[fn Editorial] Increase in No-Show Penalty Fees... Comprehensive Measures Needed for Small Business Owners

On the 22nd, the KFTC issued an administrative notice for a revised consumer dispute resolution standard. Under this proposal, group reservation customers who do not show up on time at high-end restaurants such as omakase or general eateries could face a penalty fee of up to 40% of the total amount (up from the previous 10%). This move aims to ease the burden on small business owners who are suffering from both an economic downturn and the impact of no-shows. The new standard could be implemented as early as this year.
While some no-show customers may have simply forgotten to cancel, there are also fraudsters who intentionally make expensive reservations and then disappear. Such actions not only cause direct revenue losses for business owners but also restrict services for other customers, resulting in both economic and social harm.
According to the Hyundai Research Institute (HRI), in 2017, no-shows led to revenue losses of 4.5 trillion won in the five major service sectors—including restaurants, hospitals, and beauty salons—and annual job losses of 108,000. The scale of the problem is likely even greater today. No-shows have long been a serious threat to the survival of small business owners. It is overdue for the government to address this issue, having recognized its severity only now.
The increase in penalty fees will apply not only to restaurants but also to wedding halls, study cafes, accommodations, travel agencies, gyms, clothing stores, and most other self-employed businesses where cancellations, exchanges, and refunds are common. While higher penalty fees may help reduce no-shows, they could also discourage reservations altogether, potentially reducing sales for business owners. In some sectors, existing penalty fees were already excessive, and further increases have sparked consumer complaints. During the administrative notice period, authorities should listen to both industry and consumer voices to ensure the policy is practical and balanced.
Although no-shows have become a social issue, they are not the only challenge facing small business owners. Malicious reviews, franchise headquarters and delivery platform commission fees, and rent burdens are all shaking the foundations of their livelihoods. In particular, many small business owners suffer from groundless malicious reviews. One survey found that 78% of small business owners have experienced such reviews. According to the National Tax Service (NTS), as of 2023, there were 1.05 million sole proprietors who reported zero income on their comprehensive income tax returns. This means that one in ten businesses had no profit or even incurred losses after expenses.
Self-employed businesses account for about one-fifth of all employed people and form the backbone of the Korean economy. As they support local economies through employment and consumption, instability in this sector could weaken the entire national economy. The government should not stop at no-show countermeasures but must develop comprehensive and sustainable policies that cover the entire self-employed ecosystem. Substantial support is needed so that small business owners, who are on the brink of survival, can recover.