Do Loyalty Programs Actually Work for Restaurants?

Did you know that 65% of a business’ revenue comes from repeat purchases of existing customers? Or how about this: 85% of customers think that loyalty programs make them more likely to shop with that brand.

So, if you think loyalty programs are just fluff, think again. They’re not just about handing out free desserts or discounts—they’re about keeping your customers coming back hungry for more.

But here’s the catch: not just any loyalty program will do. A half-baked, confusing program isn’t going to cut it. You need a plan with purpose. Every feature, every reward, every step of the process needs to make sense, not just for you but for your customers too.

By the end of this blog, you’ll be serving up loyalty like a pro. Let’s dig into why loyalty programs aren’t just a good idea—they’re the secret ingredient your restaurant needs. Ready? Let’s get cooking!

How Loyalty Programs Benefit Restaurants 

Loyalty programs are way more than just tools for repeat purchases. They’re a powerful strategy to supercharge revenue, build relationships, and keep your customers coming back for more. Let’s break it down!

Helps to Increase Revenue

Loyalty programs don’t just bring customers back; they turn them into your biggest fans. Here’s how:

1. Increased Frequency

Everyone loves rewards, and your customers are no exception. A solid loyalty program gives them the perfect excuse to visit more often—because who doesn’t want to rack up points for their next treat?

2. Upselling Opportunities: 

Want to nudge your customers to splurge on that appetizer or premium cocktail? Loyalty programs can encourage customers to spend more just to reach a reward threshold. “You’re only $5 away from your next reward!” is like music to their ears.

3. Larger Orders 

Have a high-margin dish you want to promote? Offer bonus points for it! Customers are much more likely to add that extra dessert or pricey entrée to their order when there’s an incentive tied to it.

Real Example:

Famous Dave’s, a popular BBQ chain, implemented a loyalty program and saw 20% of customers participating—resulting in higher ticket sizes and frequent visits. That’s proof that loyalty programs aren’t just a gimmick; they’re a serious business booster.

Gains Valuable Customer Insights

A loyalty program is a treasure chest of customer data that can transform your restaurant’s strategy. Let’s see how:

1. Behavior Tracking

With a loyalty program in place, you can uncover your customers’ dining habits, favorite menu items, and even their typical spend. Think of it as getting a backstage pass to their preferences.

2. Targeted Marketing

Why waste time and money on generic promotions when you can offer personalized deals? Use loyalty data to send offers tailored to individual customers. (Hint: They’re way more likely to bite when you offer discounts on their favorite dishes!)

3. Improved Menu Decisions

Your program can help you identify top-selling dishes and ones that are, well… not so hot. Use this data to tweak your menu and focus on the items your customers love the most.

Real Example: 

Mama Fu’s, an Asian-inspired restaurant chain, used its loyalty program’s analytics tools to dig into customer data. They discovered peak customer hours and which menu items were the real MVPs. With this info, Mama Fu’s revamped its menu and adjusted its offerings to deliver value at critical times—and it worked like a charm.

Improves Brand Advocacy 

A good loyalty program can turn your most loyal customers into your biggest cheerleaders. Here’s how:

1. Word-of-mouth Marketing

When customers love your loyalty program, they’ll talk about it. Whether it’s raving about your rewards or recommending your restaurant as their go-to spot, loyalty members are walking (and talking!) advertisements for your restaurant.

2. Organic User-Generated Content (UGC)

Everybody loves to share a good deal, especially when it’s tied to a fun perk. By adding shareable elements—like exclusive challenges or social media contests—your campaign encourages customers to promote your restaurant naturally.

Real Example:

Bareburger nailed this with their BOGO Taco Tuesday challenge. Loyalty members who participated earned 100 bonus points in their app. This not only boosted traffic to their locations but also flooded social media with posts about the fun challenges. It’s free marketing that keeps on giving!

Cost-Effective Marketing

One of the hidden superpowers of loyalty programs is their ability to act as a built-in marketing machine. Instead of pouring money into new customer acquisition, these programs let you focus on maximizing the value of your existing diners—all while keeping marketing costs low.

1. Direct Communication

Loyalty programs give you direct access to your customers’ data. Want to promote a new menu item or remind diners about an expiring reward? A quick message lands right in their inbox or on their phone. Use insights from your program to send hyper-relevant messages tailored to individual customer preferences.

2. Lower Acquisition Costs

It’s a simple truth: retaining a customer is cheaper than acquiring a new one. By making loyal customers feel valued, you reduce the need for expensive ad campaigns or promotions aimed at pulling in new traffic.

