Restaurant loyalty remains an evolving discourse. McDonald’s program turned 2 years old just a couple of months ago. Wendy’s launch arrived nearly a year earlier to the date, in July 2020. Chick-fil-A updated its “One” platform in April and Subway revamped three or so weeks ago. As this segment marches forward, guest expectations are shifting. If loyalty was once a punch card to reward brand love, it’s gone well past the act of simply acknowledging passion—it’s a tool to foster relationships.
Paytronix on Tuesday published its annual Loyalty Report, which analyzes and translates year-over-year data and trends from hundreds of millions of in-store and online loyalty program transactions.
The company labeled the above progression “digital guest engagement.” And it’s fast become the pulse of driving frequency through an era that looks materially different than pre-pandemic. To set the scene, Revenue Management Solutions recently compared sales, traffic, and average check in the first halves of 2022 and 2023 to the same period in 2019. Essentially, there’s been no “back to normal.”
Sector traffic is down 18.4 percent when measuring June 2023 to June 2019. Traffic has consistently declined since January 2022, when it was only 15.5 percent lower than 2019 (this is a clear reaction to recent price).
When 1,000 U.S. consumers were polled by RMS, 31 percent reported spending less at restaurants. Among those, one in two said they were doing so by ordering less frequently.
Overall, quick-service average check today is 40 percent higher than pre-COVID. Average check expanded by 51 percent in specific dayparts.
- Breakfast: Traffic is down an average of 21.5 percent in 2023. Breakfast performed better in 2022, when decreases were 8 percent lower than in pre-pandemic 2019. Net sales remain positive (16 percent).
- Lunch: Traffic is 18 percent lower over 2019. Net sales are up an average of 18 percent, driven by a 45 percent growth in average check.
- Dinner: Traffic remained most stable but still experienced a decrease—down 15 percent across the first half of 2023. Net sales rose an average of 25 percent.
And the quick-service segment’s dine-in business has lost nearly half of overall traffic in the past two years. Across 2023, dine-in traffic slid an average of 47 percent. It closed Q2 at negative 43.6 percent versus 2019. Average check in the dining room is 36 percent higher, with net sales 25 percent lower.
Traffic at the drive-thru is down an average of 12 percent in 2023 compared to 2019. Yet net sales are up 25 percent. Takeout traffic is 36 percent lower on that three-year view, with 42 percent average check growth, and net sales down 10 percent.
All said, it’s easy to decipher why restaurants are chasing loyalty through digital means. With fewer visits, understanding and speaking to core users has become a high-stakes effort. For example, in an earlier dive into Chipotle’s pricing strategy, data showed recent hikes—to some extent—appeared to outprice lower-income, less frequent diners. But it had little impact on Chipotle’s typical, most loyal consumer. Meanwhile, the brand reported trade-down of higher-income guests into its business thanks to wider inflation (grocery). So the true “value proposition” for the brand had become less about price and more about understanding its data and where to cater to it. Or, what could Chipotle offer core consumers in response for loyalty—something that’s the inverse of a race to the bottom.
Some numbers from Paytronix’s report
Rise in loyalty members
- Overall: 19 percent
- Full service: 16 percent
- Quick service: 24 percent
- C-stores: 19 percent
Full service
- 17.8 percent: Increase in loyalty spend per visit since January 2021
- 5 percent: Difference between loyalty customer and non-loyalty customer spend in 2022
- Thursday: Most popular day to use a loyalty reward
Quick service
- 42 percent: Category loyalty members who order online nine times out of 10
- 27 percent: Quick-service visits that occur 11 a.m. to 1 p.m. on weekdays
- Monday: Most popular day to use a loyalty reward
C-stores
- 14.3 percent: Increase in average number of visits by C-store customers
- 12 percent: Difference between loyalty customer and non-loyalty customer spend in 2022
- 35–45: Age group with the highest percentage of loyalty members
The high-level look
What’s become evident in recent years, as the numbers show, is loyalty has more users testing the waters than ever. The number hit an all-time high in 2022, Paytronix said, with particular growth in quick service. During that rise, the company consistently observed loyalty members generate a significantly higher check compared to guests who were not enrolled.
