Restaurants Lean on Loyal Customers to Navigate Omicron, Inflation Impact

As the omicron variant of COVID-19 continues to spread, restaurants face a challenging landscape. The variant poses a one-two punch, with consumers shifting to food-at-home options and the labor challenges occasioned by the surge making it difficult for restaurants to meet existing demand.

In fact, in an interview with PYMNTS’ Karen Webster, Andrew Robbins, CEO of Paytronix, noted that the company has seen “a 30% fall-off” since the end of November. With these challenges, he argues, it is even more important that restaurants invest in their digital platforms.

“Digital engagement mechanisms to keep close to the guests are paramount,” Robbins said. “So, a strong loyalty CRM program, online ordering, those are the twin pillars of a good strategy. And we see this every single time there’s a downturn.”

Data from the Centers for Disease Control and Prevention (CDC) put the current U.S. COVID case count at around 66 million, with the 7-day average positivity rate up to 29%. It remains to be seen how long this surge will last, but in the meantime, restaurants are challenged to hold on tight to the customers they have, forging deeper relationships during this challenging time.

The Rewards Opportunity

Robbins argued that, when overall spending is decreased, restaurants have a valuable chance to secure consumers’ loyalty since every dollar that a restaurant holds onto amounts to a larger share of consumers’ total spending.

Rewards programs are one of the best tools restaurants have to do so. Robbins noted that, during the early months of the pandemic, total restaurant occasions were down about 70%, but loyalty members only reduced their frequency by around 20%.

“Overall occasions for dining out will be down, but the people who have captured you in their loyalty program will keep you, and you’re going to drop someone else,” Robbins said. Loyalty members “bounced back very quickly, because [restaurants] could speak to them.”

PYMNTS research from the January edition of the Digital Divide series, The Digital Divide Report: Minding The Loyalty Gap, created in collaboration with Paytronix, found that more than half of all consumers in their early 40s and younger are members of loyalty programs.

Get the Report: Minding The Loyalty Gap

Additionally, the survey revealed the ability to earn loyalty rewards as the No. 1 feature that consumers say would encourage them to make more restaurant purchases.

A Wider View of Loyalty

While points-per-dollar rewards programs are a vital tool for restaurants right now, they are not the only move restaurants can make to build loyalty. One model leveraged by brands ranging from fast-casual health-focused chain Sweetgreen to quick-service restaurant (QSR) giant Taco Bell is subscription commerce.

Read more: Taco Bell Rolls Out ‘Taco Lover’s Pass’ Nationwide as Restaurant Subscriptions See Mixed Results

Robbins cited the example of a Mexican chain Paytronix is working with seeing positive results from its loyalty program.

“They’re doing free salsa and guac, it’s a small amount of money, but those people who sign up for that come in 30% more frequently than people who don’t,” he said. “It locks them in. And so, instead of coming 1.7 times a month, they come in 2.7 times a month.”

Too Many Cooks in the Kitchen

Such initiatives can be particularly vital for restaurants now. The shift toward eating more meals at home puts restaurants into an increased competition, with grocery stores expanding their prepared-food selections.

See also: Instacart Fires Back at DoorDash With Prepared Meals Partnership

“Grocery stores are getting better and, and they have more delivery options,” said Robbins.

Moreover, he added, the rise of ghost kitchens, with some brands even adding pop-up kitchens in their parking lots, and the advent of new food trucks and other nontraditional restaurants makes competition for dining-at-home dollars stiffer than ever.

However, he views this rise in virtual and nontraditional brands as a short-term issue, expecting that high-quality restaurants that have been in the space for longer will outlast them in years to come.

“If the aggregators said we can steal the eyeballs, and ghost kitchens are saying it doesn’t matter whose kitchen — it’s just a brand — then does that mean anybody can provide food to you now? I don’t think that’s true,” he said. “I think, in the long term, that won’t work, because people do care what they eat.”

The Restaurant of the Future

Despite the challenges, Robbins noted, many drive-thru restaurants have enjoyed a period of growth. Restaurants have been incorporating the popularity of various off-premises channels into their store designs.

Restaurants are “constantly innovating on their restaurant of the future,” he said. “You’re seeing more spaces that are more flexible for different occasions.”

In addition to expanding their drive-through footprints, Robbins noted that restaurants are also adding walk-up windows and devising layouts with additional outdoor seating. Still, he is optimistic that the on-premises occasion will soon recover while these innovations will continue to add value.

“We’re going to get through this again,” Robbins told Webster. “The uncertainty to this, I think, has been hyped, but I think it’s going to pass pretty quickly. We still see restaurants expanding. We still see a lot of growth.”