The Covid-19 crisis has inspired a lot of creative financial thinking on the part of restaurants and small businesses, particularly when it comes to recurring revenue. That’s not surprising. Recurring revenue is the gift that keeps on giving — it’s money that is contractually obligated to show up, month after month, rain or shine. It smooths out the books and provides stability during these uncertain times.
So how do you encourage people to subscribe to your restaurant? The Panera Bread Company, an American chain store of bakery-café fast-casual restaurants with over 2,000 locations, offers a useful case study. Panera recently launched a subscription program offering unlimited hot coffee, iced coffee, or hot tea at all their restaurants for a monthly fee of $9, or about $108 annually. So far it’s a hit, and Panera is planning on rolling out more subscription programs.
So what’s the difference between a subscription and a traditional loyalty program? A lot, as it turns out. The primary difference is that you’re asking your customers to pay. As Zuora CEO Tien Tzuo recently noted in Retail Touchpoints: “Customers should be paying retailers to join loyalty programs, not the other way around. If you think that sounds nuts, just look at Amazon and Costco.”
Not only do paid programs open up new revenue streams for restaurants — which can be invested in new services — but they offer a way for them to establish online relationships, which is becoming increasingly important for small businesses of all stripes. What’s more, paid services invariably have higher usage rates than free programs. Your customer is (literally) invested.
The food blog Grub Street elaborates: “Traditionally, coffee shops and casual sandwich joints have gone with loyalty programs, from buy-nine-get-one-free punch cards to extremely elaborate digital rewards programs. But these are casual relationships. Panera wants to be exclusive. You go to Panera because you’ve already paid for Panera, and while you’re there, you might also buy a muffin.”
What’s more, subscription models are everywhere these days. Consumers are used to them. It’s not a difficult concept to pitch. As Panera’s chief brand and concept officer Eduardo Luz told Adweek. “You just turn on Netflix and it’s there,” he said. “And what’s our version of that? What kind of services or categories would be of interest? Coffee [is] such a penetrated category with high usage.”