While the evolution is being driven by a growing demand by customers for seamless, efficient and personalized experiences, innovations in payment technologies are at the transformation’s center — and will define its future.

“Today’s diners want a seamless experience that’s quick and super easy. This includes digital perks like online reservations, viewing menus via the QR code, receiving alerts and customer surveys to their devices, and paying with a digital wallet,” Tatia Adams Fox, vice president and general manager for U.S. travel and entertainment merchants at American Express, told PYMNTS during a conversation centered on findings from the report “Why More Restaurants Need to Bite Into Digital Transformation” which was produced by PYMNTS Intelligence in collaboration with American Express.

The convenience and speed offered by these payment technologies are becoming indispensable in enhancing the dining experience, she added.

That’s why developing convenient and seamless digital payment and ordering capabilities should be top of mind for all restaurants looking to cater to their customers’ preferences as well as support their own operational and business needs, she said. As they explore new technologies, restaurants will still need to carefully consider how to integrate these tools and ensure their own brands can stand out from a more crowded pack.

Consumer Demands Driving Payments Innovation

On the business side, restaurants are equally driven to embrace innovation by the need to keep up with diners’ emerging behavioral demands.

According to American Express’ latest Digital Payment Trendex, 27% of consumers surveyed said they always or almost always use mobile wallets and/or apps on a smartphone for in-store purchases. Merchants are responding in kind, as 68% of merchants surveyed already accept mobile wallet payments, and an additional 30% plan to adopt them within the next year or would consider adopting. Similarly, merchant-branded payment apps have witnessed an increase, with 40% offering their own payment apps, compared to 29% in 2021.

As Fox noted, this indicates a readiness among merchants and consumers to adopt new technologies that can enhance customer satisfaction. Modern solutions are available that cater to both customer experience and back-end operations.

“In full-service restaurants, a huge portion of the hospitality opportunity is at the table and how the staff engages with the diners before, after and during — meaning there are significant opportunities to enhance the service, with touchpoints supported through user-friendly technology,” Fox explained.

She highlighted platforms like Resy, which not only facilitate reservations but also offer additional functionalities.

“For example, Resy can help restaurants upgrade the front end of the house experience while providing value behind the scenes,” Fox said.

Resy enables customers to use major credit cards and allows American Express card members to pay their bills using Membership Reward points through Resy Pay. Via Resy, operators can deploy surveys directly to customers using the reservation system, enabling direct communication based on customer feedback.

“By adopting modern payment solutions, restaurants can provide a seamless experience for diners as well as operators on the back end,” Fox said, noting that for businesses looking to implement new payment solutions, it is crucial to determine the options that best fit their unique needs.

Future Innovations in Restaurant Payments

Restaurants must be creative in how they work to stand out within the crowded dining landscape.

For restaurant operators exploring new payment solutions and innovations, Fox’s advice is to maintain a keen understanding of customer preferences and stay informed about technological advancements.

“The advice I would give restaurant operators in staying abreast is to stay open-minded, stay up to date with your customers’ needs, and stay on top of relevant technology and trends,” she said. “In this way, restaurants can focus on what they do best, and that’s serving the diners and providing them with best-in-class service.”

As for the relevant technology trends out there today, restaurants have access to solutions that help automate transactions, streamline cash flow management and prevent late payments and invoicing inaccuracies. Payment partners like American Express can assist by offering access to consolidated tools and solutions, making the digitization process easier, Fox said.

The more restaurants continue to adopt modern payment solutions and stay attuned to customer preferences, the better positioned they will be in the competitive restaurant industry.

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“Powered by Blackbird’s new blockchain, the Blackbird Flynet, Blackbird Pay gives restaurants a fresh way to address the ever growing problem of shrinking margins and eroding cash reserves by providing them with their very own end-to-end payments and check settlement network for the first time,” the company said in a news release Tuesday (July 30).

According to the release, restaurants on the network pay on average 2% per transaction while diners can enjoy automatic settlement, not having to wait for the check. In addition, diners can be in “$FLY,” described as “Blackbird’s native rewards points.”