3. Built-in Promotions

Your loyalty program can double as a marketing engine. Special events, promotions, or challenges within the program keep customers engaged and spending without requiring additional ad spend.

Real Example: 

Black Rock Bar & Grill took advantage of their loyalty program’s targeted email marketing tools to remind customers of upcoming promotions and personalized offers. The result? A stunning 35%+ guest return rate—a marketing win without extra campaign costs!

Makes Your Restaurant Stand Out

In a sea of dining options, a standout loyalty program can be your secret weapon. It’s not just about rewarding purchases—it’s about creating an unforgettable experience that keeps customers choosing your restaurant over the rest.

A well-crafted loyalty program makes your restaurant feel like more than just a place to eat—it becomes a destination. Offering perks like VIP experiences, exclusive rewards, or personalized offers helps you rise above the noise and create a lasting impression.

Real Example: 

Take 7 Leaves Cafe, for instance. In a market saturated with bubble tea shops, they launched a loyalty program to engage their audience on a deeper level. Customers felt valued, connected, and rewarded, resulting in a 53% increase in same-store revenue growth.

Encourages Engagement Past Restaurant Doors

Your relationship with customers shouldn’t end when they walk out the door. A great loyalty program keeps the connection alive, driving ongoing interaction and extending your restaurant’s influence.

Loyalty programs can help you to stay engaged with customers even after leaving the restaurant.

Real Example: 

Saffron Indian Kitchen implemented automated post-visit emails through email to re-engage customers. Within just 30 days, they earned $4,000 in repeat orders—a testament to the power of staying connected after the dining experience.

How to Win Customer Loyalty Through Psychology

Ever wonder why loyalty programs are so addictively effective? The secret lies in tapping into human psychology. When done right, your program doesn’t just drive sales—it creates a lasting emotional connection with your customers.

Here’s how:

Fulfill Their Instant Gratification 

We live in a world where people expect things now. This craving for instant rewards isn’t just a modern quirk—it’s hardwired into us. Research shows that the anticipation of receiving a reward lights up the brain’s dopamine system, giving customers a feel-good boost even before they claim their prize.

Why It Works: Dopamine, the brain’s “reward chemical,” is triggered when customers see progress toward a goal or receive even the smallest reward. This keeps them motivated to return for more.

Actionable tips:

• Small, Immediate Rewards: Offer quick wins like a free drink or appetizer for signing up. These low-cost incentives create a positive first impression.
• Rewards Progression Tracker: Display progress visually, like “You’re 3 visits away from a free dessert!” This keeps customers excited and coming back to reach their goal.

Give Them a Sense of Belonging

Everyone wants to feel like they belong—and your loyalty program can be the perfect way to give customers that warm, fuzzy feeling. When people feel valued and part of an exclusive community, they’re more likely to stick around and show their loyalty.

Why It Works: Humans are social beings, and we naturally crave meaningful connection. Feeling “in” on something special fosters emotional attachment, making customers more likely to return.

Actionable tips:

• Create VIP Perks: Add an exclusive tier for your most loyal customers with early access to new menu items, priority seating, or members-only discounts.
• Encourage Interaction: Use social media challenges or in-app features that encourage customers to share their experiences.
• Build a Community Space: Create a loyalty program hub, like a mobile app or a section of your website, where members can interact, leave reviews, and discover perks.

Create the Fear of Missing Out (FOMO)

Nothing gets people moving faster than the fear of missing out! Customers are far more motivated to act when they believe they’re about to lose out on something special.

Why It Works: Studies show people are naturally wired to avoid losses more than they are to chase equivalent gains. FOMO taps into this instinct, making them eager to grab rewards before they’re gone.

Actionable tip:

• Offer Limited-Time Rewards: Introduce time-sensitive perks like discounts or free treats that expire after a few days.
• Highlight Scarcity: Use phrases like “Only 5 rewards left!” or “Last chance to claim your free dessert!” to create urgency.
• Send Notifications: Push timely reminders via email or app notifications to nudge customers into action.
• Add Countdown Timers: Include countdowns in emails, your website, or app to visually show how little time is left.

Tips for Designing a Loyalty Program That Works

Loyalty programs are more than just discounts and freebies for your diners. A great loyalty program keeps your customers excited, engaged, and well, loyal. So, here are a few actionable tips for you to start building a program that actually works.

Know Your Customer Base

Your customers are unique, so you should treat them that way! A successful loyalty program starts with knowing exactly who you’re rewarding. Because, when you reward customers the same way as everyone else, they wouldn’t feel the exclusivity.

