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The Truth About Cancellation Fees

About the author:

Codie Henry is a former stylist based in PA and the Vice President of The Sovereign Stylist. Having finished his bachelor's degree in public relations. He is currently working on his Masters of Dispute Resolution from Pepperdine Law School. Codie’s blogs are typically focused on legal issues, marketing, and public relations topics. Codie believes that knowledge and language is the strongest weapon one can wield and that people should always strive to be life-long learners.

 

We get it, no one likes to miss out on money. As most of us know, the common method to prevent losing out on money when it comes to late cancellations and/or no-call/no-shows are cancellation fees. However, the realm of cancellation fees or booking fees is a complicated matter. These types of policies rely on contract law.


“But it’s my business, Codie, can’t I do whatever I want?”

Well… no. In this article, I'll break down why.

 

Contracts are very simple creatures. In a basic sense, there are three elements to a contract:

  1. Offer- One party must offer to enter into an agreement.

  2. Consideration- Something of value is received or promised.

  3. Acceptance- Both parties must accept final terms.

*Keep these three things in mind as we dive into each category. *

 

Cancellation Fee:

A cancellation fee, typically, is a fee that is assessed to a person that cancels an appointment outside of a set amount of time (i.e. Cancel or reschedule with less than 24 hours’ notice) or no-shows the appointment completely.


So, for a cancellation fee to apply, a contract has to be formed. In the salon world, the contract is created by setting up an appointment to receive services.

  1. Offer- The stylist offers to perform service(s) on a particular date at a certain time.

  2. Consideration- The value equals the service price(s).

  3. Acceptance- Both parties agree and the service is booked.

Stylists have been coached to enforce cancellation fees which might say something like: "Guests are required to provide 24 hours notice prior to canceling or rescheduling. Failure to do so will result in a cancellation fee of 100%."


I get it, putting it in legal format sucks all the fun out of it. However, let’s break this down a bit.


For the contract: a guest has scheduled for March 22, 2023, at 1:00 PM for a cut and color at a price of $200. Both parties have agreed to this contract as well as the cancellation fee.

The guest fails to show up to the appointment, thus breaching the contract. Can you charge the cancellation fee?


No. It is, generally, illegal to charge 100% for a service never rendered. Charging for such could result in a chargeback, which you will lose.


Why? I’m glad you asked.

Contract law is the answer. The contract is for a cut and color on March 22, 2023, at 1 PM for $200. Because the client didn’t show up, the contract was never completed. A court will not enforce one party to uphold their end of a contract (guest paying $200) while the other party does not (stylist doing the cut and color).


Further, there is what is known as the legal duty to mitigate damages. This falls under contract law as well, but is typically statutory. But for the most part, people have a legal duty to mitigate the damages they incur from a breach of a contract.

Great, but what does that legalese mean?

Well, for the cut and color, the duty to mitigate damages would require that you deduct the cost of the color from the cancellation fee. Further, you have a legal duty to attempt to fill the gap in your schedule.


So, let’s say it costs you $20 in color to do this cut and color. That would be $20 minus the $200 price tag. However, you also posted on social media and got a haircut to take some of the free time. Your haircuts are $45. That means that $45 is also deducted from the $200.


Breaking down the math: $200 – $20 - $45 = 135


As we can see, it’s not possible to charge 100% for a service never rendered. Generally, the sweet spot is between 20 to 50%.

 

Booking Fee:

The Sovereign Stylist generally recommends what we call a "Booking Fee."

How does this work, and how does it differ from a cancellation fee?

A booking fee creates a baby contract separate from the main contract for the service itself. A booking fee is a contract accepted and completed when a time slot is secured. This avoids the pitfall of a contract not being completed under a cancellation fee.


Remember that $200 cut and color? If you wanted $125 to secure the appointment, that money is yours the second the appointment is secured in your book because the contract has been completed at that point.


What does a booking fee look like? It's actually rather simple.


"Prior to securing your appointment, a booking fee of 50% is required. This 50% will be deducted from the final cost of the service."

Finally, the client should sign the contract either digitally or physically.

 

And there we have it! The differences between cancellation and booking fees. We hope this information will prepare you to solidify your salon policies.


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