Industry News

Datassential: Subscription models shined in 2020, will see further growth

There were few bright spots for restaurants in 2020. The subscription model was one of them. 

As consumers learned to work, learn and socialize from home when the pandemic hit, they took to subscription services in larger numbers, moving past traditional offerings from Netflix, Amazon and the like, to include clothing, beauty products and for a small-but-growing sect, restaurant food and drinks. 

It was an ideal set up: a majority of consumers used some kind of subscription service before the pandemic, and foodservice operators from restaurant chains to meal kit makers have increasingly jumped into the space, eager to secure a more steady stream of revenue and build customer loyalty in a very uncertain time. 

More than three-quarters of consumers use subscription services; streaming video, including Netflix and Hulu, being the most prominent option, followed closely by e-commerce options from Amazon to Walmart. 

But food and restaurant subscriptions are a growing option, according to a recent survey by Datassential. The month before the pandemic began, Panera launched a subscription that provided unlimited coffee and tea for $8.99 per month. It put more marketing into that offer during the pandemic to encourage repeat customers. Burger King has offered a coffee subscription since 2019 that offers a cup of hot coffee every day for $5 per month as a way to draw customers away from competitors better known for breakfast, including McDonald’s and Dunkin’. 

During the pandemic, many independent restaurants tried their hand at food and drink subscriptions as a way to cover some of the losses incurred from dining limits and closures. For example, the Summerlong Supper Club in New York City offered eight dinners at different restaurants for $440 starting last January in an effort to ensure that each participating restaurant earned enough to make it through the winter. 

About 1 in 10 (11%) of consumers now use restaurant-offered subscriptions or meal kit memberships, Datassential’s survey revealed. With so many consumers adapting to the subscription model in many facets of their lives, restaurants and other foodservice companies have a ripe opportunity to design their own, particularly as more Americans get vaccinated and those who have experienced financial setbacks begin to regain some disposable income. 

How does a restaurant design a strong offering that consumers will go for? Consumers most crave and use subscriptions for coffee and lunch/dinner entrees, according to Datassential. And nearly half (48%) are looking to save either time, money or both when choosing what subscription services they choose. That means a standard discount on purchases or points/credit toward free food or drink - the top two perks sought most in a restaurant subscription service. 

While most are looking for savings on what they already buy regularly, more than one-third of consumers are looking for access to unique offerings. That could include special drinks or entrees, or certain rewards available solely to subscribers. 

And among those consumers that are interested in restaurant subscription programs but not yet using, two-thirds say they would be willing to pay more than $10 for entrée programs. Overall, consumers are most willing to pay higher subscription fees for entrees and alcoholic beverages.

And who wants them most? Millennials. Millennials use all subscription programs at double the rate of other generations. About 19% of millennials say they currently pay a monthly charge for a restaurant-offered subscription, compared with just 4% of Boomers. 

Subscription models clearly spell opportunity for all kinds of foodservice operators. They are a valuable asset in a moment when many Americans are relying on food to be delivered at home, or available through a drive-thru or a similar option with limited staff interaction. But depending on their model, restaurants could structure subscription models to further incentivize customers to dine in and resume more normal dining habits as the pandemic hopefully moves further into the rear view mirror. 

Related stories:

Samantha Des Jardins is a writer for Datassential, a food industry market research and insights firm.

________________________________________________

If you enjoyed this article, you can sign up for the FMI dailyLead, ProChef SmartBrief or Restaurant SmartBrief to get news like this in your inbox. For even more great news content, sign up for any of SmartBrief’s 275+ free email newsletters today, free.