A case: Starbucks’ 90-day active rewards base grew to nearly 75 million globally, up 25 percent, in Q3. Stateside, the figure is 31.4 million, which is about 15 percent, or 4 million new customers, higher than the previous year.
This loyalty arena is fueling the java chain’s customization eruption (more than 60 percent of beverages were customized this past quarter, 9 percent higher than five years ago). The U.S. base drove 57 percent of tender for the second consecutive quarter—3 percentage points above last year. Spend per member reached a record high, as did total member spend. CEO Laxman Narasimhan told investors rewards users come in more frequently, buy more, and, interestingly, tend to order larger sizes than typical consumers. “So we’re not seeing the down-trading in our customer base,” he said. In other terms, if customers are, in fact, spending less when they go out to eat these days, it’s not a point affecting loyalty users.
Paytronix has always focused on the “top 10 percent” of loyalty members as a telling sphere. It’s a group that constitutes about half of all loyalty member visits and spend. “As always, they are more valuable than the average loyalty member and far more valuable than the average guest,” the company said.
In 2022, quick- and full-service active loyalty members boasted 5 percent increases in check size as compared to non-loyalty members.
Paytronix analysis controls for self-selection and found that, when that bias was removed, loyalty programs were responsible for an 18–30 percent increase in spend and visit frequency.
Loyalty users have also been growing roughly 6 percent per year. It’s also a field resistant to seasonality.
Loyalty versus non-loyalty average check checks
2021:
- Non loyalty: $23.44
- Loyalty: $25
2022:
- Non loyalty: $25.37
- Loyalty: $26.91
Breaking down the same measure by category:
Full service
2021:
- Non loyalty: $34.12
- Loyalty: $36.17
2022:
- Non loyalty: $36.58
- Loyalty: $38.28
Quick service
2021:
- Non loyalty: $12.95
- Loyalty: $13.71
2022:
- Non loyalty: $13.71
- Loyalty: $14.54
Many brands have adjusted offerings to reflect these changes. Subway’s new MVP Rewards replaced MyWay Rewards. The big shift was customers can now move through tiers (Pro to Captain to All-Star) and unlock benefits. For instance, if you get to All-Star, it means you’re spending $400 per year. Doing so signals 20 percent more points per $1 spent on qualifying purchases, “Free Chip Fridays,” additional bonus points days, and access to members-only VIP exclusives.
Kristin Lynch, Paytronix’s senior director of strategy and analytics, said in the last year, as inflation surged, “we saw some loyalty programs with fixed points-for- reward-item values [i.e., 100 points for a free Item] experience an increase in the cost of their program, which meant the programs had to be trimmed back.”
But broadly, the cost of building loyalty remains low. Over the last two years, it’s decreased, Paytronix said, with the gap closing from the beginning of 2021 to the end of 2022, for both categories.
- Overall: Gap closed from 16 percent (difference between non-loyalty and loyalty discounts) to 9 percent
- Quick service: Gap closed from 18 to 11 percent
- Full service: Gap closed from 16 to 9 percent
Going back to the prevailing theme, however, loyalty proved insular to the macroeconomic landscape. This was clear during COVID and has been true amid inflation as well.
Since 2020, Paytronix found the top 10 percent of loyalty users make up large percentages and, in some cases, majorities of loyalty revenue, and often spend two to three times more than the average customer.
Loyalty members spend more per check and visited more per month in 2022.
