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The Pros and Cons of Offering a Restaurant Subscription Service

Restaurants. There are a lot of them out there, and they can be the perfect opportunity for your group to enjoy a night out. 

The competition is fierce in this industry, with over 660,000 restaurants in the United States. Given how saturated this market can be, some restaurants are looking for ways to stand out. 

One way that they can do this is by offering a restaurant subscription service. 

What is this? What restaurant subscription options do you have? What are the advantages and disadvantages? 

Read on to find out all of the answers to these questions.

Restaurant Subscription Service

What Is a Restaurant Subscription Service?

A restaurant subscription service is something that restaurants use to reward people that dine at their location frequently. Essentially how it works is that incentivizes people to spend more money or come more frequently to a certain restaurant. 

Once they do this, the restaurant will give them some kind of reward or a discount in return for the loyalty that they have shown. 

Of course, there are advantages and disadvantages to offering this kind of rewards program. Let’s take a closer look at both sides of this. 

Pros of Subscription Programs

Let’s start with the good and go over some of the pros of restaurant subscription services. These are some of the top benefits.

Retaining Customers

The first advantage that you have is that with this type of program, you are acknowledging the loyalty of your biggest customers. You recognize this loyalty and let them know that their loyalty is appreciated. 

People in general, love to be recognized for something that they do, and this is something that can let a customer know that you are thinking of them. When this happens, you are more likely to keep having those same customers return to your restaurant. 

Keeping the same customers is one of the best things that your business can do. Why is this? Because not only does this create loyalty, but it can also save your restaurant a lot of money. 

With businesses in general, it is usually about five times more expensive to find new customers rather than keep the ones that they already have. For this reason, your restaurant should view a rewards program as an investment. 

Sure, you may have to give free or discounted items out now and then. However, what you get in return is saving the time, effort, and money that it takes to find new customers. 

Upselling Certain Items and Promotions

Another advantage of having subscription programs is that this allows you to upsell certain items and promotions. You can do this by putting it as part of your program where if you buy it, you get a discount or closer to an overall reward. 

An alternate way that you can approach this is to put an overall dollar value on certain rewards. Then, have these rewards expanded for certain items. 

Let’s say you decide to design your rewards program like a credit card. You may offer 2% cash back for every dollar that you spend at your restaurant. However, one twist here can be that you decide to offer 4% cash back on a certain item such as a bacon cheeseburger and fries. 

It is all about recognizing opportunities to promote certain products. 

On top of this, you can get people in a “might as well get it” mindset if you design this the right way. For example, if you reward people by giving them a free meal of a certain dollar value if they spend $500 in your restaurant, people may be inclined to order an extra item that they may not normally get. 

They could decide to get that salad or get that ice cream for dessert that they may have been hesitant about before. Take advantage of these situations. 

Learning About Your Customers

One of the best things that can come from a loyalty program is that you can learn more about your customers. How do you do this? 

When someone is first signing up for one of these programs, they are usually required to give the restaurant some sort of personal information. This can include their name, phone number, and email address. Some places may take this a step further and ask for their race, age, and gender. 

Why does this help restaurants? Getting all of this information allows restaurants to know exactly who is eating in their restaurants. 

Most restaurants probably had some idea of what they wanted their target audience to be before they opened their location. Now, having this information can confirm or deny that their target audience was accurate. 

For example, let’s say that you have a Japanese restaurant in the middle of the suburbs. You were probably expecting to get people with Japanese roots to try your location along with some other younger people that may be more curious about the food. 

Now, when you have a loyalty program, you could find out if you are hitting your target audience and even if you are hitting more people than you thought. If it turns out that the audience signing up for this program is different from what you expected, you can adjust your marketing strategy from there.

Cons of Subscription Programs

Now that we have talked about the pros of subscription programs, we must discuss the downsides of putting these in place. These are some of the biggest cons that you need to keep in mind.

Rewards Are Not Always Important

Something that you have to keep in mind is that not all shoppers have the same values. They may go to a restaurant once in a while and sign up for a rewards program if it is of no cost to them. 

In this situation, it does not mean that a customer will go out of their way to eat at your restaurant more often. In fact, a customer may not go back to your restaurant at all. 

About 40% of shoppers will switch brands if they get offered a better price elsewhere. Part of this is because of price, but part of it is also that some people want to try something new. 

Of the 40% mentioned above, 35% of those people said the reason why they would switch is to try something new. 

In an industry, as saturated as restaurants, people may get tempted to go in another direction sooner rather than later.

Market Saturation

Another thing to keep in mind is that loyalty programs are not unique to restaurants. Almost every major chain in the United States has some kind of loyalty program, and they usually work similarly to the others. 

You might have a tiered system, you could have a discount system, a buy x amount, and then get one free system, etc. What this means is that your rewards program is very unlikely to be unique to other businesses. 

What does this mean for you? It means that it can be more difficult for your program to stand out to the casual customer because they may be involved in a lot of other rewards programs. 

At the end of the day, people cannot be everywhere at once. So they may forget about your rewards program because of the market saturation or simply choose to focus on a different program. 

Inconsistent Profits

Finally, rewards programs are not guaranteed to drive consistent profits. People may elect to use their rewards at different times, and some people may take longer than others to qualify for these awards. 

It can be difficult to predict when people are going to cash in on these rewards. What does this mean for you? It means a lot of people could cash in at one time when you may not be having the best quarter to begin with. 

Also, you have to account for how the overall economy is doing. If there are ever talks of a recession, people may stop going out to restaurants so that way they can save money for a rainy day. 

These are all factors that make it difficult to predict when rewards may come in.

Build Your Subscription Service

These are just some of the pros and cons of a restaurant subscription service. Remember, these can help you retain customers and allow you more opportunities to upsell certain items. However, it can also make profits less consistent, and you may end up forgettable in a saturated market. 

Do you need help making your program stand out? Book a demo with us today.