Restaurant gift cards: money now, covers later

In the second week of December, a bistro sells more gift cards in five days than in the rest of the year together. The money arrives at the busiest time of year, when the venue needs it least. In February, the cards start coming back: couples with a card from their parents, friends with a birthday present, a guest who has never visited before. The tables that would have been empty on a wet Tuesday are full. Restaurant gift cards bring money now and covers later, and both halves matter.

Gift cards are one of the few things a restaurant can sell that cost nothing until they are used. They help cash flow, bring new guests through the door and fill quiet months. But they also create an obligation: every card sold is a meal the venue has promised to serve, and the money is not really the venue's until it does. Handled carelessly, gift cards can leave a nasty surprise in the accounts.

This guide covers how gift cards help cash flow, when they come back, what happens to cards that never do, the accounting and the liability, how to sell and redeem them well and how to use them in seasonal promotions. Every venue and figure in it is an example.

A gift card is a prepaid amount, or a prepaid experience, that the buyer gives to someone else to spend. For a restaurant, each card does three things. It brings in money before the meal is served. It brings a guest, often a new one, at a time of the guest's choosing. And it turns the buyer, usually a happy guest, into someone recommending the venue to a friend or family member.

That third point is easy to overlook. A guest who buys a gift card is saying they like the venue enough to give it as a present. The card carries that recommendation to someone who may never have heard of you.

Gift cards are usually bought around gift-giving moments: the festive season, Valentine's Day, Mother's Day and Father's Day, birthdays. The money arrives in those weeks, often well before the meals are eaten.

That can help cash flow, especially for a venue heading into a quiet month. But treat it with care. The money is a prepayment for meals you have promised to serve, not profit. A venue that spends its December gift card income as if it were December's earnings may find itself serving those meals in February with nothing set aside to pay for the ingredients and the staff.

Gift cards bought in December tend to come back in the following months, often January to March, when many restaurants are at their quietest. That is the "covers later" half of the story: tables filled by guests who have already paid.

Plan for it. Look at when last year's cards were redeemed, and make sure the venue has the capacity and the staff for the extra covers. A wave of gift card guests arriving on the same Saturdays in February, when they expected a quiet room, can strain a team that was planning for the opposite.

Many gift card guests are visiting for the first time. They did not choose the venue; someone chose it for them. That makes their first visit especially important: if they enjoy it, they may become regulars; if they do not, the person who gave them the card may feel embarrassed.

Treat them as first-time guests. Welcome them warmly, explain the menu, make the evening easy and invite them back. A gift card guest who leaves happy is one of the cheapest new regulars a venue can win, because the card brought them in at no cost to you.

Guests redeeming a gift card often spend more than its value. A card for fifty pounds becomes a dinner for two with wine and dessert, with the difference paid on top. The card was the reason for the visit; the extra spend is a bonus.

Make that easy and natural, without pressure. A server who explains the specials, suggests a bottle that suits the meal and offers dessert treats the gift card guest like any other. Never make them feel the card is a lesser form of payment, or that they should spend more to make up for it.

Some gift cards are never used. They are lost, forgotten, given to someone who moved away or kept in a drawer until they expire. Accountants call the value of these unused cards breakage, and for a venue it means money received for meals that were never served.

Do not build the business on it. Breakage varies from year to year and from venue to venue, and counting on it is risky. Treat unredeemed cards fairly too: a guest who finds a card a little after its expiry date and is turned away will tell their friends, while one who is welcomed anyway may become a regular.

Gift card accounting is the part most venues get wrong. When a card is sold, the money is usually not yet revenue: it is a liability, a debt to the card holder that is paid off when they eat. The revenue is normally recognised when the card is redeemed, and the value of cards that will never be used is handled according to accounting rules that your accountant can explain.

Tax adds another layer, because how vouchers are taxed, and when, differs from country to country. Ask your accountant how gift cards should be recorded and taxed where you trade, before you start selling them in volume, not after the first year's accounts.

Every gift card sold and not yet redeemed is a liability: an amount the venue owes in meals. Keep a running total of the outstanding value, updated each time a card is sold or redeemed, and reconcile it each month against your records.

