Restaurants are grappling with labor shortages, supply chain disruptions and inflation. According to the National Restaurant Association, restaurants are experiencing the most severe labor shortage in history, in fact 70% higher than most industries. By April 2022, restaurants had lost a further 794,000 jobs, or 6.4% of pre-pandemic employment levels. Additionally, employee retention is an ongoing issue for restaurants, indicated by the quit rate that has risen from 4.8% to nearly 7% in just one year.
Inflation also puts direct pressure on the economy, impacting every decision made in restaurants: choice of menu items, cost versus benefit of each menu item, hours of service, number of employees per shift work, etc. Many restaurants have increased the price of certain menus. articles and continue to do so, unfortunately losing customers in the process. As a result, 80% of American consumers go to restaurants less often. That leaves operators in a tough spot, and many fear they won’t be able to stay in business if costs don’t come down.
How can a gift card program help restaurants?
The global gift card market continues to grow and is expected to reach $1.4 trillion by 2026, validating consumers’ desire to have and use gift cards. The restaurant industry is one of the biggest platforms that can benefit from a well-managed gift card program.
Gift cards are readily available, providing restaurants with free advertising. In fact, they’re often called “pocket billboards” because they feature a brand’s logo and remain confined – a physical or mobile wallet, where consumers are constantly reminded of “free money” ‘they can use to dine out. This notion is particularly popular now, as many people are feeling the effects of a tight economy.
One of the most rewarding benefits of a restaurant gift card program is the ability to increase overall sales. Gift cards almost always guarantee that the money will be spent on that specific business, with the potential to attract new customers. Additionally, 60% of gift card recipients spend more than the original amount of their card, which generates windfall revenue for restaurants.
Gift cards are also great for running promotions. For example, offering a promotion such as “buy a $100 gift card to give away, get a $10 gift card to keep” both encourages freebies for new customers and invites repeat customers to return to their favorite restaurant.
What should restaurants consider when launching or redesigning a gift card program?
From issuance to distribution to compliance, restaurant owners need to consider many factors when launching or redesigning a gift card program. There are many nuances to managing a gift card program, and without the proper resources in place, it can seem like a big undertaking for a restaurant of any size or at any point in its lifecycle.
The first question a restaurant owner should ask is, “Do I have the expertise and bandwidth to run a gift card program?” If the answer is “yes”, make sure your in-house expert keeps up to date with the latest regulations in the gift card industry as they can change quickly and vary from state to state, especially if your restaurant is based in California, Delaware. or New York. Joining the Retail Gift Card Association (RGCA) or the Incentive Gift Card Counsel (IGCC) is one way to ensure you stay up to date with changing gift card laws. The consequences of failing to comply with state and federal regulations can include hefty fines or lead to class action lawsuits.
If the answer to this question is “no”, there are a variety of solutions to ensure your restaurant can still implement a successful gift card program that adds value to your business, primarily by outsourcing your program. to a gift card management partner.
What are the benefits of outsourcing a gift card program versus running one in-house?
By outsourcing a gift card program, restaurants can enjoy the benefits of a gift card program without having to worry about the complexities of issuance, compliance, management, processing, accounting , distribution and promotion. Outsourcing allows gift card industry experts to manage your program regulations if your restaurant brand does not have the bandwidth or expertise to handle these areas in-house.
Managing an in-house gift card program requires a dedicated person (or team) to ensure your resources are uniquely focused on your brand and program. If your restaurant has the bandwidth to maintain the complexities of the program, in-house management might be a suitable option when paired with issuance, processing, and legal resources.
Before your brand decides whether outsourcing or managing in-house is the best option, here are some questions to consider:
- Who will be the legal issuer of our gift cards?
- Who will ensure our gift card program is compliant?
- Who will follow gift card laws?
- Where will we sell our gift cards?
- Can our finance team accept gift cards?
- How will we market our gift cards?