Growing a Franchise
Getting customers to sign up is only the beginning. For franchise brands, the challenge is giving members enough reason to use their rewards and keep coming back.
The basic mechanics of a loyalty program are straightforward: Customers earn points and redeem, or “burn,” them for rewards. Points that are never redeemed contribute to what the industry calls breakage.
But a program can execute all three perfectly and still fail to create much actual loyalty.
Consumers have more programs competing for their attention than ever. Deloitte's 2025 Consumer Loyalty Program Survey found that the average consumer is enrolled in eight loyalty programs but actively participates in only five. Forty percent sometimes forget to redeem rewards altogether.
At the same time, loyalty can meaningfully change behavior. Seventy-two percent of respondents said loyalty programs make them more likely to spend with their preferred brand, while 56% said they increase their spending because of the program.
The opportunity for franchise brands in 2026 isn't simply getting more people to sign up. It's creating enough value to turn enrollment into engagement.
“Loyalty helps guests feel they get more value and personalized content, which is more important than ever,” said Jenna Law, senior director of marketing and communications for Keke's Breakfast Cafe. “But it has to mean more than discounts and coupons. Those can put brands in a downward discount spiral.”
Every loyalty relationship starts with a value exchange. A customer gives a brand something, whether that's another visit, additional spending, an email address, an app download or information about their preferences. In exchange, the customer expects something worthwhile.
If earning feels too slow or complicated, that exchange stops making sense.
Deloitte's loyalty research has repeatedly found that financial rewards and simplicity rank among consumers' most important program attributes. Its 2024 survey found that 86% considered financial rewards and simplicity or ease of use important or very important, while four out of five valued flexibility in how they earned and redeemed rewards.
A program with complicated tiers, expiration rules and point calculations may give marketers more levers to pull, but it can also make the benefit harder for customers to understand. Members should know what they're working toward and feel like they can realistically get there.
For franchisors, there is another consideration: The earning structure has to work at the unit level. A reward that drives visits but erodes franchisee margins isn't sustainable. Neither is a program so conservative that customers never see enough value to change their behavior.
The best earn structure creates a reason to return without training customers to wait for a discount.
If earning gets customers into a program, redemption is where the promise becomes real. That makes the “burn” side of the equation particularly important.
Deloitte's 2025 research found that 40% of consumers sometimes forget to redeem rewards, and the firm identified effortless redemption as one of the biggest opportunities for brands to strengthen engagement. Clear, simple and flexible redemption can reinforce the sense that the customer is receiving something meaningful in return for their participation.
Brands shouldn't make customers work hard to use what they've earned. That can mean reducing confusing restrictions, reminding members when rewards are available or allowing them to choose among different benefits.
It can also mean expanding the definition of a reward. “Loyalty should mean exclusive experiences, sneak peeks and creative ways of personalizing visits to make guests truly feel like VIPs,” Law said.
Deloitte has described a shift in loyalty programs from traditional rewards like free products and discounts toward experiences that build a stronger emotional connection with customers. Exclusive access, priority service and personalized offers can help brands make that connection without relying on discounts.
In accounting terms, breakage refers to rewards or other customer rights that are expected to go unused. For loyalty programs, companies may estimate expected breakage based on redemption patterns, and those estimates can affect when associated revenue is recognized.
Operationally, however, franchise marketers should be careful about treating unused rewards as a sign of success.
If a customer earns something and forgets about it, the brand may avoid the immediate cost of redemption. But it also misses the return visit, interaction and positive experience that reward could have created.
Loyalty programs also give franchise brands something potentially more valuable than another promotional channel: first-party customer data. When customers identify themselves across transactions, brands can begin understanding frequency, preferences and patterns that would otherwise remain invisible.
Deloitte's research has identified personalization as an ongoing gap. In its 2024 survey, only 60% of consumers were satisfied with the customized and targeted experiences they received through loyalty programs.
The opportunity isn't necessarily sending more messages. It's sending more relevant ones.
A regular breakfast guest doesn't need the same communication as someone who hasn't visited in three months. A customer who consistently purchases one service may respond differently from someone exploring the brand for the first time.
Used thoughtfully, loyalty data allows a franchise system to stop treating every customer identically.
That is particularly valuable across a franchise network, where corporate can provide sophisticated data infrastructure while individual locations benefit from better knowledge of the people they serve.
Lindsey McFadden, chief marketing officer of Stretch Zone, sees loyalty becoming even more important as digital customer acquisition becomes increasingly crowded. “Consumers have more options at their fingertips than ever before,” McFadden said. “On a go-forward basis, loyalty driven through meaningful customer engagement is going to be paramount.”
That changes the economics of the relationship. Digital advertising asks a brand to repeatedly compete for someone's attention. A strong loyalty program gives the company an existing relationship it can continue developing.
“The digital ad space is increasingly noisy,” McFadden said. “People's feeds are flooded with information. If your brand can stand out in all of that, and consistently build loyalty through real engagement, that's what will truly matter.”
The strongest loyalty programs in 2026 won't necessarily be the ones issuing the most points. They'll be the ones customers remember they joined.
Most importantly, determine what loyalty should mean for the brand itself. Loyalty is what happens when the value customers receive gives them a reason to choose the brand again.
Want to learn more about how 1851 helps franchisors grow their franchises with confidence? Visit www.1851growthclub.com and see what we can do for you.
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