I did some work for a client last month who had a nice-size food & beverage minimum to play with. Or rather I had a rather large-size F&B minimum to play with. We fed and watered the people all day long. All the guests of this high-income group enjoyed themselves very much. No one wanted for anything.
With all of this being said and done, however, at the end of the day WE WERE STILL a couple of thousand dollars short of the minimum. Sally (that’s what we’ll call this client) called me to discuss. She received the invoice and, of course, had to pay the shortfall difference. That wasn’t the issue. The issue is that she was charged tax and service charges on monies that she technically didn’t use. Right or wrong?
You have a couple of options.
This group meets every year at this facility, and the F&B minimum is a nice chunk of change for the day. One option is to pay the extra money and roll it into next year’s contract. If you are a loyal customer, most facilities are willing to do this. Second — and I have done this with many clients — is to make up the difference in alcohol. Even though this is technically in violation of the liquor license, many facilities will do it, and the client will use the bottles of wine to give out to customers throughout the year.
What would you say to Sally in this scenario? She had a lot of coffee breaks on consumption for 800 people throughout the day. She had about 200 no-shows, which must be allowed for in your original figures. We budgeted for the no-shows and that budgeted money is what led to the shortfall.
Back to the original question about tax and service charges on monies not spent. Right or wrong? I don’t have a legal answer on that, and I am investigating. But the correct answer, in my opinion, is that the tax must be paid because the facility is receiving income from you. But nothing was served, so the service charge should be moot.
If any of you find yourselves in this situation make sure you note on the contract that you will pay taxes on attrition but not pay service charges.
That is my story for now, and I am sticking to it.