Restaurant brands are turning to subscription models in the next big loyalty trend in 2023

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Over the last three to four years, on-demand video and audio streaming platforms such as Netflix, Prime Video, and Spotify have popularized the subscription business model. However, now the business model is finding its way into the restaurant industry, with many leading brands turning to the subscription services model to build customer loyalty and drive revenue growth.

• In February 2020, Panera Bread, the United States-based foodservice brand, become one of the early adopters of the subscription model, when it launched a monthly unlimited tea and coffee subscription service for its MyPanera rewards program members. In August 2022, the firm expanded the scope of its subscription service and included all beverages, apart from tea and Coffee. As part of the Unlimited Sip Club, which is now priced at US$10.99 per month, members can ask a free beverage after every two-hour interval at any Panera Bread’s physical outlet.

In February 2023, Panera Bread further extended the scope of its subscription service for the loyalty members. The firm announced that is adding an annual membership option, available at a discounted rate, to its Unlimited Sip Club members. Notably, the monthly subscription service enabled the firm to drive more consumer transactions and growth despite inflationary pressure in 2022. Through the annual membership offer, available at a 17% discount to monthly service, the firm is projected to experience a further boost in its revenue growth from the short to medium-term perspective.

Along with free beverages and other perks, Panera Bread has also included a US$0 delivery fee on all digital orders placed through the company's channels, as announced in February 2023. However, the free delivery service is not available on orders placed through third-party providers. Furthermore, in-store, drive-thru, curbside, rapid pick-up, and kiosks are also excluded from the free delivery service. The strategy might be intended to capture more of the customer data, which is not available through food aggregators. This data will then be used to offer more personalized rewards to its loyalty members.

Apart from Panera Bread, several other restaurant and food service brands, are experimenting with loyalty programs and memberships, which let diners to pre-pay toward their visits.

• El Lopo, a bar in San Francisco, enables its loyalty program members to receive US$100 worth of dining credit for US$89 per month or US$200 worth of dining credit for US$175 per month. The strategy has enabled the bar the drive more traffic and therefore, the revenue.
• Gravitas, a Michelin-starred restaurant in Washington, also launched a subscription service for its loyalty program members. For US$130 per month, the loyalty program members get a three-course takeout meal for two. The Supper Club, the loyalty program that serves about 60 members a month, has kept the revenue flowing for the restaurant amid rising inflation and declining consumer spending.
• P.F. Chang's, another well-established food service brand, is seeking to leverage subscription-powered loyalty programs to increase its order volume and revenue growth. In September 2022, the firm launched a subscription plan that is priced at US$6.99 per month. Under the plan, the firm provides its loyal members with free delivery, among other benefits.

In 2022, Subway and Taco Bell were among the other big food service brands that experimented with the subscription service for their loyalty program members. Over the next 12 months, PayNXT360 expects the subscription service for loyalty programs to gain more traction among restaurants and foodservice brands, as firms continue to seek new ways to drive brand loyalty and revenue growth, at a time when the fear of recession is resulting in declining consumer spending.

While the trend of subscription service will grow, restaurants and food service brands will have to overcome the subscription fatigue challenge faced by consumers. Every other online streaming service and even car rental provider has launched subscription services, and as a result, consumers have started to complain about subscription fatigue. In 2023, PayNXT360 therefore, expects those loyalty programs to perform significantly better that focus on offering unexpected perks and experiences to their members, as opposed to those that are just charging some dollars for monthly and annual memberships.

To know more and gain a deeper understanding of the loyalty programs market in the United States, click here.