A growing liability is not a problem in itself; it is what selling gift cards looks like. A liability nobody is tracking is. A venue that has sold cards for years without knowing how much is outstanding may find that a large share of its future covers are already paid for, which matters if it is planning a refurbishment, a sale or a closure. Our guide to points-based loyalty: the maths before the launch covers a similar liability for loyalty points.

Many venues give gift cards an expiry date, often a year or two. Rules on expiry differ from country to country. In some places the law sets a minimum life for gift cards; in the United States, for example, most cannot expire within five years of being bought. Check the rules where you trade.

Whatever the rules, be clear and generous. Print the expiry date on the card, remind holders before it passes if you can, and consider honouring cards that have only just expired. A short expiry date may increase breakage a little, but it creates disappointed guests, which costs more.

Gift cards usually carry a money value: fifty pounds to spend on anything. Vouchers often carry an experience: a tasting menu for two, afternoon tea, a cookery class. Both are popular, and they behave differently.

A value card is simple: the guest spends it like money. An experience voucher is more personal and often makes a better gift, but it promises a specific meal, which creates a risk if the menu or the price changes before it is used. Decide which you sell, and write the terms clearly.

An experience voucher sold for eighty pounds for a tasting menu for two is a promise to serve that menu, even if its price rises to a hundred before the voucher is used. Over a long expiry period, rising costs can turn a profitable voucher into a loss.

Protect yourself without letting guests down. Set a sensible expiry period, describe the experience in a way that allows the menu to change with the seasons, and decide in advance what happens if the experience is no longer offered, such as converting the voucher to its original value. Then honour it graciously.

Make gift cards easy to buy. Offer them at the till, so guests paying for a meal can add one; on your website, so guests can buy at any time; and by phone for guests who prefer it. Display them near the door and the bar in the weeks before gift-giving moments.

The card itself matters, too. A well-designed card, in an envelope, feels like a proper present. A printed code on plain paper does not. For online sales, an email gift card that the buyer can print or forward makes last-minute buying easy, which is when many gift cards are bought.

Gift cards fit naturally into seasonal promotions. The festive season is the biggest moment, followed by Valentine's Day, Mother's Day and Father's Day. Promote gift cards a few weeks before each, in the venue, on the website and in an email to guests who opted in.

Plan the promotion with the season. The festive gift card email should go out in late November and again in mid December, for last-minute buyers. Our guide to seasonal promotions planned three months out covers how to build gift cards into the year's promotions.

Some venues offer a bonus on gift cards: buy fifty pounds, get ten pounds extra, or a free card for the buyer. Bonuses can boost sales, especially in the festive season, but they are a discount in disguise, and they add to the liability without adding cash.

If you offer one, set limits. Make the bonus redeemable only in quiet months, such as January and February, so it fills tables that would otherwise be empty. Give it a shorter expiry than the main card. And count its cost honestly, as you would any other offer.

Companies sometimes buy gift cards in bulk, as thank-you gifts for staff or clients. A single order can be worth many individual sales, and it brings guests who may never have visited.

Make bulk buying easy: a contact for corporate orders, an invoice option and cards that can be personalised or branded. Treat these guests well, because a good experience can lead to a company booking its next team dinner with you.

The moment a guest redeems a gift card is part of their experience. Make sure every member of staff knows how to accept cards, check balances and handle partial use, so the guest never waits while someone looks for the manager.

Make it feel normal. A guest paying with a gift card should be treated exactly like a guest paying any other way. Record each redemption accurately, because it reduces the liability, and keep any remaining balance on the card for the guest's next visit.

Gift cards have value, so they attract fraud: cards bought with stolen payment details, codes guessed or copied, cards resold or used twice. Most venues see little of it, but a few simple controls help.

Use codes that are hard to guess, record every card sold and redeemed, check balances before accepting a card and be cautious with large online orders that look unusual. A card system that marks each card as used once it is spent stops the most common problems.

