It's not just about discounts for diners. A well-executed loyalty program can open up a window into customer behavior and feedback that hasn't previously existed for most restaurants.
— Erika Adams
Fazoli’s, a 215-unit Italian restaurant chain headquartered in Lexington, Kentucky, has been going through something of a renaissance in recent years. It completely rehauled its menu, updated its restaurant designs, got in on online ordering and delivery, and, last year, it launched a digital customer loyalty program.
One year into the program, the casual dining chain has a hit on its hands. Loyalty members contribute upwards of 15 percent of total sales at some restaurants, and, in return for doling out free baked spaghetti and pepperoni pizza breadsticks, Fazoli’s has received informative levels of customer data that it never had access to before.
Initial Loyalty Rollout
Like many U.S. restaurant chains seeking Starbucks-level success in loyalty, Fazoli’s has found that the program had real impact on driving sales, foot traffic, and repeat diners in the restaurants.
The loyalty program is based on a points system: for every dollar spent, members earn a point, and every 50 points turns into $5 off the bill. There are significant promotional offers, too. Members get a free pasta dish for signing up as well as freebies tied to special events, like a birthday or National Cookie Day.
It’s an aggressive discount structure, which played well with Fazoli’s customers. The company has seen an average 33 percent redemption rate on the initial free pasta dish promotion, and coupon redemption rates are higher through the loyalty app compared to Fazoli’s print or email marketing channels.
“With some loyalty programs, it feels like it takes forever to get anything,” Will Hanrahan, Fazoli’s digital marketing manager, told Skift Table. “With our program, I think people have been very happy with the redemption rates. It was really key to the way we set it up.”
Fazoli’s paired up with loyalty tech provider Punchh to roll out the new integration first at its company-owned restaurants in September 2017, and then later to franchised locations over the following summer. Within the first two months of the initial launch, Fazoli’s recorded over 20,000 app downloads between iOS and Android devices.
Rethinking Marketing Spend
Because loyalty members tended to show a high rate of response to promotions and calls to action, Hanrahan said that it started to change the way that the team thought about its overall marketing strategy. “The app is decreasing our reliance on traditional media when we really need a sales boost,” Hanrahan said. “People are now asking, ‘Hey, what can we do in the app?’ first.”
In September 2018, the chain recorded a 475 percent increase in the total spend among loyalty members due to a relatively benign promotion that Fazoli’s pushed out for the month: diners could earn double points throughout September every time they ate at Fazoli’s on a Sunday.
The total spend in the restaurants on those days among loyalty members who visited Fazoli’s leapt from $26,000 in August to $150,000 in September, and Fazoli’s recorded a 494 percent increase in loyalty member guest count on Sundays in September as compared to the prior month.
Supporting Other Departments
While the loyalty program has been great for sales and marketing, other departments are also benefitting from the integration. Fazoli’s uses the app to create informal focus groups to test out new menu items, and then the product development team uses feedback to tweak menu items before they go into wider release.
Loyalty members in certain locations got notifications to try the chain’s new cinnamon swirl breadstick bites for free in October. For those who redeemed the offer, a survey quickly followed to get feedback on the food, and the results will be used to inform any changes to the breadstick bites before they roll out to the entire system next year.
Fazoli’s did a similar promotion for a new warm apple crostata dessert that was served with ice cream. As orders in the test group came through, the crostata was delivered to the table topped off with ice cream, but the kitchen team quickly reworked it once it became apparent that ice cream scoops were sliding off in melted pools.
Improving the Feedback Loop
After dining at Fazoli’s, loyalty members are often prompted to take a survey and leave feedback on their experience. That line of communication has proven to be far more effective for keeping an eye on what’s happening in the dining room versus Fazoli’s previously most popular feedback channels: Google and Facebook.
In a recent 90-day period, Fazoli’s received 10,000 pieces of feedback through Google and Facebook. In the same time frame, the chain received 40,000 pieces of feedback from the loyalty app channel.
That doesn’t mean that franchise owners are now putting out four times the amount of fires that they were previously, however. Hanrahan said that, more often than not, it’s positive feedback coming in that just wouldn’t have been left otherwise. “Most people only leave reviews online when they have something negative to say,” Hanrahan explained. “[The loyalty app] provides a more realistic feedback sample, not just the extremes.”
When negative reviews inevitably come through the loyalty app, the problems can be resolved much quicker. Restaurant owners or franchisees are immediately flagged when negative words are mentioned in a review, and because the customer information is readily available, the issue can be dealt with immediately.
“Usually you have to ask customers [for more detail on the issue], wait for them to respond, resolve it, and ask for their address to send a gift card,” Hanrahan said. “Now, we can identify the issue immediately, add 10 points to their account, and provide a really fast resolution.”
As the loyalty app has taken off, Fazoli’s had to hire on a part-time customer support employee to field up to 15 service inquires that the chain now receives on a daily basis from customers needing help with their accounts. Hanrahan also noted that the online ordering component of the loyalty app isn’t as seamless as it could be (it loads the web ordering page versus handling the order within the app) and, currently, there’s no way to integrate loyalty points with delivery orders.
The technology isn’t as flexible for a franchise-operated chain yet, either. Franchise owners can’t push out local promotions or communicate through local messaging with their loyalty members only at their own restaurants; they can only participate in company-wide promotions at this time.
These are fixes that could be made if the technology was handled in-house versus through a third-party service, but Hanrahan explained that the costs of building and maintaining an in-house tech team don’t make sense for a business of Fazoli’s size. Hanrahan currently is the only full-time employee managing Fazoli’s loyalty program (as well as the company’s website, social media accounts, and email marketing program), and he leans heavily on Punchh’s support team to assist as needed.
Plus, he said, using third-party services allows the company a certain amount of flexibility.
“We’re definitely thinking about how we need to stay on top of the trends,” Hanrahan said. “It’s another benefit to external partners. We can move if necessary to who’s doing it the best.”