Fast-casual restaurants lean on loyalty programs to offset consumer pullback
Loyalty programs, which offer discounts or added perks for returning customers, have transitioned from being a nice bonus for restaurants to a must-have. As cost-cautious diners prioritize value, brands like Chipotle, Starbucks, Cava and others are utilizing rewards to keep customers coming back and building habits that go beyond the occasional coupon.
"In tough times, loyalty programs become more essential," said Peter Fader, a marketing professor at the Wharton School at the University of Pennsylvania. "They become a required ingredient to building and maintaining relationships."
In the 12 months ended in May, the restaurant industry only saw monthly traffic increase once, in November, according to Black Box Intelligence data. As diners visit restaurants less frequently, sales struggle. Only 43% of restaurant brands tracked by Black Box reported same-store sales growth in May.
Consumers who join loyalty programs visit restaurants more frequently, making 22% more visits per year to eateries, according to Circana data. They also frequent the brands that they belong to at twice the rate of nonmembers, the market research firm found.
Coffee giant Starbucks reported 34.2 million active rewards members in its second quarter and said more than 59% of its U.S. company-owned transactions came from those members. Potbelly has seen similar success: In the first quarter of 2025, over 42% of its total shop sales came from digital business, which includes the loyalty program users.
Chipotle has over 20 million active rewards members. It's loyalty program makes up approximately 30% of sales on average each day and helped the burrito chain to avoid major price hikes, according to the company.
"We have really strong brand loyalty among our members," Nicole West, Chipotle's vice president of digital experiences, told CNBC. "We're really focused on engaging with our members and doing that in a way that really resonates with them."
Driving loyalty is critical for the likes of Chipotle and Starbucks. In the first quarter, Chipotle posted a same-store sales decline for the first time since 2020 and said it saw a "slowdown" in consumer spending. Meanwhile, Starbucks' same-store sales have fallen for five straight quarters.
Cava is bucking industry trends with strong sales growth, but faces Wall Street pressure to maintain its rapid expansion.
As rewards programs pick up steam, more brands are getting creative and moving beyond the value meal.
Cava revamped its rewards program in October 2024 to give customers more flexibility in how they earn and use points. Members can earn points each visit and redeem them for specific items like pita chips or full entrees. The program also includes limited-time offers and in-app challenges. In late March, the company celebrated National Pita Day by rolling out a mascot named "Peter Chip" and offering members complimentary pita chips.
"Guests like to see periodic surprises and delight moments where we can reward them with pita chips or other brand offerings," Andrew Rebhun, Cava's chief marketing officer, said
The Cava Rewards program now has more than 7 million members. A new tiered system is expected to launch soon, according to Rebhun.
Chipotle this year launched a seasonal campaign called "Summer of Extras." The campaign is giving away over $1 million in free burritos, encouraging customers to rack up visits and compete to become the top Chipotle visitor in their state.
"We continue to see activations in this program build and excitement and positive reaction across social media from our fans," West said. "We just continue to focus on delivering value to them in ways through programs where customers are given opportunities to 'plus up' their points or earn specific offers by exhibiting specific behaviors."
Salad chain Sweetgreen also 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.
Even Starbucks, an established leader in rewards programs, has made changes. In June, the coffee chain ended its 25-star reusable cup bonus and replaced it with double stars across the full purchase. While the change was controversial among loyalists, who claimed the earning potential was reduced, the coffee chain said participation has remained steady.
Of course, giving free rewards comes with tradeoffs. Promotions cut into profits in an industry that faces tight margins in the best of times. Restaurant chains hope those freebies drive longer-term loyalty and spending on full-price items.
Brands navigating economic pressure are seeing that loyalty programs are helping to drive visits.
Potbelly revamped its loyalty system in early 2024, moving to a coin-based structure that allows customers to redeem rewards faster and across more items. Customers now have access to over 14 menu items through the rewards program. This flexibility has led to more frequent visits, Potbelly's chief marketing officer, David Daniels, said.
"We saw a lift almost immediately in terms of engagement," Daniels said. "The response has been incredibly positive."
Chicago-style eatery Portillo's joined the loyalty game in March with "Portillo's Perks." Instead of using a traditional app, the program utilizes a digital wallet system and focuses on frequency. It tracks how often a customer visits and awards badges as they go.
"It gives flexibility to change how the program is deployed," Garrett Kern, Portillo's vice president of strategy and culinary, said 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."
The company is aiming for 1.5 million to 1.7 million sign-ups by mid-summer.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Yahoo
9 hours ago
- Yahoo
Is a Chinese chain's blood orange cold brew the future of coffee in America?