Blackbird Labs was founded by Ben Leventhal, also the co-founder of food and drink magazine Eater and restaurant reservation platform Resy.

“The restaurant business model is broken,” Leventhal told TechCrunch last year after the company raised $24 million. “It can be really expensive to remain at the top of a sea of competition. Operational costs are also at an all-time high, and restaurants need revenue. There’s only two paths forward: creating new revenue streams or creating regulars who’ll want to come back.”

As PYMNTS wrote in June, one of the things that could keep patrons coming back is the option to pay at the table. While QR codes on menus haven’t quite caught on, the technology is finding an audience with diners who are fans of the pay-at-the table concept.

“With that technology (literally) in hand, restaurant-goers pay for their meals with their phones at the point of sale with a device used by the waitstaff,” that report said.

PYMNTS wrote earlier this month that the restaurant sector is facing “a pivotal opportunity with the rise of frictionless digital payments, responding to growing customer demand for convenience.”

Despite these advances, adoption rates have been slow, thanks to the entrenched use of traditional payment methods and ongoing staffing obstacles.

The new PYMNTS Intelligence’s study, “Why More Restaurants Need to Bite Into Digital Transformation,” examines at how consumers are embracing technologies like digital wallets, mobile apps and QR codes because they meet the wishes of tech-savvy diners, while also improving operational efficiency and helping staff to enhance the dining experience.

“To stay competitive in this digital-first era, restaurants must integrate these modern payment solutions to ensure seamless dining experiences and avoid falling behind more innovative competitors,” PYMNTS wrote.

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PYMNTS Intelligence’s new study, “Why More Restaurants Need to Bite Into Digital Transformation,” delves into consumers embracing technologies like digital wallets, mobile apps and QR codes because they not only meets the preferences of tech-savvy diners, but also enhance operational efficiency and empower staff to elevate the overall dining experience.

To stay competitive in this digital-first era, restaurants must integrate these modern payment solutions to ensure seamless dining experiences and avoid falling behind more innovative competitors.

Frictionless Digital Payments on the Rise

In today’s dining landscape, the push toward adopting frictionless digital payments represents a pivotal opportunity for restaurants, backed by compelling statistics and industry insights.

Restaurants that integrate digital wallets, mobile apps and QR codes meet rising customer demand for contactless payments, enhancing satisfaction while streamlining operations and minimizing errors. This integration also liberates staff to focus on enhancing the overall dining experience, ensuring smoother service and greater efficiency.

Customer preference for contactless payments is robust in both limited-service and full-service restaurants in the U.S. A National Restaurant Association study shows 68% of patrons at limited-service venues favor contactless or mobile options, including 65% for smartphone apps, 63% for self-service kiosks, 61% for digital wallets, and 48% for QR codes.

Similarly, 62% of diners at full-service establishments prefer contactless payments, with 57% favoring digital wallets, 55% smartphone apps and 46% QR codes. Square’s survey noted a 7% year-over-year rise in diners preferring contactless methods, with digital wallet usage up by 42% and adoption of contactless payment kiosks by 15%, highlighting the rapid adoption of modern payment technologies.

Broader Adoption of Advanced POS Systems Needed

Advanced POS systems that unify in-store and digital orders benefit restaurants by enhancing operational efficiency and customer loyalty through robust analytics. Currently, only 38% of restaurants in the U.S. and Canada have integrated these systems, but they cite efficient order processing as a key advantage.

In the fast casual and quick-service restaurant segment, 65% prioritize adopting unified POS platforms to optimize service and menu offerings using detailed analytics. Despite an 11% increase in off-premises and digital sales, broader adoption of integrated POS solutions is needed to meet rising consumer preferences.

Investment in contactless payment solutions remains moderate, with 41% of full-service and 42% of limited-service restaurants planning investments in 2024, citing concerns over costs, integration and ROI.

Despite the advantages of advanced POS systems, there is room for broader adoption. Restaurant off-premises and digital sales have seen an 11% increase from 2022, underscoring the growing importance of integrated POS solutions in meeting evolving consumer preferences.

