What do Subway, Sweetgreen and Cracker Barrel all have in common?
They’re all in search of traffic. And they’re all turning to their loyalty programs to get it.
Subway is reviving its Sub Club, which will give members a free footlong sub for every three that they buy. Sweetgreen just launched a bargain-priced $10 bowl—for loyalty members only. And Cracker Barrel is cutting its advertising budget by up to $16 million as it looks to save money, but plans to use its loyalty program to connect with customers in the meantime.
These brands are desperate. Sweetgreen is coming off a quarter in which traffic declined 11.7%. Cracker Barrel is facing a similar traffic plunge following its new-logo debacle. And Subway has been struggling with sales declines and closures for years.
Can targeted, discount-driven marketing help turn things around?
If it can, it would be a big endorsement for loyalty programs, a strategy that is still very much in flux in the restaurant industry. For evidence of that, just look at all the brands that have overhauled their programs over the past year or two—Sweetgreen included. When it comes to loyalty, restaurants are still Figuring It Out. And yet many are putting a lot of investment and urgency into these programs.
Subway, for instance, believes that the Sub Club will help generate much-needed repeat visitors. It very well might—the program may be the most generous in the industry—but at what cost?
As my colleague Jonathan Maze pointed out, a customer could combine some of the chain’s existing offers with Sub Club to get a total discount of up to 61% on four sandwiches. That’s unheard of in today’s loyalty landscape, where most restaurants are shooting for a discount rate of under 10%.
It’s no surprise, then, that Subway franchisees are pushing back on Sub Club, as Maze reports here.
Subway, however, is betting that the wallet-friendly offer will boost traffic enough to make it profitable. One franchisee Maze spoke to estimated that the program would have to drive a 13% to 15% traffic increase to break even.
So will it work? It’s a big if.
At fast-casual Sweetgreen, customers have been complaining about its high prices. It responded this month with a limited-time, $10 bowl, the ‘Tis the Seasoned Harvest Bowl with Blackened Chicken.
Most of Sweetgreen’s bowls range from $13 to $17, and the chain itself has pegged the national average for fast-casual bowls at $12 to $14, my colleague Lisa Jennings reports. So a $10 bowl is a great deal, one that would almost certainly drive more customers to the chain. Except there’s a catch: You have to be part of Sweetgreen’s loyalty program to get it.
Why not make $10 bowls available to everyone? Because generating traffic is apparently only part of the motive here. Sweetgreen also wants to take the opportunity to get people to join its loyalty program, so it can collect their data and market to them in the future.
It’s not necessarily a bad strategy. Dave’s Hot Chicken did something similar earlier this year, offering a free chicken sandwich to new loyalty members, and its mobile app jumped to the top spot in the Apple app store as people flocked to sign up.
But gaudy membership numbers don’t make a loyalty program effective. And if people join only for a one-time freebie or deal, they may not be all that loyal in the long run.
So is leaning into loyalty the right strategy, right now, for Sweetgreen, which is suffering from a negative value perception that is having a real impact on its traffic?
Again, it’s a big if.
Cracker Barrel is facing a multitude of issues, all stemming from its unfortunate logo debacle. It needs to cut costs, and it will spend less on traditional advertising. But it hopes its loyalty program can help it stay in touch with its biggest fans while it focuses on fixing things in its restaurants.
The chain is in a uniquely difficult situation, and this move is somewhat understandable. But it’s not the only brand taking this approach. The Cheesecake Factory is also devoting more marketing dollars to its loyalty program, in part because it can more easily measure the ROI. (With a loyalty program, “I'm going to know whether or not you came back in. I'm going to know what I offered to you,” explained President David Gordon at a recent investor conference.)
Cheesecake believes it can get an extra one or two visits per year from frequent customers by dangling offers through its program.
It’s part of a growing focus on personalization in restaurant marketing, with the general thesis being that tailored offers and ads are more effective than one-size-fits-all messaging.
Here’s the problem: Broad-based marketing campaigns can still work really well. McDonald’s Grinch meal is flying off the shelves. Burger King’s SpongeBob meal appears to be having similar results. Starbucks’ “Bearista” cups were a huge hit. Much of Chili’s success has come from advertising $10.99 meal deals and from an appetizer platter going viral on TikTok.
Sure, those brands may not be able to trace all of those transactions back to known customers and email them next week with a special offer. But at the end of the day, traffic is far better than no traffic.
Ultimately, this isn’t an either/or situation. To succeed right now, restaurants have to appeal to the masses and to their most frequent, valuable customers. Neither is easy, and both come with risks. But some brands are putting an awful lot of faith in loyalty programs that still have a lot to prove.