Restaurant loyalty space is leveraging on stored value programs to drive revenue

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Restaurant chains are banking on these stored value programs, which include gift cards and other rewards programs in their loyalty apps, to drive revenue. Consequently, restaurant chains are partnering up with some of the leading brands for cross-brand rewards which help both parties in engaging more customers.

• In October 2022, Panera Bread, a fast-casual chains of restaurants, entered into a cross-brand partnership with American Express. Under this partnership, the bank’s consumers and corporate card members are eligible for a four-month subscription to the Unlimited Sip Club beverage program of Panera for a specific period. Since there are many Americans who use Amex cards, the restaurant chain strategized to partner with Amex to attract those consumers, who still did not engage with the brand.

Furthermore, the restaurant chain also started to offer a free subscription to customers who visited their restaurants. Also, the restaurants are offering in-restaurant offers to other brands’ customers and rewards from other brands are also offered to their customers. These are all part of the restaurant’s strategy to drive loyalty, out of which the restaurant chain is seeking to earn profit. 

• Similarly, in August 2022, IHOP, a casual dining breakfast chain based out of California, teamed up with Xbox to enable its loyal customers to access gaming rewards through the IHOP’s “International Bank of Pancakes” rewards program. This partnership also falls under the cross-brand rewards program that enables the restaurant chain to expand the brand’s reach. Under this unique partnership, IHOP, through its loyalty program, provides a month of a free trial of a subscription to Xbox Game Pass Ultimate. This game pass will enable the loyal members of the IHOP to access several add-ons for the video game Forza Horizon 5 and also get codes for the video game Grounded. Together with this, the International Bank of Pancakes, the program also provides pancakes and other items for free.

• In October 2022, Starbucks Coffee Company (Starbucks) and Delta Air Lines announced to enter into a partnership to enable customers who are members of both the Delta SkyMiles and the Starbucks Rewards to earn more rewards and benefits. To benefit from the partnership, firstly both the accounts of the customer must be linked. Now, for every dollar spent at Starbucks (eligible products only), the member can earn one mile. On the other hand, the members who fly on Delta Air Lines will also be eligible to earn double Starbuck Stars at several participating Starbucks stores. These offers are not only available for the currently enrolled members, but also for the new members of both brands. Additionally, the customers who would link both these accounts between October 12 and December 31 will be eligible to earn around 500 miles together with 150 stars after a qualifying purchase is made.

Furthermore, the airlines planned to introduce additional Starbucks Stars for Diamond and Platinum SkyMiles Members as a part of their partnership. Moreover, a flight passenger departing Seattle on Oct.12 received a “Star Card” with 150 Stars that can be redeemed in any of the Starbucks stores.

Notably, this partnership is the outcome of Starbuck's Reward Together program that enables a selected group of leading brands to connect their rewards programs, generating revenue over the next quarters. Thus, PayNXT360 anticipates these strategies would lure more customers of both brands thereby driving more memberships and increasing customer lifetime value. These loyalty programs have been successfully driving revenue and because of this more and more restaurant chains are entering into these cross-brand partnerships. For instance,

Starbucks, which has been heading the restaurant loyalty space, saw that more than 40% of its revenue comes from its stored-value programs, starting with gift cards to credits in the company’s loyalty app and many more. However, it was seen that most of these Starbucks gift cards and loyalty accounts remain unused. Furthermore, the Seattle-based company claimed that it generated around US$181 million in revenue from the unused money from these stored value programs in 2021, and it rose from that of 2020. Recently, an organization composed of labor unions named Strategic Organizing Center raised a complaint against the restaurant chain on the investigation of this unused money. Though the percentage of profit from this unused credit is not that significant, the disclosures regarding the unused credit remain insufficient as compared to other leading brands in the market. However, Starbucks and many other restaurant chains, stated this unused gift card money is considered as breakage or revenue over time as a proportion to the stored value card redemptions.

Starbucks, which mainly operates in the United States and many other markets, revealed that these stored-value cards do not expire and historical data says some of the credits remain unused. Notably, Starbucks issues its credit through gift cards, which are sold at several retailers and also at its restaurants. Importantly, one can also access these credits through the rewards accounts and can keep accumulating credits by purchasing online or on the mobile app. Moreover, the members will be able to use these credits at all Starbucks locations and licensed stores across North America, Japan, and other international markets.

To know more and gain a deeper understanding of the United States gift card market, click here.