• Segment Your Audience: Group customers based on their habits—do they visit daily for coffee, or only come in on weekends for brunch? Create rewards that match their behavior.
• Collect Feedback: Ask customers what they actually want—through surveys, casual chats, or even social media polls. The more you know, the better your program will be.
• Understand Preferences: Some customers love discounts, others want exclusive experiences (VIP tasting nights, anyone?). Figure out what drives loyalty and build your rewards around it.

Set Your Restaurant’s Goals

Like any other investments you’re having for your restaurant, it should be made with a clear goal in mind—and a loyalty program is no exception. To make your loyalty program really drive results, you have to know what success looks like for your restaurant. So, a well-designed program should align with your business goals. Here are a few goals that you might want to think about:

Customer-Focused Goals

Want to strengthen your relationship with customers? 

• Increase Customer Retention: Give customers a reason to return regularly, whether through points-based rewards or exclusive perks.
• Attract New Customers: Use sign-up bonuses and referral incentives to bring in fresh faces.
• Enhance Customer Satisfaction: Rewards, birthday perks, and exclusive experiences make dining more enjoyable and memorable.
• Build Customer Loyalty: Go beyond transactions—personalized offers and appreciation events make customers feel valued.

Revenue and Profit Goals

Want to see more cash flowing in? Tailor your loyalty program to do just that.

• Boost Average Order Value: Encourage customers to spend more with incentives like double points on high-margin menu items.
• Drive Higher Sales: Create special promotions that motivate customers to visit more and buy more frequently.
• Improve Profit Margins: Design rewards that increase revenue without cutting too deeply into profits, such as exclusive experiences instead of heavy discounts.

Marketing and Brand Goals

Loyalty programs can also double as powerful marketing tools that help grow your brand. While at the same time, cutting down costs to acquire new customers. Win-win, right?

• Increase Brand Awareness: Promote the restaurant to a wider audience through advertising and word of mouth. A well-promoted program gets people talking—both online and offline.
• Build an Online Presence: Encourage customers to engage on social media and review platforms by offering incentives for posts or check-ins.
• Foster Community Engagement: Strengthen your restaurant’s community by hosting events, featuring local partnerships, or supporting charitable causes.

Select the Right Type of Loyalty Program

Not all loyalty program types are created equal! The best one for your restaurant depends on your business model, customer habits, and overall goals. Here’s a breakdown of the most popular types:

1. Points-based loyalty programs

Let customers earn points for each purchase, which they can redeem for rewards. The rewards can be simple but variable! Offer free menu items or discount vouchers, whatever your customers like.

Best For: Cafes, casual dining, and quick-service restaurants.

Why It Works: Simple, familiar, and easy to customize with bonus point events or double-point days.

2. Tiered loyalty programs

This type of program gives your customers a chance to unlock different reward levels based on their spending value or visit frequency. Typically, restaurants offer three tiers.

Best For: Upscale restaurants, or restaurants with high-value customers.

Why It Works: Encourages higher spending and long-term loyalty by making customers feel like VIPs.

3. Promotional loyalty programs

Short-term promotions, such as “Earn double points this weekend!” or “Join today and get a free appetizer!”

Best For: Restaurants looking to drive immediate engagement or test a loyalty program before committing long-term.

Why It Works: Creates urgency and attracts new customers while keeping existing ones engaged.

4. Item-based loyalty programs

Customers earn rewards based on specific menu items they purchase (e.g., “Buy 5 lattes, get 1 free”).

Best For: Coffee shops, bakeries, or any restaurant with high-repeat purchase items.

Why It Works: Encourages repeat purchases of best-selling or high-margin items.

5. Frequency-based loyalty programs

Customers earn rewards based on how often they visit (e.g., “Dine with us 5 times, get a free appetizer”). 

Best For: Fast-casual and sit-down restaurants with regular customers.

Why It Works: Keeps customers coming back consistently, building a habit of choosing your restaurant.

6. Journey-based loyalty programs

Customers move through a personalized journey (e.g., first visit = free appetizer, fifth visit = 20% off, tenth visit = free entrée).

Best For: Restaurants looking to create a fun, gamified experience.

Why It Works: Keeps customers engaged with a sense of progress and achievement.

7. Paid loyalty programs 

This program requires customers to pay a monthly or annual fee to unlock exclusive perks (e.g., free delivery, priority seating, or special discounts). But be careful—the upfront costs may turn some customers away, so you have to strategically plan your rewards so customers want to join!

Best For: High-end restaurants or delivery-focused restaurants.

Why It Works: Guarantees upfront revenue and attracts dedicated, high-value customers.

So, which program is right for you? Remember: the best loyalty program is the one that aligns with your goals. Want higher spending? Try a tiered program. Need frequent visits? Go for a points-based or frequency-based system. Looking for exclusivity? A paid program might be your best bet.

