Aug 11, 2022 - Economy

Restaurant reward programs driving sales amid food inflation

Illustration of a phone with apps that spell "SAVE."

Illustration: Maura Losch/Axios

As food inflation continues to creep up and coupons disappear, customers are flocking to reward and loyalty apps that places like McDonald's, Starbucks and Taco Bell say are helping drive digital sales.

The big picture: Loyalty has its perks. Free coffee, discounted meals and access to exclusive savings are up for grabs at the nation’s largest restaurant chains.

  • Restaurants have been raising prices as ingredient prices and labor costs increase along with transportation.

Inflation drives prices at restaurants and stores

Driving the news: Price increases for food at home are outpacing hikes of food “away from home,” which is up 13.1% over the last 12 months, which is the largest 12-month increase since March 1979, according to the Consumer Price Index released Wednesday.

  • The CPI for food away from home, which includes meals from restaurants, increased 7.6% in the last year.
  • McDonald’s CEO Chris Kempczinski recently said the gap is the largest gap the company has seen in 50 years “meaning that food at home has increased pricing significantly faster than what food away from home.”

Between the lines: The 12-month rate of price increases included a 38% jump for eggs, 26.4% for butter and margarine, 15.6% for milk and 13.7% for bread, Axios Closer co-author Nathan Bomey reports.

Starbucks, McDonald's, Taco Bell add more loyalty members

Context: Starbucks Rewards grew by 13% to 27.4 million members over the last year with 3.2 million new members, Howard Schultz, the coffee giant’s interim CEO, said last week.

  • Starbucks Rewards members drove 53% of U.S. company revenue and are spending more than non-members.
  • Taco Bell gave rewards members early access to Mexican Pizza for two days in May before the nationwide launch, which increased “the average loyalty registrations 15 times” and fueled 10% growth in loyalty members in the quarter, Yum Brands CEO David Gibbs said last week.
  • McDonald’s launched its MyMcDonald's Rewards in July 2021 and said nearly 22 million members have been active in the last 90 days.

Restaurant deals, "value" menu move to apps

Meanwhile, consumers can often combat the price increases with loyalty programs that in some cases match the savings that paper coupons and value menus previously used to offer.

Of note: Consumers also earn points on purchases that can be redeemed for free food and drinks.

What's happening: McDonald's has deals on its mobile app daily including free medium fries with a $1 or more purchase on Fridays.

  • Burger King is giving Royal Perks members free fries weekly with any purchase with an offer on its app through the end of the year.

Our thought bubble: Chains started moving discounts to mobile apps and loyalty programs before the pandemic, but since then more members-only offers are available for app orders.

What’s next: Restaurants have already been personalizing offers based on consumer habits but expect to get more customized deals in the future.

  • McDonald's Chief Financial Officer Kevin Ozan recently said the chain is in the middle of an evolution going from national to local offers to "ultimately a personalized approach."
  • If there was a significant downturn in the economy, Starbucks Schultz said he expects his company would use the rewards program "to provide discounts, value and a value proposition on an ongoing basis."

Go deeper: Inflation hits back-to-school shopping

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