The Top 10 Percent
- Make up 44 percent of quick-service loyalty visits and 50 percent of category spend
- Make up 44 percent of full-service loyalty visits and 48 percent of spend
- Make up 56 percent of C-store loyalty visits and 59 percent of in-store loyalty purchases
- Spend about 33 percent more per visit at quick-and full-serves; 14 percent at C-stores
Again, it’s a visible peek into why Subway would turn toward segmenting and rewarding those VIP customers who deliver consistent revenue. PDQ, in another example, created a “MyPDQ Pro Tier” that it can define and speak to.
Redemption, and the profile
Birthday rewards, hardly a novel offer, remain popular despite all the nuanced deals entering the marketplace. Paytronix discovered the average redemption rate of birthday rewards to be about 12 percent. But Jeff Hoover, director of strategy and data insights at the company, said it’s a figure that conceals a bifurcation in the rate. “Redemption rates for most brands tend to be in either the 1–8 percent range or the 30–40 percent range, with relatively few in the middle,” he said. “Rewards in the lower range tend to be incentives such as a free side or dessert, an item that’s only attainable with a large purchase. On the other hand, rewards in the higher category tend to be loyalty points or a free item, such as a coffee or pizza. Examples of C-stores rewards in the higher category are: free breakfast sandwiches, coffee, or a significant fuel discount of 25 cents or more.” Client data showed brands across concepts offered more birthday rewards than ever last year.
Today’s loyalty members are younger than they used to be, too, Paytronix said. The average member is most likely to range 36–45. Full-service users are older (the 36–45 and 46–55 age groups are the most common loyalty members, with the 26–35 and 56–65 groups close behind), while quick-service noticeable younger (36–45 age contains the most loyalty members). “Different generations have different spending habits, and that should inform the offers they receive,” Lynch said. “A two-for-one offer will likely appeal to age groups with families more readily than it will to older and younger generations, while a free drink will be more effective for the youngest generation to get them in the door.”
In terms of category to category, full-service brands, in particular, have evolved through the crisis window. They’ve scaled from adoption to optimization to lasting leverage. Paytronix reported increased visits when guests were email eligible. More than a third of customers consistently placed full-service orders online.
It’s also a category that sees business peak in the evenings, specifically on Fridays and Saturdays, whereas quick-serves are more of a habitual, frequency play. Full-serves also welcome the highest reward spend at the end of the week.
Some observations:
- Full-service guests proved more likely to visit Friday and Saturday evenings, yet redeem rewards at a higher rate on Thursday (this centers the idea of hybrid work schedules).
- Thirty-eight percent of full-service guests order online for 90 percent of their orders or more, up 2 percent from 2021.
- A full-service loyalty guests who is email-eligible visits roughly 25 percent more often.
On the Border is another brand that recently moved to tiered loyalty, which it did in May. Silver is available to those who spend less than $250 annually and Gold for $250 and above. The latter group receive 50 percent off queso every day and a day of double points per month. Silver gets $2 off and no double events. The brand can individualize experiences for its most-valued users and incentivize somebody to work their way up.
Looking at other trends, full-service loyalty guests, as mentioned, prefer evenings, with 40 percent of all check open times occurring between the hours of 5 and 8 p.m. Moreover, 13 percent of segment loyalty orders, about one in eight, occur on Friday and Saturday evenings.
In addition to being a reflection of new office dynamics, the fact guests redeem on Thursdays, Paytronix said, showed full-service users look at rewards as a treat to be used outside regular visits, not as a discount for already planned trips.
There’s a visible need to get into the omnichannel as well. In 2022, 55 percent of full-service loyalty users ordered in-person nearly all of the time, while 31 percent did so digitally.
