Fast-Casual Loyalty Programs & Recession Fears
# Restaurant Loyalty programs Evolve to Win Over Value-seeking Diners
As economic pressures mount, restaurant chains are increasingly turning to revamped loyalty programs to attract and retain customers. These aren’t your grandfather’s punch cards; today’s programs are dynamic, flexible, and designed to deliver immediate value in a challenging habitat. From simplifying reward structures to embracing digital wallets, restaurants are experimenting to find the sweet spot between enticing offers and protecting already-thin profit margins.
## The Shift in Strategy: From Tiered Systems to Immediate Gratification
For years, tiered loyalty programs were the standard, promising escalating rewards for frequent visits. However, many consumers found these systems complex and arduous to navigate. Now, restaurants are simplifying, focusing on delivering tangible benefits upfront to capture attention and drive repeat business.
Sweetgreen is a prime example. The fast-casual salad chain retooled its loyalty program this spring, moving away from its tiered subscription program that many consumers found confusing.
“In a challenging industry environment where consumers are making more intentional choices with every dollar, SG Rewards is designed to meet the moment by delivering a meaningful value,” Sweetgreen co-founder and CEO Jonathan Neman said on the company’s quarterly conference call in May.
This shift reflects a broader understanding of the current consumer mindset. Diners are prioritizing value and seeking immediate rewards, rather than striving for aspirational tiers that may take months to achieve.
## Even Industry Leaders Are Adapting
Even established players like Starbucks are acknowledging the need for change.In June,the coffee giant ended its 25-star reusable cup bonus,replacing it with double stars across the full purchase. While the move sparked controversy among some loyal customers who felt the earning potential decreased, Starbucks reported steady participation levels. This demonstrates a willingness to experiment, even with a highly successful existing program, to optimize for engagement and overall value perception.
of course, offering free rewards isn’t without its challenges. Promotions inevitably impact profitability in an industry already known for tight margins.Restaurant chains are betting that these incentives will foster long-term loyalty and encourage increased spending on full-price items. The key is finding a balance that attracts customers without substantially eroding profits.
### Long-Term Wins Through Enhanced Engagement
Brands are discovering that well-designed loyalty programs are directly contributing to increased customer visits and spending. The success stories emerging from recent program overhauls highlight the importance of versatility and ease of use.
Potbelly revamped its loyalty system in early 2024, transitioning to a coin-based structure. This allows customers to redeem rewards more quickly and across a wider range of menu items – now exceeding 14 options.
“we saw a lift almost immediately in terms of engagement,” said Potbelly’s chief marketing officer, David Daniels. “The response has been incredibly positive.”
Chicago-style eatery Portillo’s launched its first-ever loyalty program, “Portillo’s Perks,” in March. Rather than developing a traditional app, Portillo’s opted for a digital wallet system that emphasizes visit frequency, awarding badges to customers as they return.
“it gives flexibility to change how the program is deployed,” explained Garrett Kern, Portillo’s vice president of strategy and culinary, to CNBC. “It doesn’t require a redesign and relaunch to an application.It was a great way for us to get the program out there in a branded and easy-to-use way.”
Portillo’s is targeting 1.5 million to 1.7 million sign-ups by mid-summer,signaling strong initial interest in the program.
– *CNBC’s Amelia Lucas and Jacob Pramuk contributed to this report.*