Fazoli’s Restaurants: Driving loyalty with app-based program
Fazoli’s, a US-based fast-casual restaurant chain with over 200 locations, are innovating and adapting their loyalty rewards program to meet a dynamic and changing market. Using strategic partnerships and a keen eye on data collected through app-based technology, the company closed out June 2021 by posting its 13th double-digit sales gain with another astounding two-year June comparison of 27.2 percent.
We sat down with Will Hanrahan, Senior Manager of Digital Marketing at Fazoli’s, to learn how the loyalty program developed, what the challenges have been in light of the pandemic, and learn how the program plans to grow in the future.
Fazoli’s saw an opportunity for change in its traditional approach to loyalty in 2017 when the company decided to move from “a traditional style of loyalty” which Hanrahan described as simply a paper punch card whereby, “after 10 visits you get a free item” to an app-based loyalty program based on data-driven customized incentives. He explained that the downside to the more traditional approach, and therefore the benefit to the app-based program, was the lack of smart and predictive technology and an inability to collect data on consumers. “There was no way for the company to track and ultimately measure and use information in a very smart way.”
At the same time, existing technology was holding Fazoli’s back from moving ahead with the future of its loyalty program. “The point of sales (POS) systems that were in the restaurants were kind of old. It was a legacy system that had been around since the restaurants opened, in some cases 20 years ago.” In the early days of the program, Hanrahan describes difficulties with over-discounting. “Our old POS system had a very limited coupon platform which made it very difficult to track coupon redemption tied to particular campaigns.”
With the growth and success of the app-based loyalty program, audience segmentation became possible. Fazoli’s is now able to mine data to determine who is most likely to purchase at certain times, what they’re likely to want to order, and where they order from, amongst loads of other information, all of which informs and empowers the program to customize its offerings for each consumer.
A key to Fazoli’s loyalty program success has been the strong use of strategic partnership. Fazoli’s works with Punchh to both develop and refine their program. The California-based loyalty company aims to help, “physical retailers supercharge their in-store and online customer experience”. Hanrahan said, “When I joined the company (in 2017) the vendor had already been decided…and that’s been great for me. I was able to see this through with them from the very beginning.”
Of the many benefits Hanrahan has found partnering has offered is a deep and specific knowledge of restaurant loyalty as well as seamless integration with technology platforms including both the companies’ old and new point of sale systems. Punchh has helped Fazoli’s understand industry standards, ensure that app security protocols are being followed and has worked with them to define their goals with the program. Furthermore, the partnership freed up valuable staff time for Hanrahan and the Fazoli’s team. Hanrahan commented, “Looking back, I think that bringing on Punchh, it was definitely the right thing to do.”
Support from the larger company has been a key part of the process since the original launch in 2017. Hanrahan says, “I’ve had a lot of buy-in from the very beginning on the app, which I think is why it’s been really successful for us.” Having a smaller company size also worked in the program’s favor, as he says, “Being a small organization where there aren’t a huge number of layers and lots of departments…it was easier to get everyone on board.”
Support for the program came from the top down to which Hanrahan credits a lot of its success. “Giving credit to our CEO, Carl Howard, he was able to see the importance of technology in the restaurant business ahead of time.” In large part because of Howard’s foresight, the company upgraded their point-of-sale systems which allowed them to put into place the app-based loyalty scheme they now have. Hanrahan makes sure to note that having that system in place before the pandemic and lockdown events of 2020 really set the company up for success when the pandemic hit the business.
The importance of having each of Fazoli’s 200+ restaurants advocating for the program has been critical. Hanrahan says, “We have franchisees who have really embraced it and gotten behind it. And we have some that haven’t.” Hanrahan works with those who are more reticent by, “Honing in on particular locations or franchise groups and saying, ‘what can we do to help you grow your business?’” and finds this is key in getting each location motivated and enthusiastic about the program.
