The Loyalty Breakdown and the Dissolving Dining Distinctions

Restaurant loyalty is breaking down as, instead of defaulting to brands out of habit, consumers are actively reassessing every experience based on whether it feels worth it, according to Tillster’s 2026 Phygital Index Report.

“Loyalty is no longer something brands can assume, and it has to be earned on every visit,” Hope Neiman, Chief Marketing Officer at Tillster, told Modern Restaurant Management (MRM) magazine. “Nearly half of diners (45 percent) say their favorite restaurant has changed in the past year – up significantly from 33 percent in 2025.”

The relationship between diners and brands has fundamentally changed, the report reveals. Loyalty used to be much more fixed, and it took a lot to sway someone to try a new restaurant over their go-to spot. A few years ago, consumers tended to have clear favorites and stick with them, whether that was one fast-casual brand over another or a specific quick-service chain.

“What we’re seeing now is much more fluid behavior,” said Neiman. “Diners are constantly asking: 'Is this experience worth what I’m paying?' 'Is it easy and convenient to order?' 'Does this brand actually recognize me and make the experience feel seamless?' So when nearly half of diners say their favorite restaurant has changed, it means the idea of the ‘favorite restaurant’ is no longer permanent. In fact, the concept itself, much like loyalty, is dying.”

… the old playbook of competing on price or relying on loyalty programs alone isn’t enough. The operators that will win are the ones delivering consistent, seamless experiences across every channel. When that experience breaks down, diners are proving they’ll move on quickly.

Fast-food and fast-casual are among the most vulnerable with twenty-nine percent of diners reporting that they're visiting fast-food chains less frequently, and 37 percent saying the same about fast-casual. 

“These are categories that have historically won on convenience and consistency, but those advantages are no longer unique, said Neiman.”Grocery stores and convenience stores are increasingly delivering on the same attributes, and in some cases, outperforming restaurants on the factors diners care about most.”

Thirty-six percent of diners say they’re visiting grocery chains more frequently, and 33 percent say the same about c-stores. At the same time, 44 percent of diners say c-stores offer better quality food than fast-food and fast-casual chains, 45 percent say they provide better service, and 78 percent say prices are on par or better. 

“Given food quality tops the list of factors that influence dining decisions, it’s not shocking “default” favorites are at risk when other competitors aren’t resting on their laurels.  We also think it could be that those other channels are not just thinking about themselves as “meal occasions,” but rather “eating occasions,” which allow all kinds of shifts in consumer behavior. Overall, the brands that are most at risk are the ones that have relied on habit rather than earning the visit, each and every time a consumer decides ‘I need to get something to eat.’”

The results also revealed a mismatch in brand strategies and what consumers are actually using to evaluate value. Operators are still competing with pricing and discounting, when they should be playing an experience game, Neiman noted. When asked what the top factors consumers use when deciding where to eat, food quality (45 percent), convenience (44 percent) and speed (34 percent) were the top three, while price came in at number four (33 percent.)

“For brands, this means the old playbook of competing on price or relying on loyalty programs alone isn’t enough,” she said. “The operators that will win are the ones delivering consistent, seamless experiences across every channel. When that experience breaks down, diners are proving they’ll move on quickly.”

The report surveyed 2,144 U.S. diners to better understand ordering habits, dining preferences and evolving expectations. As consumers adjust their spending, with 69 percent of diners saying they have decreased or maintained their dining-out budgets due to economic conditions, they are more discerning in how and where they choose to dine out. 

Consumers are shifting away from go-to brands, changing how they spend, and shifting toward C-stores and grocery options, creating one of the most fragmented foodservice landscapes in history and delivering an urgent call to brands, the data shows.  If restaurant brands don’t start delivering better, more consistent experiences, they’re going to continue losing repeat visits,  said Neiman as C-stores and groceries are stepping in by delivering on convenience, speed, and perceived value in ways that rival, and even sometimes beat out, traditional restaurants.

Diners are no longer willing to tolerate friction, especially as food costs continue to rise, and they’re making decisions based on whether the experience feels worth it.

The opportunity is to orchestrate the full experience: making sure every touchpoint works together seamlessly, Neiman said, because in this environment, experience is what determines whether a diner comes back or chooses something else next time.

“Diners are no longer willing to tolerate friction, especially as food costs continue to rise, and they’re making decisions based on whether the experience feels worth it. They’re also ordering on a multitude of channels, and expect every one to provide the same seamless, great experience. When it doesn’t, they’re moving on.”