Tech, Automation Vital in Addressing Staffing Challenges

Amid a slow recovery in restaurant post-pandemic employment rates, technology and automation are increasingly crucial tools in addressing staffing shortages. As of May, restaurant employment has grown by less than 1% despite high demand. This ongoing staffing crunch is pushing restaurants to rely more on technology and automation, including for payment processing.

Among establishments using automation, 67% report direct benefits to diner experiences. Specifically, more than one-third of these establishments cite payment acceptance as a key area of impact. Implementing automated payment processing and digital ordering platforms not only enhances operational efficiency but also reduces cash handling, providing employees with quicker access to wages and tips. This approach significantly boosts staff retention and satisfaction in the face of ongoing labor challenges.

As the industry navigates these challenges, technological solutions are proving essential for maintaining service standards and meeting customer expectations.

The post 3 Big Ideas From PYMNTS Intelligence’s Restaurants’ Digital Transformation Report appeared first on PYMNTS.com.

Newer technologies such as digital wallets, mobile apps and QR codes can not only satisfy tech-savvy diners but also help streamline operations, reduce errors and, critically, free up staff to focus on enhancing the overall dining experience. To thrive in this competitive, increasingly digital-first landscape, restaurants will need to embrace these modern payment solutions — the missing ingredients for seamless dining experiences.

• • Contactless and Digital Payments: The New Table Stakes in Dining
  • Payments Technology Appetites Outstrip Adoption
  • Why Digital Innovation Is the Secret Sauce for Restaurant Success
  • Harnessing Technology to Satisfy Diners and Boost the Bottom Line

Contactless and Digital Payments: The New Table Stakes in Dining

Greater adoption of frictionless digital payment options represents an important business opportunity for restaurants.

Contactless offers speed and satisfaction to limited-service restaurants.

Sit-down diners have tasted contactless convenience — and like it.

The National Restaurant Association also found that 62% of full-service U.S. restaurant diners would choose contactless or mobile payment options if available, with 57% opting for digital wallets, 55% for smartphone apps and 46% for QR codes. In other words, even at sit-down restaurants, where human interaction is central to the dining experience, more than 3 in 5 diners prefer a digital or contactless payment process. This trend offers full-service restaurants a significant opportunity to score big on customer satisfaction and optimize staff allocation, thereby boosting efficiency and loyalty.

Diners want more contactless options, and restaurants can benefit too.

A recent survey by Square across four key restaurant markets — the U.S., Canada, the United Kingdom and Australia — reveals a 7% year-over-year jump in diners preferring contactless payment methods. Usage of digital wallets surged by 42%, while that of contactless payment kiosks climbed 15%. Satisfying consumer demand is only half the story. Integrating these methods also mitigates transaction reconciliation pain points. The knock-on effects are substantial, including speeding up end-of-day closing processes and improving overall accounting accuracy. Perhaps more importantly, preference for a digitally transformed restaurant industry is gaining momentum, suggesting that restaurants hesitating to adapt may find themselves at a competitive disadvantage.

Payments Technology Appetites Outstrip Adoption

Restaurant payment innovation still has a way to go to keep up with diner preferences and persistent staffing shortages.

Next-gen POS systems enhance restaurant efficiency.

Restaurant investment in contactless payment solutions is still moderate.

Despite the strong demand from diners, only 41% of full-service and 42% of limited-service restaurants plan to invest in contactless payment solutions in 2024. Investments in self-order and self-pay solutions are even lower, with just 30% of limited-service and 20% of full-service restaurants including them in their innovation agendas. Delays may stem from concerns over initial costs, integration challenges and uncertainty regarding return on investment. Nevertheless, the popularity of digital and contactless payments continues to rise, ensuring their top billing on the menu of the future.

When kitchens are short-handed, automation steps up.

Four years after the pandemic’s onset, the restaurant industry is finally seeing a return to pre-pandemic employment levels, but only by less than 1% as of May 2024, despite high demand. The ongoing staffing crunch is pushing restaurants to reach increasingly for technology and automation, including for payment processing. Among those using automation, 67% report direct benefits to diner experiences, with more than one-third specifically citing payment acceptance as a key area of impact.