Hospitality has felt the effects of the pandemic in ways that have cut extremely deeply and, sadly, far too many have struggled to adjust to what many refer to as the “new normal”. In our conversation with Hanrahan, he pointed out a few pandemic-related challenges to the growth of the loyalty program.
Despite more and more people unwilling or unable to visit restaurants in person, Hanrahan noted how it made apparent just how much the loyalty program relied on dine-in guests. “There’s a big opportunity there, for them to see material in the restaurant about joining the loyalty program and when you remove those touchpoints, it’s kind of like it becomes less of a focus.” Further, when customers visit the restaurant in person, they have time to be a part of a conversation with Fazoli employees. Hanrahan said that “making sure that loyalty program was in the conversation” was important, and the pandemic has made that very difficult.
Ordering food through third-party apps in the US such as Grubhub, Doordash and Uber Eats have become the norm for many in 2020-21. For Fazoli’s, however, these apps are both a blessing and a curse. Hanrahan said, “I consider delivery almost like a competitor because if you’re ordering through a third-party app, you’re not getting any offers on loyalty. I feel like people are becoming loyal now to Uber Eats and they’re not loyal to our brand.” To mitigate this issue, Fazoli’s allows for delivery ordering through its app. “We’ve built in the ability through our online ordering provider Olo, a program where you can order delivery through the app and still have the ability to earn and redeem points.” There are limitations to the program, as it’s only available in certain areas and providers, and the delivery itself is carried out by a third-party service so resolving issues with late or mixed-up orders can become quite complicated.
Packaging and supply chain delays have also had an effect on the companies ability to market to and entice customers to the loyalty program. As Hanrahan described, it has become more difficult to order custom packaging for delivery orders—food boxes with information printed on them about the program, for example—so the company has had to revert to using plain packaging. “We used to have a bag of breadsticks that we were kind of known for, and they had a big label on them that said ‘download the app’…now we’re lucky if we can get any packaging at all.”
Despite the incredible challenges that pandemic has presented the restaurant industry, and Fazoli’s place within that sector, the company has continued to thrive, seeing record sales in the last year. When asked about specific metrics for success in the loyalty program Hanrahan noted three things he strives for; engagement, frequency and spend increase.
The participation rate, or the percentage of POS transactions made by loyalty members, Hanrahan said, has been sitting at 12 percent across the business for some time and he hopes in the next year to raise that number to over 15 percent. In the long term, he says, “we’d like that number to be somewhere around 20 percent.”
Frequency is the second metric that the company examines. In other words, they ask, “how often can we get a guest to visit?” Further, how do we get them to visit even more? Hanrahan said challenges and incentives work really for this. “We looked at guests’ average visit history over a three-month period and said if they only visited on average two times, let’s see if we can get them to visit three times in the next three months….and we’ll do that by incentivizing them with offers.” He goes on to say, “January 1 to August 31, 2021 we have seen a spend life of 4.44 percent, meaning that loyal guests spend 4.44 percent more in check size compared to non-loyal ‘anonymous’ guests.”
Finally, spend increase is a major focus when Fazoli’s uses to measure its loyalty program success. “We look at how much loyalty guests spend compared to non-loyal guests.” Using data they’ve collected they can then segment the audience and send campaigns specifically made for that group. For example, Hanrahan said, “Let’s say someone’s average spend is under $10. So if I send them an offer that says, “Save $3 when you spend $15” we’ll get them to spend more.”
Hanrahan closed our conversation proudly, “I think we have one of the more generous programs out there because we send so many offers out all the time. So that’s something that makes our program a little bit different to most—we send so many different things out all the time. We’re pretty aggressive when it comes to loyalty.”
In their next app update, what Hanrahan calls “Fazoli’s Rewards 3.0” there are updates he and the team are working to implement from a more personalized app experience, integrating SMS technology to communicate with guests and even creating unique menu items available only to those ordering through the app or online.
Fazoli’s rewards 3.0, Hanrahan hopes, will include the following:
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