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quids: You are in the wrong here this time. I do not think this should have been a big deal for the kid and I think that staff happy birthday singing in restaurants is idiotic. However, once the hostess tells them they will sing happy birthday, the owner should either have them make an exception and sing happy birthday or otherwise compensate them by comping some stuff or giving them a gift cert or something. Just saying, SORRY, LOL, WE DON'T DO THAT ANYMORE isn't acceptable. I'm confident every bar or restaurant owner I know (a lot) would all agree with me. The restaurant screwed up, it is their responsibility to try and make it right.
All: FYI, the restaurant in question:
http://www.eltorero.com/
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I haven't read the whole thread, but agree on the comping part, as long as it's a minor comp. Definitely don't think a restaurant should have to change its policies every time an employee goes stupid, though.
Also, this would play out different if there were other patrons in the restaurant and if there weren't. If nobody was around, a quick policy change would be fine. If others were, a disruptive spectacle is something a lot of other diners might not want to share, which is fair enough.
Btw serious consideration should be given to the comp having some impact on the hostess, for making it necessary. Even more so, for letting it escalate all the way to the owner. Owners should not have to pay people to handle this stuff for them, and then have to handle it themselves because the people they paid f*cked up.