Why Digital Innovation Is the Secret Sauce for Restaurant Success

PYMNTS Intelligence interviews Toast’s Michel Rbeiz, General Manager of FinTech, and Susie Riley, Vice President of New Ventures, on why innovations in payment variety and the use of data promise to serve up a growing feast for restaurants well into the future.

Restaurants are generally in the business of hospitality, and meeting the customer with their preferred way to pay aligns with that.”

[Our AI benchmarking tool is] an industry-first comprehensive solution that pairs data at scale with an easy experience.”

Four years after the pandemic prompted an immediate pivot, the demand for digital payments is growing strong in the restaurant sector.

Both restaurant consumers and staff are increasingly valuing convenience and flexibility in their payment preferences, Rbeiz told PYMNTS Intelligence in a recent interview. This applies to both sit-down and takeout options.

“Consumers are embracing contactless payments like tap-to-pay and mobile wallets [that help] restaurants serve guests more efficiently,” he noted. “Additionally, consumers want seamless payment options for digital orders, such as using a card on file or a mobile wallet, to make completing a takeout or delivery order quick and easy.”

According to Rbeiz, restaurants are responding to these changes in guest expectations by adopting digital ordering platforms that are designed to improve the payment experience and shopping cart-to-order conversion. A prime example is Toast’s online ordering platform. Moreover, he said, the use of digital applications is growing on the staff side of the restaurant equation as well.

“We’ve found that only a small minority of employees prefer to be paid via check,” he said. “Instead, employees are motivated by having earlier access to their wages and tips instead of the traditional paycheck every week or two.”

For example, Toast payment methods such as its pay card and tip payout options are a great alternative to direct deposit, Rbeiz said, as they allow employees to have early access to a portion of their earned wages and tips before payday.

“This also means that restaurants don’t need to keep cash on hand to pay out daily tips, and it allows them to fully automate the pooling of tips, which can save them up to 60 minutes per day,” he explained.

In addition, he noted, offering on-demand pay and tips is a benefit that can attract employees and support retention by allowing them to reap the benefits of greater financial flexibility.

Providing multiple payment options to their customers and staff makes a crucial difference for restaurants.

“Restaurants are generally in the business of hospitality, and meeting the customer with their preferred way to pay aligns with that,” Rbeiz observed.

For example, he enumerated, Toast’s handheld mobile point-of-sale (POS) device allows restaurant staff to take orders anywhere on premises and consumers to pay with multiple payment methods at their tables — whether by tapping their phones, leveraging contactless cards, or using the typical chip or card swiping. Mobile payments via QR codes also allow consumers the flexibility of paying quickly via their phones. Finally, he said, offline processing on the company’s hardware provides additional flexibility, ensuring that restaurants never skip a beat with a consumer’s payment.

“These various consumer payment options help keep service moving, boost sales and enhance customer satisfaction by allowing them to pay in the way that is most convenient to them,” Rbeiz explained.

Restaurants still face challenges when implementing and managing multiple payment options. Platforms can help.

One of the challenges that comes with multiple payment options, Rbeiz stated, is the need to train staff on how to serve guests and provide a positive customer experience with a variety of options.

“For example, if there is an option to order and pay via a digital ordering app and alternatively order and pay via the traditional way, the staff need to adapt to a variety of service models throughout a shift,” he observed.

Another challenge is the lack of integrated systems if different platforms are used across different ordering and payment options for a consumer. Unified systems can overcome this challenge.

“With Toast, our customers benefit from a single system that takes care of it all,” he said.

Innovation around data is set to have a transformative impact on the restaurant industry over the next few years.

While Rbeiz described the importance of restaurants offering payment variety, Riley explained how data is key to running a successful restaurant and her belief that Toast is well positioned to lead the charge in this area.

Data has always been critical to the restaurant industry, she noted, but the ways restaurants can harness data have remained largely the same since the advent of cloud-based POS systems. This, she asserted, is about to change.

“One area that has been especially challenging for restaurateurs is understanding price, menu and sales trends in their specific markets,” she explained. “Despite all the data from the millions of restaurant transactions that happen every day, there has been a need for a better way to harness this data for restaurateurs to look beyond their own four walls.”

