How Restaurants Can Counter Inflation with a Gift Card Program

    The right gift card program partner can help restaurants increase revenue and build a strong brand at the same time.

    Outside Insights | September 26, 2022 | Dave Jones
    Chick-fil-A gift card.
    Chick-fil-A
    While gift cards are often given as gifts (as the name implies), people also use them as a budgeting tool, purchasing a gift card for their own use at a future date.

    The pandemic and its aftereffects have been a rollercoaster ride for restaurants, which have had to pivot quickly in response to changing public health restrictions, customer anxiety, economic uncertainty and supply chain disruptions. As COVID-19 began to enter the endemic phase and the restaurant sector was looking forward to meeting pent-up demand and generating revenue to make up for lost time, the country was hit with the worst inflation in 40 years.

    Wages are higher, which theoretically gives people more money in their pockets to spend at restaurants, but consumers have been blindsided by inflation, too, and are now paying more for fuel and groceries than they were last year. Restaurants are dealing with higher prices on critical supplies, and many have had to pass those costs on to customers, which makes dining out more expensive. Compounding the problem, restaurants are struggling to keep staff on board during an unprecedented labor shortage.

    But restaurants can fight back against inflationary effects with a gift card program. When rolled out on the right platform and with a sound strategy, a gift card program can help restaurants generate higher sales and increase customer loyalty. Here’s a closer look at how a gift card program can help restaurants compete more effectively in uncertain times.

    Gift cards keep the brand front and center while driving incremental revenue: Restaurant brands that are new to an area or established brands that are looking for ways to keep their logo top-of-mind can use gift cards to build brand awareness. Up to 40% of gift card users will be new to the business, so restaurants can use the opportunity to make a great impression that turns a first-time guest into a regular. Plus, restaurant owners can expect incremental sales from 5 to 10 percent once their gift card program reaches the mature stage.

    Gift cards are ideal for rewarding loyalty and making amends for service shortfalls: Restaurant owners can reward their best customers for their loyalty with gift cards that encourage repeat business. Gift cards are also a great way to make it up to customers when service falls short of expectations. That’s especially important during a labor shortage that’s behind a three-fold increase in customer complaints about service on Yelp in the first quarter of 2022.

    Gift cards can be used as an incentive during restaurant promotions: Restaurant owners can use gift cards to bring in more customers during a promotion. For example, offering customers a gift card valued at $15 if they spend $50 at the restaurant during a promotion can draw more customers in—and encourage repeat business when they use the gift card later.

    Gift cards can encourage users to spend more than the face value of the card: Gift cards also drive incremental revenue through overspend, i.e., a purchase that exceeds the card’s value. According to one survey, 80 percent of quick service and fine dining restaurant customers spend more than the face value when dining out using a gift card.

    While gift cards are often given as gifts (as the name implies), people also use them as a budgeting tool, purchasing a gift card for their own use at a future date. Whether self-purchased or received as a gift, restaurant gift cards can build loyalty, encourage repeat business and contribute significantly to incremental revenue. But not all gift card programs are created equal, so it’s crucial to develop an effective strategy before launching a gift card program.

    Who will handle card production, processing, marketing and distribution? How can restaurants ensure they are complying with all applicable laws and regulations? Who will handle fraud claims? The answers to these questions are critical because launching a gift card program without card industry expertise can compromise program effectiveness or even result in legal exposure.

    Many restaurants ensure program success and avoid compliance issues by partnering with gift card program experts who manage the critical details, including legal issues, fraud, regulation, finance and marketing. Outsourcing a gift card program can free restaurant owners to focus on their core business, but it’s important to make sure the partner has industry experience and a track record of success in creating effective programs and protecting partner businesses.  

    Another important point to keep in mind is that companies that administer gift card programs may also be serving other organizations as their primary client. It’s better to find a partner whose main focus is the restaurant rather than a distributor, such as a grocery store, or loyalty program. A full-service gift card program issuer and manager can handle the details and ensure success for the restaurant’s gift card program.

    Fuel prices are dropping, but inflation remains high, costing potential restaurant guests more when they buy goods and services—and visit their favorite restaurants. But restaurant operators can help customers fight inflationary effects by providing incentives and rewarding loyalty. The right gift card program partner can help restaurants increase revenue and build a strong brand at the same time.

    Dave Jones is the CEO of TOTUS, an all-in-one gift card management platform, says restaurants can increase foot traffic and gain customer loyalty by offering gift cards.