hen cold weather shuts down the patio, and dining room restrictions put a cap on in-restaurant sales, what can restaurants do to maintain and boost revenue?
In Wisely’s new content series we explore the whys, how-tos, and possible benefits of three strategies that can build profit when Winter Is Coming.
The first of these strategies takes a page out of the retail playbook and examines subscriptions for restaurants. This quick guide outlines:
- Do subscriptions apply to restaurants?
- Why consider subscriptions?
- The benefits and risks of restaurant subscriptions.
- Things to consider when designing a subscription.
Do Subscriptions Apply to Restaurants?
What we imagined to be the future of restaurants is out the window post-COVID-19. To build a road to survival and profitability, reinvention is needed to pave the way.
Subscriptions flip the script on a restaurant's relationship with sales. Instead of single event sales, the subscription model aims at selling over a period of time.
There are two kinds of subscription models restaurants can consider:
- Panera’s monthly unlimited coffee subscription
- Lazy Dog’s Beer Club
- Bar Brigade’s Monthly Subscription
Type 2: The customer pays a lump sum and receives meals at set intervals — think Farm CSAs, Goldbelly’s “Best Of” box, Omaha Steaks “Steak of the Month Club”, or Mouth’s pickles or bourbon of the month — but for restaurants.
- Olive Garden’s Never Ending Pasta Pass
- HuHot Mongolian’s Grill Pass
- Freshii's clean eating meal box subscriptions
Why Consider Subscriptions
The short answer? Predictability. In these uncertain times, restaurant leaders, financial advisors, and board members/investors are looking for more predictable revenue. The good news is, customers are also looking for routines that create predictability.
The pandemic has accelerated trends that were already in motion, especially when it comes to consumer expectations for value and convenience.
Research shows that consumers will continue to use pandemic-driven, convenient ways of engaging with business in the future. For example, 56% of consumers will continue to use Buy Online, Pick Up in Store services, and 45% will continue their elevated use of delivery for food and groceries.
Subscriptions done right can tick the boxes of both value and convenience for customers, while also providing that much desired predictability for restaurants.
Benefits and Risks of Subscriptions
Do the benefits of subscriptions outweigh the possible risks for restaurants? Each brand will balance them differently.
Reliable revenue: A subscription model provides a business with a more steady cash flow because both revenue and costs are more predictable.
Customer retention: As customers have committed to a relationship for a certain time-frame by paying for meals in advance, there is a higher probability that the customer will build a strong emotional bond with the brand.
All hail the Auto-Pay: Research shows that for many reasons, subscribers are less likely to cancel subscriptions, especially if they already have a strong emotional relationship with a brand
Reliable product: To sustain the trust that customers put in a restaurant when buying a subscription, it’s essential to maintain or even improve the quality of the food/meals for each installment.
Waste: Subscriptions can lead to food waste because customers may not need every periodical delivery—take in mind how to recycle or reuse the product.
Customer experience: Problems ordering, paying, or with pick-up/delivery can hold more weight when the promise of a subscription is predictability and convenience.
Workload: From designing packaging, to coming up with menu items/combinations, subscriptions can be like starting a mini-business within your business.
Designing a Subscription
To maximize benefits and minimize risk, subscriptions need to be thoughtfully designed, with the needs of both the customer and operations in mind.
Things to consider when designing a successful restaurant subscription:
1. Use the existing customer relationship to learn about your customer’s needs and preferences
Customers who buy subscriptions aren’t looking for products for their own sake, they are really subscribing to the outcomes they want.
Designing the right subscription for the right customer requires:
- Knowing who your valuable customers are
- Understanding the problem they need solved
- Creating a subscription that provides value for them
Feed Families: Parents might be solving for a quick, healthy, reliable mid-week dinner because after work and teaching school they need an alternative to cooking.
Socialites Seeking Alternatives: Young professionals who once relied on a fully booked calendar of restaurant reservations may be craving a sense of normalcy and desire to bring a cocktail/snack/dinner experience home.
2. Ensure a frictionless experience
The true value of subscriptions comes with use over time. To keep customers satisfied across the lifetime of a subscription (and to avoid cancellations), every step should be easy, clear, and add value for the customer.
- Choices: Turns out, there’s a sweet spot for choices—research shows that consumers spend the most money when offered three options.
- Payment: What’s the number one rule of business? Make it easy to pay. Better to go with a pay-up-front model if the experience will be seamless, than risk a poor experience with recurring payments.
- Distribution: Streamline the pick-up process. Automated reminder emails, and two way texting when the order is ready, reduce friction (and no shows). Designated pick up and curbside zones add clarity and convenience for the customer.
- Cancellation & Refunds: Research shows that maintaining a good customer relationship through cancellations requires proactive communication, flexible cancellation options, and transparency.
3. Create a retention plan
Beyond the subscription - end game is continuing the customer relationship when a subscription has run its course.
- Get proactive about feedback: a subscription is meant to solve for customer needs—early and regular feedback is critical to learning if the solution actually solves for the problem.
- Turn feedback into a better experience: directly address stated problems. Pick up location isn’t clear? Add signage. Vegetarians want to get in on the fun? Consider a plant-based option.
- Create outreach for a segment of subscribers: from renewal prompts to menu items/events they might like—will keep the relationship fresh long after the subscription ends.
Re-imagining the Future
The quickly shifting times are driving restaurants and customers alike to adopt systems, products, and innovations that might’ve been unthinkable pre-pandemic.
The boom in off-premise sales is pushing lifestyle brands to adopt ghost kitchens, and fast-casual brands to try out drive-throughs. New infrastructures restaurants are building now to survive, will continue to shape how customers behave down the road.
Subscriptions might feel out of the box, but it’s time to re-think what it means to be a restaurant.