Full-service annual visits by email eligibility
2021:
- Not email eligible: 4.11
- Email eligible: 5.21
2022:
- Not email eligible: 4.43
- Email eligible: 5.39
Preferred ordering method, by annual visit frequency (2022)
One visit:
- 90 percent online: 39 percent
- 90 percent in-store: 61 percent
Two to five visits:
- 90 percent online: 37 percent
- Both online and in-store: 14 percent
- 90 percent in-store: 49 percent
Six to 10 visits
- 90 percent online: 33 percent
- Both online and in-store: 20 percent
- 90 percent in-store: 46 percent
11–15 visits
- 90 percent online: 34 percent
- Both online and in-store: 14 percent
- 90 percent in-store: 52 percent
16-plus visits
- 90 percent online: 27 percent
- Both online and in-store: 12 percent
- 90 percent in-store: 61 percent
“It’s critical to treat the online ordering audience and in-person ordering audience as separate for the purpose of messaging and offers,” Lynch said. “In addition, encouraging members of each group to try ordering a different way through incentives gives an extra channel to delight guests.”
Into quick service
Through inflation, Paytronix found quick-service loyalty members visited about 2 percent more often in the past two years—the smallest increase of any concept. This occurred despite the fact average spend per visit for quick-services increased more than 17 percent—as much as full-serves.
Comparatively, quick-service guests use loyalty at alternate times than full service and spend rewards differently, and place online orders in opposite proportions.
Big picture:
- Nearly 50 percent of quick-service loyalty members order online at least 90 percent of the time, while fewer than one in eight users order both in-person and online.
- Quick-service loyalty members tend to visit at midday on weekdays and like to spend rewards at the beginning of the week.
- The quick-service customer base is the youngest of all sectors.
- The number of visits by loyalty members and rise in spend per visit both rose since January 2021, by 1.9 and 17.27 percent, respectively.
“Both [quick- and full-service restaurants] see the highest redemption of rewards on some of the least popular days to visit,” Lynch said, noting its Sundays and Mondays for counter service. “This is a great reminder of the nature of rewards—they are spent as a treat, not as part of regular visits. An easy way to take advantage of this is to send reward reminders on days the guest doesn’t usually visit.”
Most quick-service visits take place on Thursdays and Fridays. And 5.5 and 6 percent of those, respectively, come during mid-day. Yet Sundays and Mondays are redemption days, circling Lynch’s point that users tap rewards to increase visitation versus supplement their expected trips.
Understandably, quick-service guests show greater propensity to be influenced through digital messaging than full service, too. Quick-service visit frequency takes place nearly 50 percent more when customers are willing to receive emails from a brand.
Also, 42 percent of quick-service guests order online more than 90 percent of the time, while 35 percent typically order in-store.
Quick service annual visits by email eligibility
2021:
- Not email eligible: 4.11
- Email eligible: 5.21
2022:
- Not email eligible: 4.43
- Email eligible: 5.39
Preferred ordering method, by annual visit frequency (2022)
One visit:
- 90 percent online: 62 percent
- 90 percent in-store: 38 percent
Two to five visits:
- 90 percent online: 45 percent
- Both online and in-store: 20 percent
- 90 percent in-store: 35 percent
Six to 10 visits
- 90 percent online: 35 percent
- Both online and in-store: 33 percent
- 90 percent in-store: 33 percent
11–15 visits
- 90 percent online: 38 percent
- Both online and in-store: 26 percent
- 90 percent in-store: 36 percent
16-plus visits
- 90 percent online: 36 percent
- Both online and in-store: 26 percent
- 90 percent in-store: 38 percent
Paytronix doesn’t expect any of this to dial back into the future. AI is going to improve behavioral predictions and brands will become more sophisticated in turning this data into targeted outreach. “If loyalty were only about giving every guest a 10th sandwich for free, the trends highlighted in this report would have begun decades ago. Instead, the factor that made a difference was that each concept embraced loyalty and used it to get to know their guests better. That knowledge has been leveraged to enhance the relationship between guest and brand,” the company said.
Understanding what customers need, when they need, combined with data, means as guest change their relationships with brands, restaurants can alter offers to match.
“When loyalty is combined with other technologies, such as online ordering and messaging, the digital guest engagement only becomes more natural and, ultimately, more human, allowing brands to build relationships that are scalable and real,” Paytronix said.