Chinese chain Luckin Coffee opened its first two U.S. locations this week, betting that mobile-only ordering and creative flavors can lure customers away from Starbucks. Both new Luckin stores are based in Manhattan, and at the midtown location on Wednesday, Sam Liu took a sip of her jasmine cold brew. 'I've never tried anything like it,' she said. Liu said she'd hoped for more seating — the small shop has only three tables — and was initially confused by Luckin's in-app ordering system, which means customers can't order directly from a barista. 'I thought I just order at the counter, but I realized everyone was standing around looking at their phone,' Liu said. Luckin is China's largest coffee chain, with more than twice as many locations as Starbucks there. Its two New York City stores are its first foray outside Asia, where it has over 24,000 locations across the region. By comparison, there are over 17,000 Starbucks in the United States. Its CEO, Guo Jinyi, called the U.S. 'a strategically important market' for the company's expansion in a press release heralding the two new locations Wednesday. 'We are excited to introduce a diverse and unique coffee experience to American consumers.' The company, which didn't respond to a request for comment, has touted its ambitions to expand globally but hasn't publicly detailed its next moves in the U.S. or other markets. The chain has gained success overseas through creative drinks like alcohol-infused coffees and fruit lattes, along with its smartphone-centric ordering model. The app-based approach makes it easier to track inventory, send personalized appeals to consumers and serve drinks quickly, said John Zolidis, an analyst who tracks Luckin and Starbucks at the brokerage firm he founded, Quo Vadis Capital. 'Luckin was able to develop an incredible muscle with regard to product innovation, and they have been very creative in China,' he said. Zolidis said how Luckin fares on Starbucks' home turf will depend on its ability to differentiate its menu from other major U.S. coffee chains and smaller, independent cafes. Its American lineup already includes distinctive drinks like blood orange cold brew and coconut lattes. 'These orange drinks, or one of their most successful, a coconut cloud latte — that's how you get trial [customers] from the U.S.,' Zolidis said. Luckin faced financial troubles during the pandemic. It was delisted from Nasdaq in 2020 after its stock plunged following an internal investigation that found an executive had falsified revenue reports. The company filed for bankruptcy in the U.S. the following year but emerged from proceedings in 2022 and its sales have soared since, reaching $4.7 billion worldwide in fiscal year 2024, a 38.4% increase from 2023. Starbucks, by contrast, is struggling in both the U.S. and China. Its same-store sales in the U.S. declined 2% and its sales in China 8% in fiscal year 2024, and it reported in April that its quarterly profit was half of what it pulled in for the same period last year. The Seattle-based chain is reportedly looking to partially sell its business in China while revamping its U.S. strategy to focus on customer experience and human connection, in contrast with Luckin's model. 'We veered away from, I think, owning the idea of the 'third place,' the coffeehouse experience, making sure that the customer was front and center,' Starbucks CEO Brian Niccol told NBC News in June. A Starbucks spokesperson declined to comment. Zolidis said that whereas Starbucks aims in both the U.S. and China to appeal to customers looking for higher-end coffee served in an inviting setting, Luckin has successfully positioned itself as the 'everyman's coffee' in China, with low prices and small, grab-and-go storefronts. After taking the train in from Hoboken, New Jersey, to check out the new one in midtown, Samantha Coy said the trip was worth it. She had enjoyed Luckin in China previously and was eager to order one of its fruit drinks. 'I'm surprised Starbucks hasn't tried to bring that over to the U.S.,' Coy said. 'I hope they stay open.' Zolidis said he thinks Luckin is well-positioned to gain a foothold in America. 'They've been able to operate and grow incredibly quickly in the Chinese market, much faster than I would have thought possible, and they've been able to sustain it and develop a strong financial model so they can fund their expansion in the U.S.,' Zolidis said. 'They wouldn't be coming here to try it if they didn't think they had a shot of owning part of the market.' This article was originally published on
New York Post
11 hours ago
- New York Post
Most Americans can no longer afford even a ‘minimal quality of life,' depressing new study finds
The American dream is slipping away. Most US citizens no longer enjoy 'a minimal quality of life' due to skyrocketing costs, a depressing new study has uncovered. Ludwig Institute for Shared Economic Prosperity conducted research into the economic well-being of the country's residents, defining 'minimal quality of life' as the ability to pay for a 'basket of American dream essentials': housing, food, transportation, clothing, medical costs and basic leisure expenses. The leisure expenses included access to cable TV and streaming services, as well as the ability to pay for six movie tickets and two baseball tickets per year. The Minimal Quality of Life index goes 'beyond traditional cost-of-living measures to provide a more comprehensive understanding of what it takes to secure a foothold on the bottom rung of the American dream ladder and have a real opportunity to climb it over time,' the authors wrote. The bottom 60% of American households by income fell well short of that threshold, the researchers damningly determined. The bottom 60% of American households by income fell well short of that threshold, the researchers damningly determined. The bottom 60% of American households by income fell well short of that threshold, the researchers damningly determined. 'The MQL reveals the harsh reality that the American dream, with its promises of well-being, social connection, and advancement, is out of reach for many,' the authors concluded. 'Rising costs in essential areas like housing, healthcare, and education significantly outpace wage growth, leaving millions struggling to attain even a minimal quality of life.' An average American couple with two children would need to spend $120,302 per year to cover the minimum quality of life expenses, the researchers determined. Skyrocketing costs over the past two decades are to blame, with medical premiums rising 301% from 2001 to 2023. Transportation, groceries and childcare have all increased in price by more than 50% on average across that same period. Transportation, groceries and childcare have all increased in price by more than 50% between 2001 and 2023. 'I get tired of the 'Stop your Starbucks latte habit' [advice], because in reality it's not people's fault,' financial planner Laura Lynch told CNBC in relation to the study. 'The structures around us have created an expectation of a lifestyle that is increasingly becoming unreachable for folks.'
