How to charge for bike rental cancellations?

March 13, 2012 9:48 AM

What's a fair way to deal with bike rental cancellations and/or security deposits for a small company just getting into this?

So my husband and I have a small mobile bike shop in our small (beach) city, and we started doing rentals for this season - insurance and bikes are all set and ready to go. Since we don't have a storefront, our model is that you can reserve via phone or online, and we drop the bikes off at your motel, rental cabin, or house or wherever in our tourist area (Cape Ann, MA.)

But our first rental? Cancelled on us today. They said they had a family emergency, not a big deal, it happens. However, I didn't get a credit card in advance. Lesson learned. They booked only a few hours prior and there were no other requests for that time, we aren't out money. We weren't expecting rentals this early in the season.

We've got most of the big stuff worked out, but not small things like above.

What, askmefites, do you think would be a fair cancellation charge for less than 24 hours notice? I was thinking $10 per bike to hold a reservation over the phone since we are delivering, and that's forfeited if there's a cancellation. Then, when they sign the release and pay (via our square card), the $10 gets deducted from the rental cost. Is that too little? I want to be fair, but I don't want to be taken advantage of, either. We have a very small fleet and a small income.

The other question I had was how to handle security deposits. Unfortunately, we only use SquareUp, so there's no option for authorization only. We can either not charge any security deposit and just take down the same credit card information that they use for the bike rental (rental is paid for when we drop the bike off to them in the morning), or charge them a set amount and refund it at the end of the day, but I can imagine consumers may be wary of the latter option.

I'd love to hear your opinions on how best to do this to make customers happy, and make us happy, too. If you've rented lately, how did other places do it? Were you satisfied?

posted by kpht to sports, hobbies, & recreation (9 answers total)

I'm not sure you should have such a fee, at least until you've established that such cancellations are a pattern you simply can't live with. Don't make policy based on one bad experience. Keeping someone's deposit is likely to alienate them, and they won't have nice things to say about you, which will likely cost you a lot more than any justifiable cancellation fee. Being generous will probably generate a lot of positive word-of-mouth.

Maybe take a deposit, but be ready to refund it in full?
posted by jon1270 at 10:10 AM on March 13, 2012

I think cancellation same day could have a small fee associated, but only if you held the booking for some time previously, or a more recent booking where you showed up with the bikes to find the cancellation. But for family emergencies, I would always waive it.
posted by chapps at 10:17 AM on March 13, 2012

As a fellow square user, I can tell you that square won't refund their fees if you elect to refund a charge back to your customer.
posted by Wild_Eep at 10:19 AM on March 13, 2012

Some issues stem from the business model, which isn't really the customers problem.

(i.e. small stock of bikes, delivery rather than store front) These mean you have particular concerns that aren't comparable to the store front rentals, have advantages in some way for the customer (i.e. as a non-car owner, I appreciate the delivered bike!) But they also have cost savings for you (i.e. not renting a store, not maintaining stock) which means the customer can't walk in and be assured of a bike without pre-booking,

So i think it's important to consider it from that angle. I might have a delivery fee for the entire booking (assuming it costs the same to transport several bikes as it does one) and if it is cancelled same day, keep the delivery fee.
posted by chapps at 10:20 AM on March 13, 2012

I think when I was in Ireland, we had to leave a license or other form of ID while out with the bikes, rather than leave a monetary deposit. Something like this might work out better for you, too, than a monetary security deposit.
posted by zizzle at 10:34 AM on March 13, 2012

I should have mentioned that we also use velolet to book online, so their system for reservations is no refunds at all if cancellation is under 24 hours from reservation unless the weather is significantly terrible, and that's settled. The advice given here would only be for folks who called us on the phone to book, where we have discretion to do what we'd like.

I looked around for comparison and it seems most touristy bike rental places in my area keep the whole thing if under 24 hours unless the weather's terrible, much like hotels will keep your money if you cancel within x hours. That's obviously fair to the company, but as a consumer it kind of sucks. It's a tough spot all around - I don't want to piss people off, but a reservation is a reservation, and if it happens on a busy holiday weekend, that's really unfair to us. Obviously if it was a family emergency I'm lenient, a small hotel cancelled our reservation on Columbus Day weekend last year when my husband had shingles, and I'm indebted to them for their awesomeness and will return.

I'd also be OK with using a forfeited deposit toward future rental that year.

I'm totally now on board with not charging any kind of security deposit and just having a license #, and you guys solidified my thinking on that, so thanks!
posted by kpht at 10:39 AM on March 13, 2012

For what it's worth, it's better to have a strict policy and then be lenient at your discretion — even if you end up being lenient nearly all the time. "He talked to me about it and ended up refunding my deposit" is in some ways even better for customer goodwill than "He never charged a deposit to begin with," and it leaves you the right to keep a deposit if someone is really inconsiderate.

On preview, letting people use their deposits towards a future rental sounds like a great idea.
posted by nebulawindphone at 10:47 AM on March 13, 2012 [4 favorites]

You are just getting started -- what's most important right now is getting customers (any customers) and making them happy.

I wouldn't worry too much about this until you get your 25th cancellation.

Also, cancellations don't cost you any money UNLESS you have another customer who wants a bike and you have no bikes available. Once you reach peak season, AND you are running out of bikes (a great problem to have, BTW) then reservation fees make sense.

Since your model isn't proven yet, I'd say you'd want it to be as easy as possible for your customers to sign up. Asking for no reservation or deposit means there is less of a barrier to rent from you.

Seconding nebulawindphone once you have too many customers to handle :)
posted by bushmango at 12:34 PM on March 13, 2012 [1 favorite]

I agree that you are better to charge a deposit and have a strict policy on refunds, but be prepared to waive this in almost all circumstances, at least as you build your business up. Even if you do uphold the policy, give them a credit for the same amount for future hires. This way, you have arrangements set up the way you would want them for the longer term and you get to provide better customer service by treating people as individual cases and being soft about the policy. They'll remember your 'kindness' and recommend you to others and likely return if they can.

The value of that $10 deposit you keep is far and away lower than the value of the goodwill you build by giving them their deposit back, especially if they aren't expecting it.

most touristy bike rental places in my area keep the whole thing if under 24 hours unless the weather's terrible
All the more reason for your business to do otherwise, if you ask me (which you did ;-). This may also win you points with accommodation providers who can steer business your way (or not...). The staff there don't want to deal with guests whining about how they lost their deposit at that place the staff referred them to.
posted by dg at 8:50 PM on March 13, 2012 [1 favorite]