No matter which you choose, make sure it’s easy to use and rewarding for your customers.

Getting Ready to Roll Out Your Program

So, got your program type ready? Before take-off, you need to make sure everything is set up for a smooth and successful rollout. Here’s what you need to check off your to-do list:

• Sync with POS Systems: Your loyalty program should integrate seamlessly with your point-of-sale system to track purchases, rewards, and redemptions effortlessly. No one likes manual tracking!
• Team Training: Your staff will be the frontline champions of your loyalty program. Train them to explain the benefits, enroll customers, and troubleshoot basic issues confidently.

Promote Your Program

A loyalty program only works if customers actually use it! Spread the word and get people excited with a strong promotional push:

• In-Store: Use eye-catching signage, table tents, and even printed messages on receipts to make customers aware of the program.
• Online: Leverage your website, email newsletters, and social media to showcase the benefits and encourage sign-ups. A short video or customer testimonial can make a big impact!
• Staff Engagement: Encourage your team to mention the program during customer interactions—whether it’s at checkout, while taking orders, or when handing out receipts.
• Incentives: Offer a special launch promotion—such as double points, a free appetizer, or an exclusive discount—for customers who sign up early.

Answering Restaurant Owners’ Most Common Questions

By this point, you’ve probably been thinking about launching a loyalty program, but some questions still linger in your mind. Still unsure if it’s the right move? You’re not alone! Here are answers to some of the most common questions restaurants owners may have before getting started.

1. Are Loyalty Programs Expensive?

The cost of a loyalty program varies based on how you implement it, but it doesn’t have to break the bank!

• Initial Investment: Costs depend on the type of program—some require a subscription fee, while others involve purchasing a system from a provider.
• Customizable Options: Start small and scale up based on your budget. Many platforms offer flexible pricing, allowing you to pay for only the features you need.

2. What if I Don’t Have Enough Customers Yet?

Think loyalty programs are just for the big names? Think again! It’s also great for attracting new people! So, you can start with a loyalty program and grow your customer base from there.

• Referral Strategy: Offer incentives for existing customers to bring in friends, like bonus points for every successful referral.
• Incentive Opportunities: Encourage first-time visits by offering a small reward (e.g., a free appetizer or discount) just for signing up.
• Marketing Boost: Use social media, email, and in-store promotions to spread the word and bring in fresh faces.

3. What if My Customers Aren’t Signing Up?

If customers aren’t joining your loyalty program, it might be a visibility or convenience issue. Here are a couple of tips to get your customers to sign up for your loyalty program:

• Promotion Campaigns: Use eye-catching in-store signage, social media posts, and email blasts to get the word out.
• Easy Enrollment: Make sign-ups quick and effortless—consider a mobile app, a simple QR code scan, or an automatic opt-in at checkout.

4. How Long Will it Take to See Results From the Program?

Patience is key! A loyalty program builds momentum over time. Don’t sweat if your loyalty program doesn’t deliver results in a few weeks to months.

• Adoption Time: Both customers and staff need time to adjust and make the program part of their routine.
• Reward Accumulation: Customers need to rack up enough points or visits before they start redeeming rewards, creating long-term engagement.
• Typical Results Timeline: Most restaurants start seeing positive results within 2 years, though many notice increased customer retention much sooner.

5. What Happens if the Loyalty Program Doesn’t Work?

It’s true, failure is not a 0% chance, so it’s understandable if you’re worried that your loyalty program flops. But here’s a pro tip: if your loyalty program isn’t performing as expected, don’t scrap it—optimize it! Discontinuing your loyalty program should be a last resort!

• Analyze the Data: Review customer feedback and program engagement metrics to pinpoint weak spots.
• Iterate and Improve: Try adjusting reward structures, tweaking communication strategies, or simplifying the program.
• Seek Expert Advice: Loyalty program providers and marketing professionals can help fine-tune your approach.

We’ve covered some of the most common questions here, but every restaurant’s situation is unique. If you’re still unsure whether to start, don’t hesitate! Waiting too long could mean leaving money on the table when you could be investing in a loyalty program, especially if you’re a small and growing restaurant. Start driving real customer engagement now!

Conclusion

A well-designed loyalty program isn’t just a marketing tool—it’s a game-changer for customer retention, brand growth, and increased revenue. Whether you’re looking to keep customers coming back, boost spending, or stand out in a crowded market, a loyalty program can help you get there.

The best part? It doesn’t have to be complicated. Start small, refine your approach, and watch as your customers turn into loyal fans.

Ready to take the next step? Start building stronger customer relationships and driving repeat business today with SimpleLoyalty!