Yahoo
15 hours ago
- Yahoo
Is a Chinese chain's blood orange cold brew the future of coffee in America?
Chinese chain Luckin Coffee opened its first two U.S. locations this week, betting that mobile-only ordering and creative flavors can lure customers away from Starbucks. Both new Luckin stores are based in Manhattan, and at the midtown location on Wednesday, Sam Liu took a sip of her jasmine cold brew. 'I've never tried anything like it,' she said. Liu said she'd hoped for more seating — the small shop has only three tables — and was initially confused by Luckin's in-app ordering system, which means customers can't order directly from a barista. 'I thought I just order at the counter, but I realized everyone was standing around looking at their phone,' Liu said. Luckin is China's largest coffee chain, with more than twice as many locations as Starbucks there. Its two New York City stores are its first foray outside Asia, where it has over 24,000 locations across the region. By comparison, there are over 17,000 Starbucks in the United States. Its CEO, Guo Jinyi, called the U.S. 'a strategically important market' for the company's expansion in a press release heralding the two new locations Wednesday. 'We are excited to introduce a diverse and unique coffee experience to American consumers.' The company, which didn't respond to a request for comment, has touted its ambitions to expand globally but hasn't publicly detailed its next moves in the U.S. or other markets. The chain has gained success overseas through creative drinks like alcohol-infused coffees and fruit lattes, along with its smartphone-centric ordering model. The app-based approach makes it easier to track inventory, send personalized appeals to consumers and serve drinks quickly, said John Zolidis, an analyst who tracks Luckin and Starbucks at the brokerage firm he founded, Quo Vadis Capital. 'Luckin was able to develop an incredible muscle with regard to product innovation, and they have been very creative in China,' he said. Zolidis said how Luckin fares on Starbucks' home turf will depend on its ability to differentiate its menu from other major U.S. coffee chains and smaller, independent cafes. Its American lineup already includes distinctive drinks like blood orange cold brew and coconut lattes. 'These orange drinks, or one of their most successful, a coconut cloud latte — that's how you get trial [customers] from the U.S.,' Zolidis said. Luckin faced financial troubles during the pandemic. It was delisted from Nasdaq in 2020 after its stock plunged following an internal investigation that found an executive had falsified revenue reports. The company filed for bankruptcy in the U.S. the following year but emerged from proceedings in 2022 and its sales have soared since, reaching $4.7 billion worldwide in fiscal year 2024, a 38.4% increase from 2023. Starbucks, by contrast, is struggling in both the U.S. and China. Its same-store sales in the U.S. declined 2% and its sales in China 8% in fiscal year 2024, and it reported in April that its quarterly profit was half of what it pulled in for the same period last year. The Seattle-based chain is reportedly looking to partially sell its business in China while revamping its U.S. strategy to focus on customer experience and human connection, in contrast with Luckin's model. 'We veered away from, I think, owning the idea of the 'third place,' the coffeehouse experience, making sure that the customer was front and center,' Starbucks CEO Brian Niccol told NBC News in June. A Starbucks spokesperson declined to comment. Zolidis said that whereas Starbucks aims in both the U.S. and China to appeal to customers looking for higher-end coffee served in an inviting setting, Luckin has successfully positioned itself as the 'everyman's coffee' in China, with low prices and small, grab-and-go storefronts. After taking the train in from Hoboken, New Jersey, to check out the new one in midtown, Samantha Coy said the trip was worth it. She had enjoyed Luckin in China previously and was eager to order one of its fruit drinks. 'I'm surprised Starbucks hasn't tried to bring that over to the U.S.,' Coy said. 'I hope they stay open.' Zolidis said he thinks Luckin is well-positioned to gain a foothold in America. 'They've been able to operate and grow incredibly quickly in the Chinese market, much faster than I would have thought possible, and they've been able to sustain it and develop a strong financial model so they can fund their expansion in the U.S.,' Zolidis said. 'They wouldn't be coming here to try it if they didn't think they had a shot of owning part of the market.' This article was originally published on Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
