Subscription-based product models have been all the rage in recent history. Starting with eCommerce-based monthly deliveries like Birchbox and other curated fare, the model has extended in several directions. That includes everything from premium online content to software.
The latter is of course foundational to the broader and longer-standing SaaS movement. Retention and recurring revenue have made it a favorite among investors, while the behavioral economics of monthly pricing (versus large one-time software purchases) reduces friction for buyers.
But can subscriptions work in local product categories like restaurants? They’ve existed in for years in some form, including loyalty programs and quantity-based rewards. But is there a more modern version of the loyalty program that infuses current interest in online subscriptions?
Order Flow
Taco Bell seems to think so. Its new Taco Lover’s Pass lets members redeem one of seven tacos per day for 30 consecutive days for $10. This builds from an existing loyalty program introduced in 2020, framed slightly differently to gain some of the mojo around current subscription demand.
And the result? Taco Bell reports that Taco Lover’s Pass members are three times more likely to visit a Taco Bell location per month. This is logical, as anyone signing up for the subscription is likely a brand loyalist and is motivated to redeem the rewards they’re paying for.
But the program can also cement their loyalty and drive additional visits, including purchases that go beyond redeemed rewards. In fact, the pass program drove 20 percent growth in sign-ups compared to the previous reward program that didn’t have a subscription component.
Taco Bell has also taken steps to reduce onboarding friction, letting new members sign up for the pass in its app. This is a direction the company has been moving in general. Digital sales through its app and website (e.g., order online, pickup in-store) are up to 20 percent of total revenues.
Moreover, Taco Bell’s owner Yum Brands specified in its Q4 earnings call that its goal is to get this total up to 50 percent. Why the drive towards digital? There are logistical benefits in a mobile order flow directly to a POS/expediting system, and other efficiencies that streamline operations.
Digital ordering can also plant a given restaurant brand’s app on that valuable plot of land on your mobile home screen. There, it can stimulate frequent purchases and keep a brand top of mind versus others in the hyper-competitive QSR space. Subscriptions reinforce that even further.
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Bearing Fruit
Beyond Taco Bell, where else is there evidence of subscription programs bearing fruit? Panera’s pilot subscription program boosted loyalty program signups by 25 percent. More importantly, those members were tracked to reveal 70 percent greater order sizes than average customers.
And others are catching on. Pret A Manger and Sweetgreen recently launched subscription programs. Meanwhile, the National Restaurant Association reports that 57 percent of adults are interested in restaurant subscription programs. That figure jumps to 80 percent for millennials and Gen Z.
So it appears that the broader interest around subscriptions can translate to products at the local level. Of course, all of the above examples are national brands that operate locally. But that’s precisely where tech adoption tends to start before being validating and moving down-market to SMBs.
So the lesson for the SMB world is that there could soon be competitive pressure to adopt subscription-based programs. Similarly, this could mean an opening for smart SaaS players who can democratize subscription programs for the SMB restaurants of the world. We’ll keep watching closely.
