How Gift Cards Can Help Restaurants Cope with Inflation

Restaurants are grappling with labor shortages, supply chain disruptions and inflation. According to the National Restaurant Association, restaurants are experiencing the most severe labor shortage in history, actually 70 percent higher than most industries. As of April 2022, restaurants were still down 794,000 jobs – or 6.4 percent pre-pandemic employment levels. Additionally, employee retention is an ongoing issue for restaurants indicated by the quit rate which has grown from 4.8 to nearly seven percent in just one year.   

Inflation is also causing direct strain on the economy, impacting all decisions made in restaurants: choice of menu items, cost vs profit of each menu item, service hours, number of employees per shift, etc. Many restaurants have increased the price of certain menu items and continue to do so, unfortunately losing customers in the process. As a result, 80 percent of U.S. consumers  are dining out less often. This leaves operators in a sticky spot, and many fear they won’t be able to remain in business if costs don’t decrease.   

How can a gift card program help restaurants? 

The global gift card market is continuing to grow and predicted to reach $1.4 trillion by 2026, validating consumers’ desires to have and use gift cards. The restaurant industry is one of the larger platforms that can benefit from a well-run gift card program. 

Gift cards are easily accessible, offering restaurants free advertising. In fact, they are frequently called “pocket billboards” because they boast a brand’s logo and stay within close confinement – a physical or mobile wallet, where consumers are constantly reminded of the “free money” they can use to dine out. This notion is especially popular now, as many people are experiencing the effects of a tight economy.  

One of the most rewarding benefits of a gift card program for restaurants is the ability to boost overall sales. Gift cards almost always guarantee money will be spent at that specific business, with the potential to attract new customers. Moreover, 60 percent of gift card recipients spend more than the initial amount on their card, providing unexpected revenue for restaurants. 

Gift cards are also excellent for running promotions. For example, offering a promotion such as “buy a $100 gift card to give, get a $10 gift card to keep,” encourages both gifting for new customers and inviting regular customers to return to their favorite restaurant. 

What should restaurants consider when launching or revamping a gift card program? 

From issuance, to distribution, to compliance, there are many factors restaurant owners must consider when launching or revamping a gift card program. Managing a gift card program comes with many nuances, and without the proper resources in place, it can seem like a large undertaking for a restaurant of any size or at any point of its lifecycle.  

The first question a restaurant owner should ask is “do I have the in-house expertise and bandwidth to launch a gift card program?” If the answer is “yes,” be sure your in-house expert stays up to date on the latest regulations in the gift card industry, as they can change rapidly and vary state by state, especially if your restaurant is based in California, Delaware or New York. Joining the Retail Gift Card Association (RGCA) or Incentive Gift Card Coalition (IGCC) is one way to ensure you stay current with evolving gift card laws. The consequences for not operating within state and federal regulations may include large fines or lead to class action lawsuits.  

If the answer to this question is “no,” there are a variety of solutions to ensure your restaurant can still implement a successful gift card program that adds value to your business, primarily outsourcing your program to a gift card management partner.  

What are the benefits of outsourcing a gift card program versus managing one in-house? 

By outsourcing a gift card program, restaurants can welcome the benefits of a gift card program without having to worry about the complexities that come with issuance, compliance, management, processing, accounting, distribution and promotion. Outsourcing allows experts in the gift card industry to handle the regulation of your program if your restaurant brand does not have the bandwidth or expertise to manage these areas in-house.  

Managing a gift card program in-house requires a dedicated person (or team) to ensure that your resources are solely focused on your brand and program. If your restaurant has the bandwidth to maintain the program’s complexities, in-house management could be an appropriate option when partnered with issuing, processing and legal resources. 

Before your brand decides if outsourcing or managing in-house is the best option, here are some questions to consider:  

• Who will be the legal issuer of our gift cards? 
• Who will make sure our gift card program is compliant? 
• Who will keep up with gift card laws? 
• Where will we sell our gift cards? 
• Can our finance team take on gift cards? 
• How will we market our gift cards?