Why Loyalty Programs May be More Valuable than Ever for Franchisors

Prior to COVID-19, loyalty programs were increasingly becoming an essential part of the typical franchise brand’s business model. Now, with delivery and take-out services thriving, loyalty programs offer a new potential for generating recurring revenue and promoting customer satisfaction. 

While most QSR concepts have had loyalty programs for years, franchisors are realizing that it may be time to upgrade their offerings and promotion benefits. Recently, Taco Bell announced that it would be expanding its digital properties and rolling out a new loyalty program, Taco Bell Rewards.

Taco Bell's new loyalty program comes five years after launching its first such program — a lifetime ago when it comes to the tech world. To promote the news, Taco Bell offered a $5 Chalupa Cravings Box for free to those who downloaded the app and ordered ahead for contactless pickup. To redeem the Chalupa reward, customers had to download the latest version of its app, which currently includes a beta version of Taco Bell Rewards. 

Apparently, the consumer demand was there. Higher than normal traffic caused Taco Bell’s website and app to crash and stay down for hours. In many ways, it is fitting that Taco Bell would be the brand to usher in a new era of loyalty programs. In 2014, the chain became the first quick-service brand to offer order-ahead technology through its mobile app.

Now, as many restaurants navigate dining room closures (and re-closures) amid rising COVID-19 cases, innovative digital ordering channels are no longer a nice-to-have option. Plus, as diners grow more accustomed to ordering their food through off-premise channels, it’s even more critical for restaurants to have a frictionless and enticing digital presence, especially as many franchisors rally against third-party delivery fees. As brands have learned in the past, the best way to get customers used to branded mobile apps is through a loyalty program. 

According to data collected by Paytronix, loyalty customers bring in more revenue. As the site-crashing popularity of the free Chalupa Craving Box shows, this is especially true as consumers seek value offerings amid a nearly 50% unemployment rate. 

Taco Bell isn’t the only brand leaning heavily into loyalty programs at this time. Chipotle’s rewards program, which only started late last year, has already brought in around 12 million members. Laurie Schalow, the brand’s chief corporate reputation officer, told Forbes that the popularity of its loyalty program makes sense right now, noting consumers want to enjoy benefits as more of them are using the app for digital orders during the pandemic. 

McDonald’s also has plans for expansion when it comes to its loyalty program. During the Evercore ISI Virtual Consumer & Retail Summit Conference on June 16, McDonald’s CEO Chris Kempczinski said a loyalty program is in the works for his chain as well. “I do expect we’re going to have a loyalty program that’s expanded to all of our major markets, but we haven’t laid out exactly what that configuration looks like yet,” he said. 

As brands do everything they can to attract customers and keep them satisfied, loyalty programs may very well reach a new level of significance in the post-COVID landscape. If Taco Bell is any indication, customers are eager for benefits.