With this critical need in mind, Toast recently launched a reporting tool that helps restaurants view sales, price and menu trends in their local markets based on aggregated data from more than 100,000 restaurant locations on the Toast platform. The data is categorized and analyzed leveraging an artificial intelligence (AI)-based classification tool.

Riley said the tool provides restaurateurs with valuable insights, thanks to the AI-based feature that helps categorize more than 500 million menu items and decide, for example, whether a “Whiskey Donut” is a dessert or an alcoholic beverage.

“[Our AI benchmarking tool is] an industry-first comprehensive solution that pairs data at scale with an easy experience,” she elaborated. “As we see how these trends play out over the next few years, we believe Toast will continue to lead in this space, given the combination of proprietary technology and the power that comes from the unique mix of restaurants on our platform. Our goal is to help restaurants thrive, and we believe we can leverage data and AI to help them do just that.”

Harnessing Technology to Satisfy Diners and Boost the Bottom Line

For the restaurant industry, diners are the only critics who matter — and their reviews are in: More contactless and digital payments, please. Adoption rates among restaurants are trailing demand, a lag that is felt especially keenly given the staffing challenges many restaurants continue to face. These factors make payment efficiency even more crucial for maintaining smooth operations. Restaurants can no longer afford to serve anything less than a modern payments experience. It’s time to plate up the future of payments and give customers the fresh experience they crave.

PYMNTS Intelligence prescribes the following actionable roadmap for restaurants:

• Integrate an advanced POS system for unified operations: Implement cutting-edge, unified POS systems that process both in-store and digital orders and harvest robust analytics on diner behavior. Use these insights to refine service strategies and optimize menu offerings, ultimately driving improved operational efficiency and enhancing the overall dining experience.
• Modernize and diversify payment options: Expand the range of accepted payment methods to include multiple digital and contactless methods. Variety is the secret ingredient for enhanced customer engagement and streamlined transaction processes, contributing to increased sales and customer loyalty.

As food and labor costs rise, it’s important that restaurants find efficiencies in other areas, including upgrading their payment technologies and back-end processes. By adopting automated payment solutions — like One AP, offered by American Express — restaurants can help increase efficiency and reduce errors when paying suppliers. This allows more time to focus on customers and can help the restaurant’s economics overall.”

Acknowledgment
The B2B and Digital Payments Tracker^® Series is produced in collaboration with American Express, and PYMNTS Intelligence is grateful for the company’s support and insight. PYMNTS Intelligence retains full editorial control over the above findings, methodology and data analysis.

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After all, food spoils.

Misjudge the crush of the lunchtime crowd, and you might get stocked out of the day’s most popular dishes.

The net result is lost sales, lost cash that might otherwise be headed into the corporate coffers.

Supply chains, of course, are built link by link.  For restaurants — especially the mom and pop organizations that line Main Street and where the National Restaurant Association estimates that 9 in 10 restaurants have fewer than 50 employees (and qualify as small businesses) — strong vendor relationships are key.

While PYMNTS Intelligence data has noted that most sectors have overcome the volatility and the vagaries of the pandemic, efficiency is an ever moving target, and there’s been a continued shift to digital conduits to get things done, and to pay and be paid (naturally).

There may be a groundswell for account-to-account payments in the restaurant sector.

We noted in our latest “Restaurant Edition” of the “Small Business Real-Time Payments Barometer” that a full three quarters of restaurant SMBs, generating less than $10 million in annual top lines, sent instant payments last year. Instant PayPal and debit cards are the two most common instant payment methods at around 40% each.  Instant pay-by-bank trailed a bit, at 20%.

Familiarity Breeds Satisfaction

There’s at least some lack of familiarity at work here. Separate PYMNTS Intelligence research showed at the end of last year that more than a third of consumers — and business owners are, of course, consumers, as trying new payment methods in everyday life lends itself well to using them in a business setting — did not know how account-to-account payments (A2A) payments work.  Those that tried it tended to like it, at 84% of consumers surveyed.

