Next-gen loyalty programs keep customers coming back as restaurant traffic declinesNext-gen loyalty programs keep customers coming back as restaurant traffic declines

As guest traffic to restaurants continues to decline, it’s important to get the most out of the guests who do arrive, and to encourage them to come back more often. One tool for doing that is loyalty programs, which was the topic of Nation’s Restaurant News’s first Emerging Restaurateur Live Learning Series event of 2023.

“With advancements in digital tools and a pressing need to provide value to consumers, loyalty programs have increasingly become a popular way for restaurant brands to connect with their guests and encourage frequency,” NRN editor-in-chief Sam Oches, who moderated the discussion, told attendees.

The webinar on Wednesday was presented in partnership with the Savory Restaurant Fund and Black Box Intelligence. Savory’s managing director, Andrew K. Smith said that as restaurants emerge from the pandemic, “We really do need our patrons to like us, love us, and want to come back and tell their friends.”

That means traditional loyalty programs, such as punch cards that offer a free item after 10 purchases, might not be engaging enough.

“It’s about creating a connection and letting that customer really personalize their experience,” he said. To help restaurateurs develop programs uniquely suited to their customers, new technology is available that allows operators to collect more data about their customers, such as when and how often they visit, who they come with, what they order, and more.

But Victor Fernandez, vice president of insights and knowledge at Black Box Intelligence, warned about jumping into loyalty programs if your operations are in order. He said that in public reviews on sites such as TripAdvisor, loyalty program members tend to rate their experiences less positively than others, probably because they know just how good their experience can be, so they can be disappointed when it falls short.

With restaurant traffic down by more than 9% at the end of 2022 compared to 2019, according to Black Box data, and with many observers expecting a mild recession at some point in the next year, getting those operations in order is important for other reasons, too, Fernandez said.

Yaron Goldman, CEO of Finally Restaurant Group, parent company of Rib & Chop House, an upscale restaurant with locations in Montana, Wyoming, and Utah, told attendees that the chain was shifting away from a traditional model of getting a fixed number of loyalty points based on how much money you spend to a subscription based “Royalty” program that they launched a year ago. Guests pay $50 per month to be members and are immediately gifted a knife set. They also get to move to the top of waitlists, get 10% meal discounts, gift cards, invitations to special dinners, wine tastings, and more.

“So far it’s been going really, really well,” he said, with an attrition rate of less than 5% after a year.

Those Royalty members come in three times more often than traditional loyalty members and also spend 28% more per visit on average. They also tip better, Goldman said.

Now he’s working to convert those traditional loyalty members to the Royalty program, and if they don’t want to upgrade, he said the company would “buy them out with gift cards.”

Snooze, an A.M. Eatery, a casual-dining breakfast, brunch, and lunch concept, launched its multitiered My Snooze Benefits program in April, and since then have recorded more than $6 million in loyalty-related transactions, according to Adam Porter, the chain’s director of digital strategy.

It’s a money-for-perks program in which guests earn 100 “Jacks” for every dollar they spend, but the perks get better based on whether guests are in the bronze, silver, or gold tier, and those tiers were designed with the goal of driving traffic.

Porter said that the average Snooze customer visits around three times per year. If they can increase that number to four or five, the program is “incredibly worthwhile for us.
 So the tiers are designed so that the difference between bronze and silver status equates to the difference between visiting three times and four times.

“That point of division was a really intentional break point,” he said, adding that guests who visit every month will achieve gold status.

Additionally, Snooze tends to have long waits for weekend brunch, but considerably less traffic during the week, so weekday visitors earn more Jacks, Porter said.

Original ChopShop, a fast-casual concept, launched its loyalty program in August of 2020, using Paytronix to manage it, CEO Jason Morgan told the audience. Guests who earn “Chops” get $20 in reward dollars, and they can also load funds into their app, which encourages them to come back.

Now about 45% of direct sales have a loyalty number attached to them, and 70% of orders originate in their app.

Paytronix also gives them strategic analytical support for an added fee, which Original ChopShop has used to help structure their marketing. 

Morgan said the data indicated that if they get guests to visit three times, there’s almost a 90% chance that they’ll come in a 4th time.

“Everything we do is driven to trying to drive frequency,” he said.

So over the holidays they told loyalty members that if they loaded $50 onto their app they’d get $3 off of their purchases ever day in January.

“With that we get people loading funds, [and] we get people coming back more frequently to use those funds. It’s all connected,” he said.

Eureka! Restaurant Group just launched its loyalty program in July, through which guests get $10 for every $200 they spend, and they get free cheese fries if they link their credit card to their loyalty program, vice president of marketing Alexia Penna explained.

Loyalty program members also get exclusive items such as special cocktails, “secret” menu items and “menu hacks,” she said.

Using guest data collected via the loyalty program, Penna said they’re currently figuring out how to structure higher-tier programs based on what guests say they want, such as branded swag, trips, unique experiences, and other perks, such as highly allocated bottles of spirits from local distilleries with which Eureka! partners.

“We really love sharing our passion for small-batch distilleries with our members,” Penna said.

This panel and others in NRN’s CREATE Live Learning series can be watched on-demand at create.nrn.com.

Contact Bret Thorn at [email protected]