Fast-casual restaurants lean on loyalty programs to offset consumer pullback

Fast casual restaurants are seeing a boost in customers using loyalty grams through shifting economic behaviors

Flexibility, personalization, and surprise rewards are becoming central to how brands design loyalty grams

Brands are expanding beyond simple perks into strategic tools for engagement to see long-term growth in the future

Brendan McDermid | ReutersAs some consumers pull back on spending amid economic uncertainty, fast-casual restaurant chains are leaning on rewards grams to pull them back in

Loyalty grams, which offer discounts or added perks for returning customers, have transitioned from being a nice bonus for restaurants to a must-have

As cost-cautious diners prioritize value, brands Chipotle, Starbucks, Cava and others are utilizing rewards to keep customers coming back and building habits that go beyond the occasional coupon. "In tough times, loyalty grams become more essential," said Peter Fader, a marketing fessor at the Wharton School at the University of Pennsylvania. "They become a required ingredient to building and maintaining relationships. "In the 12 months in May, the restaurant industry only saw monthly traffic increase once, in November, according to Black Box Intelligence data

As diners visit restaurants less frequently, sales struggle

Only 43% of restaurant brands tracked by Black Box reported same-store sales growth in May

Consumers who join loyalty grams visit restaurants more frequently, making 22% more visits per year to eateries, according to Circana data

They also frequent the brands that they belong to at twice the rate of nonmembers, the market re firm found

Coffee giant Starbucks reported 34. 2 million active rewards members in its second quarter and said more than 59% of its U

Company-owned transactions came from those members

It's loyalty gram makes up apximately 30% of sales on average each day and helped the burrito chain to avoid major price hikes, according to the company. "We have really strong brand loyalty among our members," Nicole West, Chipotle's vice president of digital experiences, told CNBC. "We're really focused on engaging with our members and doing that in a way that really resonates with them. "Driving loyalty is critical for the s of Chipotle and Starbucks

In the first quarter, Chipotle posted a same-store sales decline for the first time since 2020 and said it saw a "slowdown" in consumer spending

Meanwhile, Starbucks' same-store sales have fallen for five straight quarters

Cava is bucking industry trends with strong sales growth, but faces Wall Street pressure to maintain its rapid expansion

Getting creativeAs rewards grams pick up steam, more brands are getting creative and moving beyond the value meal

Members can earn points each visit and redeem them for specific items pita chips or full entrees

The gram also includes limited-time offers and in-app challenges

In late March, the company celebrated National Pita Day by rolling out a mascot named "Peter Chip" and offering members complimentary pita chips. "Guests to see periodic surprises and delight moments where we can reward them with pita chips or other brand offerings," Andrew Rebhun, Cava's chief marketing officer, saidThe Cava Rewards gram now has more than 7 million members

A new tiered system is expected to launch soon, according to Rebhun

Brandon Bell | Getty Images News | Getty ImagesChipotle this year launched a seasonal campaign called "Summer of Extras. " The campaign is giving away over $1 million in free burritos, encouraging customers to rack up visits and compete to become the top Chipotle visitor in their state. "We continue to see activations in this gram build and excitement and positive reaction across social media from our fans," West said. "We just continue to focus on dering value to them in ways through grams where customers are given opportunities to 'plus up' their points or earn specific offers by exhibiting specific behaviors. "Salad chain Sweetgreen also retooled its loyalty gram this spring, moving away from its tiered subscription gram that many consumers found confusing. "In a challenging industry environment where consumers are making more intentional choices with every dollar, SG Rewards is designed to meet the moment by dering a meaningful value," Sweetgreen co-founder and CEO Jonathan Neman said on the company's quarterly conference call in May

Even Starbucks, an established leader in rewards grams, has made changes

In June, the coffee chain its 25-star reusable cup bonus and replaced it with double stars across the full purchase

While the change was controversial among loyalists, who claimed the earning potential was reduced, the coffee chain said participation has remained steady

Of course, giving free rewards comes with tradeoffs

Motions cut into fits in an industry that faces tight margins in the best of times

Restaurant chains hope those freebies drive longer-term loyalty and spending on full-price items

Long-term winsBrands navigating economic pressure are seeing that loyalty grams are helping to drive visits

Customers now have access to over 14 items through the rewards gram

This flexibility has led to more frequent visits, Potbelly's chief marketing officer, David Daniels, said. "We saw a lift almost immediately in terms of engagement," Daniels said. "The response has been incredibly positive. "Chicago-style eatery Portillo's joined the loyalty game in March with "Portillo's Perks. " Instead of using a traditional app, the gram utilizes a digital wallet system and focuses on frequency

It tracks how often a customer visits and awards badges as they go. "It gives flexibility to change how the gram is deployed," Garrett Kern, Portillo's vice president of strategy and culinary, said to CNBC. "It doesn't require a redesign and relaunch to an application

It was a great way for us to get the gram out there in a branded and easy-to-use way. "The company is aiming for 1. 5 million to 1. 7 million sign-ups by mid-summer. — CNBC's Amelia Lucas and Jacob Pramuk contributed to this report.