The A2A model moves funds directly from a sender’s bank account to a recipient’s bank account — through both “push” and “pull” scenarios — with no additional parties in the mix.  Our data shows that 76% of restaurant SMBs that opt for A2A instant options as a preferred payment method have healthy balance sheets, at a majority of all revenue “levels.”  For the firms that have top lines of between $250,000 to $1 million, the “healthy balance sheet” population rises to 86%.  For these smaller players, the relatively lower fees tied to the direct-bank options can be attractive to margin. That’s especially true when managing daily operating expenses such as utilities and other recurring payments — which can of course include deliveries from suppliers. The suppliers have cash in their own accounts rather than waiting to “settle up.”

There’s a positive ripple effect for the local banks that are the mainstays of Main Street businesses. Our data show that instant payment options are most important to the small restaurants that opt to bank locally, at 47% of SMBs in the food space.

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The move aims to modernize the fast-food giant’s marketing approach, enhance its competitive advantage and strengthen its position in the digital business landscape, CNBC reported Thursday (May 9), citing an internal company memo.

McDonald’s did not immediately reply to PYMNTS’ request for comment.

The company plans to require its U.S. operators to contribute to the digital marketing fund starting next year, according to the report.

The introduction of the digital marketing fund is part of McDonald’s broader efforts to expand its digital business, the report said, citing the memo. The company plans to invest hundreds of millions of dollars in the coming years to improve its loyalty program and introduce new ordering channels. These initiatives include web orders without the need to download an app.

McDonald’s loyalty program members generated over $6 billion in system-wide sales globally during the first quarter, per the report.

The company recognizes the importance of digital marketing in gaining a competitive edge, according to the report. With 34 million active digital customers in the U.S., McDonald’s aims to leverage its digital presence to attract and retain more customers and reach 100 million loyalty program members by 2027.

To fund the digital marketing initiatives, McDonald’s is recommending that franchisees allocate a portion of their existing marketing contribution, the report said. Currently, franchisees are required to spend at least 4% of gross sales on marketing. Starting next year, U.S. operators will contribute 1.2% of projected identified digital sales, such as transactions made through the loyalty program or delivery orders.

The digital marketing fund will not be limited to the U.S. market, per the report. Franchisees in the U.K., Canada, Australia and Germany will also contribute to the global digital marketing fund. McDonald’s plans to gradually transition the rest of its markets to this approach in the future.

When announcing its goal to add 100 million loyalty program members by 2027, bringing its total to 250 million, McDonald’s President and CEO Chris Kempczinski said the company also plans to more than double systemwide sales attributable to those users.

“We have a clear trajectory for future growth as we continue to build on brand strength, global footprint and digital ecosystem that have resulted in unparalleled competitive advantages and cemented McDonald’s as one of the world’s leading consumer-facing brands,” Kempczinski said in a Dec. 6 statement.

For all PYMNTS digital transformation coverage, subscribe to the daily Digital Transformation Newsletter.

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Square Kiosk, announced Tuesday (May 7), is a combined software, hardware and payment solution designed to work in tandem with the company’s Square for Restaurants offering and larger broader ecosystem of banking, customer engagement and business insights tools. 

“For diners, using Square Kiosk is a sleek and simple experience that lets them bypass lines and easily customize their orders,” the company said in a news release.

“Guests are able to select exactly what they want, with customization options being sent directly to the kitchen, and restaurants can grow their check sizes by offering upgrades and add-ons on every order without any awkward exchanges.”

With labor costs rising, the release added, Square Kiosk lets operators reduce wait times and increase staffing in other parts of their businesses while still taking orders. 

PYMNTS explored the demand for self-service among consumers in a recent interview with Brandon Barton, CEO of self-service kiosk provider Bite, which recently raised $9 million in its Series A funding round.

He said that his company, which has been focused on restaurants, was getting “more inquiries today from retail brands” than ever before. 

Retailers, Barton told PYMNTS, are seeing the opportunity to use the ordering solution to address customer demand for omnichannel experiences in a way that maintains their focus on the shopping journey.

