Restaurant Subscriptions - A New Revenue Stream
In recent years, monthly subscriptions to streaming services like Netflix and Amazon Prime have become part of our lives. At the same time, sales of weekly meal kits from the likes of Hello Fresh and Blue Apron have soared, especially in the past year when people stayed home and spent less time at grocery stores.
Some restaurants and bars, devastated by the COVID-19 pandemic, are adapting the subscription model to boost their revenue stream until indoor dining resumes.
The result has been a surge in chef-prepared meals, cocktail fixings, special events featuring wine and cooking demonstrations via Zoom, plus curated boxes of cheese, pantry items and much more arriving on doorsteps with free shipping.
One of the more successful subscription ideas originated at the US-based Panera Bread chain. Just before the world shut down in March 2020, Panera launched a Netflix-style MyPanera+Coffee program, a social media-driven campaign that offers customers unlimited cups of hot or iced coffee, any size, for $8.99 (US) a month.
“I believe part of our future is going to involve recurring revenue or subscription-based revenue, which is new to the restaurant world,” chief brand and concept officer Eduardo Luz told Adweek. “This is Panera’s first attempt to go in that direction.” In an interview with the Business Insider website, Panera CEO Niren Chaudhary said the program has not only increased interest in Panera’s coffee, but it has encouraged customers to discover the bakery café’s food offerings. Some guests, for example, began ordering a bagel with their morning coffee. Chaudhary said 35% of Panera’s coffee orders now include food.
Other U.S. restaurants are also experimenting with the subscription model to up their cash flow. Last fall, Dickey’s Barbecue Pit, a 460-unit chain based in Dallas, Texas, launched a meat-box service selling for between $100 and $280 a month. In January, restaurateur Matty O’Reilly in Saint Paul, Minnesota, began enticing customers with a $99-a-month plan that allowed them to order a daily menu item at any of his four restaurants, which include a burger joint.
“When you operate in an industry like this, with thin margins, cash flow is everything,” said O’Reilly, adding he made his money back and then some with the promotion.
Experts agree the timing of these promotions has contributed to their success. Though the pandemic has put many people out of work, those who have kept their jobs and miss their former life are happy to support the beleaguered restaurant industry. One report showed that more than 55% of New Yorkers would consider subscribing to a favourite restaurant to help it stay afloat.
Surveys show that Gen Z consumers, between the ages of 18 and 24, are more interested in the subscription idea than older consumers because they’re more value-conscious.
Is a subscription program right for your restaurant?
Since many people are still wary of dining indoors, subscriptions may encourage them to return to their favorite restaurants. The program may even continue after dining reopens, said Alex Susskind, director of the Cornell’s Institute for Food and Beverage Management.
“I agree that this is something that operators should seriously consider, and something that will help them down the road,” said Susskind.
With sales limited during the pandemic, restaurateurs were forced to quickly “pivot” and find new ways to pay the bills. Bottle shops, shelves of pantry items, comfort food in Mason jars, gourmet meals delivered with wine and a Zoom link, adding pizza to the menu … everything was on the table.
The experiment continues as owners must now figure out how to bring customers back into their restaurants.
Since customers are already familiar with subscription services, whether it’s a meal kit or Spotify, a subscription may be right for your restaurant whether it’s high-end, fast-casual or a cozy café.
It’s a fact, customers who buy a subscription are more likely to visit your store frequently to recoup their investment. Since they’re already getting a good deal, they may well treat themselves to a little extra. Soon it becomes a habit, and you’ve got a loyal customer.
One study shows that 37% of customers don’t consider themselves brand loyal until they’ve made five purchases.
Subscriptions are also a good way to collect customer data, especially if the program is linked to a loyalty program or customers must scan a QR code. Use the data to personalize marketing strategies and target promotions to specific customer segments.
To make a subscription work, however, restaurant owners must know their costs and budget carefully before selling discounted food items, said Lilly Jan, who lectures at the School of Hotel Administration at Cornell University, Ithaca, New York.
You must also carefully evaluate how it fits your restaurant business model.
While there’s no one-size-fits-all subscription model for foodservice – even the big guys are still figuring it out – restaurants that have survived the past year may well be ready to try something new.
Written by Cynthia David