Gift cards are sometimes confused with prepaid bookings, but they are different. A gift card is prepaid value with no date attached; the guest books when they like. A prepaid booking, such as a deposit or a fully paid event ticket, is tied to a specific date and time, and protects the venue against no-shows.

Both bring money in advance, and both create obligations, but they solve different problems. Gift cards bring guests at the time of their choosing; prepaid bookings secure guests on a particular night. A venue can use both, as long as its records keep them clearly apart.

Decide what happens when a guest loses a card. If cards are registered or sold online, a lost card can often be replaced with a new code for the remaining balance. If they are anonymous paper cards, replacing them may not be possible.

Decide, too, whether cards can be refunded, and say so in the terms. Most venues do not refund gift cards, but rules on this differ, and a generous, clear policy avoids arguments. Whatever you decide, apply it consistently and kindly.

In a group, decide whether gift cards can be used at every venue or only at the one that sold them. A group-wide card is more attractive to buyers, but it complicates the accounts, because the money arrives at one venue and the meal is served at another.

If you allow group-wide cards, agree how revenue moves between venues when a card sold at one is spent at another, and track the liability for the whole group. Explain clearly on the card where it can be used, so guests are not disappointed.

Measure a gift card programme with a few figures: cards sold and their value, cards redeemed and their value, the outstanding liability, how much redeeming guests spent above the card's value and how many of them were new guests who returned.

Look at them each season. A programme that sells well but whose cards are rarely redeemed may need clearer reminders. One whose redeeming guests rarely return may need a warmer first visit. The figures tell you where to improve.

Regulars are often the biggest buyers of gift cards, because they love the venue and want to share it. Thank them: a word at the till, a note in the envelope, perhaps a small gesture on their next visit.

Regulars who give gift cards are recommending you to people they care about. That is worth more than almost any advert, and it deserves recognition. Our guide to loyalty for a small venue with no marketing team covers how gift cards fit into a simple loyalty approach.

An invented bistro sells gift cards mainly in December, without tracking the outstanding total. In February, it is surprised by a run of gift card guests on Saturdays, and its accountant points out that the unredeemed cards are a liability it has never recorded. The bistro starts a simple register of every card sold and redeemed, reconciled monthly, and asks its accountant how to record them.

The next year, it promotes gift cards in late November and mid December, adds a modest bonus that can only be used in January and February, and briefs the team to welcome gift card guests as first-time guests. Its January covers rise, the liability is known at every month end and several gift card guests become regulars.

servearound does not sell or track gift cards: there are no gift cards or vouchers in servearound, and the till records a payment as cash or card. Gift cards are sold and redeemed through your own provider or website, and their balances and liability are tracked there and in your accounts.

What servearound offers is the email side. Among the more than 150 campaign templates are two about gift cards, one for any time of year and one for the festive season, and campaigns go only to guests who opted in, scheduled to send at a set time on the venue's clock. A card holder who books a table appears on the booking like any guest, and when the booking shows no previous visits, the team knows to welcome a first-time guest. See Campaigns and pricing.

Usually, yes: they bring money in advance, new guests and covers in quiet months.

Usually not until the card is redeemed. Until then it is a liability. Ask your accountant.

Their value is known as breakage. Do not plan the business around it.

Rules differ by country. Whatever the rules, make expiry clear and be generous.

A gift card usually carries a money value; a voucher often carries a specific experience.

Only with limits, such as redeemable only in quiet months, and with its cost counted honestly.

No. Gift cards have no date attached; prepaid bookings secure a specific night.

Track cards sold and redeemed, the outstanding liability, spend above card value and how many new guests return.

Restaurant gift cards bring money now and covers later. They help cash flow around gift-giving seasons, bring new guests in the quiet months that follow and turn happy guests into recommenders. But the money is a prepayment, not profit: every unredeemed card is a liability on the books, and some cards will never come back.

Track the outstanding value, take advice on accounting and tax, set clear and generous expiry terms and plan for price rises on experience vouchers. Sell cards easily, in the venue and online, promote them in seasonal promotions, keep bonus offers to quiet months and make redemption smooth. Above all, welcome gift card guests as the first-time guests they often are, because each one is a chance to win a regular at no cost.