Can the blockchain save independent restaurants?
Blackbird Labs, the high-tech restaurant loyalty provider from Resy co-founder Ben Leventhal, believes the answer is yes. And he is not alone. Earlier this month, Blackbird raised $24 million from investors including Andreeseen Horowitz and Amex Ventures, suggesting they think it’s a good bet, too.
On the surface, Blackbird’s system is actually pretty simple: Customers tap their phone to an NFC card reader at a restaurant to get started. They can then earn points with each subsequent tap-in. Those points unlock rewards and perks, like surprise freebies, priority seating and access to exclusive merch.
Restaurants pay a fee to use Blackbird. The company also makes money from customer memberships.
The goal is to help restaurants learn more about their customers and then use that information to get them to visit more often, which Blackbird views as the key to reversing years of shrinking profit margins.
That in and of itself is not a unique philosophy. Loyalty programs are spreading like wildfire in restaurants because they see the same thing Blackbird does: Rewards yield data, which yields better frequency, higher spend and more data to feed back into the system.
But what separates Blackbird from most other loyalty providers is its underlying technology—i.e., the blockchain. The blockchain keeps a permanent record of every customer tap-in with Blackbird. The data is decentralized, meaning no one person or entity controls it, and it is public, giving everyone in the ecosystem a view of the action (as long as the customer OKs it). It also allows Blackbird to issue its own cryptocurrency, called $FLY, which acts as customers’ loyalty points.
Blackbird believes that once fully realized, the blockchain can solve some of the problems it sees with traditional loyalty programs. One big one: Today, each individual loyalty program operates independently of all others. Starbucks knows when a loyalty member buys a coffee from Starbucks, for example, but not when they buy one from the Dunkin’ down the block.
“As a result, a restaurant’s understanding of any individual customer’s value is siloed and incomplete,” Blackbird writes in its “Flypaper”—a sort of manifesto for its blockchain strategy.
The blockchain presents an opportunity to break down those silos—to “make that ecosystem permissionless and open,” Leventhal said in an interview.
So what does that look like? Here’s an extreme example: Using the Blackbird blockchain, all of the businesses on a town’s Main Street—both restaurants and others—could team up and offer a neighborhood-based loyalty program. Customers could earn and spend $FLY at each one, and the businesses would get insight into all of their shopping behavior within the neighborhood. This could encourage consumers to keep coming back to those businesses, giving a boost to the entire area. And because the blockchain is open, the businesses could operate the program themselves, with no oversight from Blackbird itself.
“That’s the idea of a permissionless, coalition loyalty platform,” Leventhal said, and it is not really possible with traditional loyalty software.
Leventhal founder Resy and the food news site Eater. | Photo courtesy of Blackbird Labs
The blockchain offers some other intriguing possibilities. For instance, when a customer earns some $FLY from Blackbird, so does the restaurant. The idea is that the restaurant will then use $FLY, rather than actual dollars, to acquire customers. The restaurant could dangle some $FLY in exchange for a customer taking some valuable action, like referring a friend or sharing more information about themselves. Customers then have more $FLY to spend at the restaurant, creating a flywheel effect.
Customers can also opt in to sharing all of their Blackbird tap-in data across all of the Blackbird restaurants they interact with. So one restaurant on Blackbird could see how often they visit another. “It gives you context on that guest,” said Leventhal. “It allows you to see what their aggregate dining behavior is.”
Of course, for these features to pay off, Blackbird will need to have a lot more restaurants and customers using its technology, something Leventhal said is one of its top priorities. It currently has more than 20 active clients, mostly in New York City, and another 60 or so have signed up. It's expanding into other markets, including Los Angeles, the Bay Area and Charleston, S.C.
It’s also working to integrate with POS systems, so that customers can earn $FLY based on spend rather than just tap-ins. And it is quietly rolling out the ability for customers to exchange their $FLY for things like free drinks and desserts.
But Leventhal acknowledged that Blackbird’s blockchain system is not yet being used to its full extent. “Some of the things we’re doing today, obviously we can do without the blockchain,” he said. “The blockchain is a long-term decision for us.”
Indeed, one of Blackbird’s guiding principles is to give mom-and-pops the same loyalty tools used by giants like Starbucks. It believes the blockchain can help it stay two steps ahead.
“As a technology partner of restaurants, it’s our responsibility to future-proof the software, to build for the long-term, to make sure as time goes on, restaurants continue to look at Blackbird as a world-class technology partner,” Leventhal said.
If all of this is hard to wrap your head around, don’t worry: Leventhal said restaurants won’t have to be tech nerds to understand how to use Blackbird.
“That’s our job, is to make the software intuitive,” Leventhal said. “A lot of these concepts are fairly nuanced, and I don’t think we necessarily expect a restaurant to get under the hood and deeply understand the technology.”