation back, but if you cancel within an hour, you'll only get 25 percent. No-shows are also non-refundable.
restaurants must communicate these refund criteria to consumers in advance. it should be clear, such as half a refund for cancellations made one hour in advance and no refunds for no-shows. Restaurants can also set their own thresholds for no-shows, but this should be communicated in advance.
changes to wedding venue penalties
the revisions also include changes to the penalty threshold for canceling a wedding venue contract. previously, a full refund was available for cancellations 150 days before the wedding, 10 percent for 60 days, 20 percent for 20 days, and 35 percent after that.
going forward, the closer you get to your wedding date, the higher the penalty. the 150-day, 60-day, and 30-day cancellation thresholds will remain the same, but venues will now be able to charge a 40 percent penalty for cancellations 10 days before the wedding, 50 percent for cancellations between 1 and 9 days before, and up to 70 percent for same-day cancellations.
it's also important to note that if the contract is canceled due to the venue's fault, the venue will have to reimburse guests for the same percentage penalty.
frequently asked questions
q1: Do all restaurants accept 40% deposits?
no. Restaurants can only take up to 20% by default. the 40 percent only applies to restaurants that take large orders or group reservations, or reservation-based restaurants like omakase or fine dining.
q2: How far in advance do I need to cancel to get a refund?
you need to cancel up to one hour before your reservation at a regular restaurant and up to one day before your reservation at a reservation-based restaurant to receive a full refund. After that, you may receive a partial or no refund, depending on when you cancel.
q3: What happens if a restaurant doesn't provide a refund policy?
restaurants are required to disclose their deposit and refund policies to consumers in advance. If they don't, you can take them to court to resolve the dispute under the Consumer Disputes Resolution Standard.
q4: Do the new standards apply to existing reservations?
if you have already booked and paid for a reservation, the standards in place at the time of booking will apply. the new standards will apply to bookings made after the amendments go into effect.
q5: Why are wedding venue penalties higher than restaurants?
this is because venues are booked for a specific date and time, and it's difficult to get another booking in the event of a cancellation. In addition, venues require a lot of preparation, including catering, decorations, and staffing, so the impact of a cancellation is greater.
for a culture of reasonable reservations
raising the threshold for no-show penalties is a win-win for both restaurants and consumers. restaurants will be able to mitigate the damage caused by no-shows, and consumers will have more reliable reservations. It's in everyone's best interest to check your schedule carefully when making a reservation, and to contact us as soon as possible if you must cancel. if you have any questions, let us know in the comments.