“What you want people to do is go to the internet and check [product information], because then it’s scalable and updated with the most recent info, with the most recent sale and everything, but the minute somebody takes out their phone, they have 70 notifications from Slack, Instagram email and texts that distract them,” he said. 

“So, if you have a self-service kiosk that sits beside and is complementary to a retail experience, you blend online and offline in what I think is an elegant way for the consumer purchase journey,” Barton added. 

Meanwhile, research by PYMNTS intelligence has shown that customers are more enthusiastic about self-service at quick-service and fast-casual restaurants than at full-service dining establishments. 

The PYMNTS Intelligence study “The Digital Divide: Technology, the Metaverse and the Future of Dining Out” showed that a little more than half of grab-and-go customers said ordering using a self-service kiosk have a positively impact on their satisfaction, while just 20% of dine-in customers said the same.

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Howard Schultz made the argument on LinkedIn Sunday (May 5), days after the company reported its steepest drop in U.S. customer traffic in 14 years.

To combat that problem, Schultz said, Starbucks’ leadership needs to focus on its stores, which he said require “maniacal focus on the customer experience.”

“Senior leaders — including board members — need to spend more time with those who wear the green apron,” Schultz wrote, referring to the uniforms worn by Starbucks’ rank-and-file workers. “One of their first actions should be to reinvent the mobile ordering and payment platform — which Starbucks pioneered — to once again make it the uplifting experience it was designed to be.”

Schultz, who served three terms as Starbucks’ CEO and remains its largest individual shareholder, also called for an overhaul of the company’s go-to-market strategy “with coffee-forward innovation that inspires partners and creates differentiation in the marketplace.”

Starbucks last week released earnings showing a 1% year-over-year decline in revenue, with store sales falling 4%, driven largely by negative growth in North America and China.

The company attributed its decline to factors that include a tough macroeconomic environment, slower-than-expected growth in China (its biggest market aside from the U.S.), severe weather, and ongoing caution among consumers.

“The remainder of our challenges were attributable to fewer visits from our more occasional customers,” Starbucks CEO Laxman Narasimhan said on an earnings call.

The chain’s troubles are part of a broader trend of consumers avoiding fast-food eateries amid climbing prices.

Fast-food traffic in the U.S. dropped 3.5% year over year in the first quarter of 2024, while prices at these restaurants were 33% higher in March than 2019 levels.

In addition to Starbucks, Yum Brands, owner of several chains, reported its own decline in sales last week, with Pizza Hut and KFC falling a respective 7% and 2%.

“This pattern underscores broader trends affecting the fast-food industry, including fluctuating consumer spending habits,” PYMNTS wrote May 1. “The decrease in sales at Pizza Hut and KFC could be linked to a general reduction in discretionary spending, a sentiment echoed across the sector, including by peers like McDonald’s.”

The post Starbucks Ex-CEO Urges Leaders to Return to Stores appeared first on PYMNTS.com.

In fact, 70% of them are single-unit operations. And when you’re dealing with the changing dining and payment preferences of the consumer, restaurants need to get as much data and promotional help as they can access.

Part of that data and promotion can come from card-linked offers. According to PYMNTS Intelligence, 93% of consumers who use special savings or rewards attached to a merchant or product say they plan on maintaining or increasing their use in the next year.

As Steve Fusco, president at Rewards Network, told PYMNTS, card-linked offers can be the key to accessing data and partnerships to deliver the best options, in the right context, to consumers.

The conversation came together on the heels of the announcement in early April that J.P. Morgan Chase had launched a retail media network, Chase Media Solutions, enabling personalized advertising within the banking sector. The approach is one that uses transaction-level data to target, craft and deliver personalized offers. Rewards Network’s own offers have been made available via Chase for more than a year.

Said Fusco: “If you look at what Chase is doing with CMS, this has been our go-to market approach,” and offers that this is “an example of how to use our content in different ways.”

Rewards Network was founded in the 1980s, and was among the first platforms to fashion card-linked offers, said Fusco. Rewards Network now has over 20,000 restaurants in its network, all offering rewards through this platform.

