There are at least two types of refund situations. The cancellation refund is when event is just not going to take place or is cancelled. Sometimes the caterer can’t rebook the date or the ballroom, resulting in a loss of profit. The performance refund is when the customer believes—true or not—that the caterer has placed them in a bad situation during the execution of the event. A performance refund might be demanded for such things as running out of some food items, stale rolls, the wrong color frosting on the cake or an unprofessional staff member.
When you are faced with a refund situation, ask yourself:
1. Why is this particular refund happening? Did the wedding couple break-up? Was there bad weather? Was the cost of the event too high for the client? Is there a rumor going around about my company? How many extra people did they invite that weren’t in the guarantee? Is my customer being influenced by anything that I said or did before the event?
2. What are my real losses? Is the event canceling with just two days to go, or is it six months out? Can I resell my space or date? Are they leaving me and moving to a competitor? Can I get credits from my suppliers? Can the stuff I already bought for this event be used at a later date for another catering?
3. What are the consequences to my business if I don’t handle this refund properly? How will my image be affected if I say no to the refund request? How will it be affected if I say yes? Is this a local group? What will future customers do if they find out what I did for someone else? Will it save my relationship with this buyer?
4. What is the potential refund? Do I need to give it all back? Does it have to be cash, or can I give a credit towards a future event? Can I just send some extra food after the party? Do I send cash or food?
5. How should the refund be paid? Should it be a credit towards a new event? Should it be paid back only if the date is resold? Can I give them a refund account to eat in my restaurant? Can I make a donation to a charity in their name? Can I give them more food? Should I deduct a professional fee from the refund amount for my planning time? Did I give them anything free during the planning and selling that I can now charge again.
6. What are the real costs associated with this refund? What are the chances that I won’t be able to resell my date or space? Do I still have to pay for any staff because the cancellation came so close to the date? How much volume will I lose from the community once they find out about my problem?
Refunds are not a happy topic for either caterer or client. When money and image are very important, a caterer needs a policy that is fair to both parties. (Some states and cities have laws pertaining to the amount of money that a caterer can keep if an event cancels.)