The data details that even as brands have invested more time and energy into loyalty programs over the last year, satisfaction actually dropped. Twenty-eight percent of diners said they’re dissatisfied with the loyalty programs they belong to, nearly double the 15 percent reported in 2025. 

“This is alarming at a moment when 61 percent of diners say they always check loyalty programs before deciding where to eat,” said Neiman. “That shows that consumers want to engage,  but current programs aren't delivering.”

Most programs are still too reactive and reliant strictly on the program itself, rewarding transactions after they happen instead of influencing behavior in real time, she noted.

“Even when personalization exists, it’s often not showing up at the moments that make an impact, like when a guest’s behavior starts to change or when they’re deciding where to eat. That means brands can design loyalty programs to be more proactive, including targeted nudges that could help address things like underutilization or using other tools to create a sense of urgency or even ‘secrecy’.”

Reward tracking is the number one quality in favorite loyalty programs, so brands should incorporate a tracking metric to make spending motivating. Neiman said, adding that the bigger shift is that brands need to move beyond thinking about “loyalty programs” and start thinking about Loyalty with a capital “L,” or an always-on relationship. They should use behavioral data to proactively engage customers before habits break, not after. 

“If a regular guest starts visiting less often, that’s a critical window to reach them with something relevant and timely. By showing up in a way that feels proactive and consistent across the entire experience, brands will be able to better build loyalty with guests.”

While experience is what’s driving visits, and it’s also validating what Tillster is dubbing Restaurant 2.0: a categorical shift in how brands use technology to orchestrate experiences in a way that drives engagement, repeat visits and loyalty. Diners aren’t choosing between digital and in-person interactions, but they do expect both to work together. Sixty-four percent are using kiosks regularly, while many still order from a cashier multiple times a month. 

“As consumers diversify how and where they engage, brands need to ensure the experience feels consistent across every touchpoint,” said Neiman.”That requires a fundamental shift in how they think about technology. A Restaurant 1.0 mindset is ‘tech for tech’s sake,’ adding more channels and tools without connecting them. Restaurant 2.0 is about making those tools work together to deliver a unified experience. It elevates technology from a set of tools to something that actually impacts customer connection.”

Ultimately, brands need to orchestrate both physical and digital (phygital) touchpoints in a way that feels effortless. That’s what builds engagement, and increasingly, that’s what determines whether a customer comes back.

Where brands struggle is when their ecosystems don’t work together, she noted. If technology is adding friction instead of removing it, consumers feel it immediately, and they disengage just as quickly.

“Ultimately, brands need to orchestrate both physical and digital (phygital) touchpoints in a way that feels effortless. That’s what builds engagement, and increasingly, that’s what determines whether a customer comes back.” 

Speed and control are two aspects that diners clearly value from phygital experience. For some, it’s about efficiency, while for others, it’s about having the time and space to explore. But, great phygital experiences support both, Neiman said. Customization is another aspect that diners value. Sixty-two percent say they’re pleasantly surprised by menu and order customization options, which reinforces how much value they place on being able to tailor their experience.

“Ultimately, diners really value how well every part of the dining experience works together so they know they’ll be satisfied every time, regardless of how they order.”

Tipping has caused friction for diners, particularly those ordering at a kiosks, with forty percent of diners have abandoned an order because they felt pressured to tip, and 62 percent tip less or avoid ordering from places with tip prompts entirely, which means brands need to be more thoughtful about where and how those prompts appear. 

“A tip prompt at a full-service table where a server has been attentive is a very different experience from a tip prompt at a kiosk where the interaction was entirely self-directed, " said Neiman. “Brands need to look at every moment where a tip prompt appears and ask honestly whether it reflects the experience the guest just had. When it doesn't, it can turn off a diner at pivotal moments, either before they place an order or right at the end of the visit when they decide if they want to come back.”

The report also found that digital-native does not mean delivery-dependent with the data telling  a more nuanced story, particularly within the framing of third-party delivery.

“Gen Z grew up with technology at their fingertips, so many brands assume that they’d always prefer digital engagement,” said Neiman. “Being digital-native means being comfortable across all channels, and it doesn't mean absorbing added cost just for the convenience of staying home.”

Gen Z diners are actually more likely than millennials to purchase fast food directly at the restaurant (49 percent versus 37 percent) and 45 percent say they plan to reduce their use of third-party apps in the next 12 months compared to 35 percent of millennials. 

“They're cost-conscious and they're doing the math, and when a delivery order costs significantly more than picking it up themselves, they'll choose pickup, especially as brands invest in making that in-store and curbside experience faster and more seamless.”