Asked about Rewards Network’s own partnership efforts, Fusco said getting the right alliances in place remains “very, very important in this ecosystem.” Rewards Network’s approach, he said, is to find partners with significant size and scale.

Diverse Membership, Partnerships That Scale

“You’re looking for a partner with a diverse membership base that has a demonstrated engagement with a valued currency,” he said. For the Rewards Network platform, he said, valued currencies are miles and points as well as cash back or statement credits, all of which the platform enables.

Diners who are members of Reward Network’s participating airline and hotel loyalty programs and fuel savings programs among others, earn rewards (points or cash back) as they eat at independent restaurants advertising to those consumers. For the customers themselves, having a large inventory of relevant offers presented to them, on a tailored one-to-one basis, proves valuable as well.

“Each partner brings in a different type of diner,” said Fusco, who added, “We also recognize that local dining is a very important value differentiator to our partners — and they see that [dining out] is a critical way of engaging their member bases … regardless of geography or preferences.” 

Rewards Network, he said, has a broad-based, real-time view of the industry, as it works with fine-dining establishments, fast-casual restaurants, quick serve, and everything in between.

With the ever-increasing trove of data on hand, Fusco said, “It’s less a question of whether or not a dining offer will be relevant — it’s more a question of which dining offer will be relevant. We connect with them, in context, when they’re in the restaurant, and we reinforce that they’re receiving a reward.”

Verified reviews, he said, are another platform feature that helps restaurants better manage their operations and dining experience at a granular level, right down to the menus offered.

“We’re able to conduct ‘relevance engine data mining,’” Fusco said, “enabling us to provide a restaurant owner, across a large number of locations, with specific call-outs on the experience that their customers are having.”

As he told PYMNTS, “We’re able to observe peoples’ preferences and offer up relevant opportunities to earn rewards in any major market, across the spectrum of dining opportunities.”

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These online-only dining spaces boomed during the pandemic, but as a report Friday (April 12) by The New York Times (NYT) noted, they’ve since begun to fade. 

For example, the report said, commercial real estate company CBRE predicted in 2021 that ghost kitchens would make up a little more than a fifth of all restaurant sales by 2025. But once the pandemic waned and people began dining in person again, restaurants became overburdened and had to rethink their strategies, with brands like Wendy’s and Kroger’s scaling back their ghost kitchen operations.

“Consumers are going out to eat at restaurants again and craving that relationship with the brands themselves,” Dorothy Calba, a senior research analyst for food service at Euromonitor International, told NYT. “Virtual brands just did not have that connection with consumers.”

The report cited the example of Brinker International, owner of Chili’s and Maggiano’s Little Italy. The company launched two virtual brands: It’s Just Wings and Maggiano’s Italian Classics, initially popular with diners tired of home cooking.

But as in-person dining returned, Brinkers found it could not juggle both physical and virtual operations, leading the company to close down Maggiano’s Italian Classics and incorporate It’s Just Wings offerings onto its restaurant menus.

“Everyone thought if you have the labor and the equipment, it would be easy to run virtual brands, but the reality is, most of the delivery times for virtual brands transact during busy times for the regular restaurant,” said Kevin Hochman, Brinker’s chief executive. “It was too much to have a busy dinner rush with an influx of virtual orders coming in, too.”

As noted here last year, research by PYMNTS Intelligence has shown that a majority of consumers “want to know that their food is coming from somewhere with a tangible, brick-and-mortar presence.”

That report – “Connected Dining: The Robot Will Take Your Order Now,” — found that of the 48% of diners who do enjoy ordering from virtual kitchens, 30% said this interest comes at least in part from the fact that these digital restaurants require no interaction with other people.

That report also notes — as did the recent NYT piece — that the rapid proliferation of virtual brands has come with complaints about quality. It led Uber last year to remove 8,000 virtual restaurants from its marketplace, a reduction of 20%.

“With the boom in virtual restaurants over the past several years, we’ve noticed a wide range of approaches to creating virtual restaurant brands,” John Mullenholz, Uber’s head of virtual restaurants and dark kitchens for the U.S. and Canada, said in a statement at the time.

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