NATIONAL REPORT Amid less-than-jolly projections for holiday spending, restaurants are wrapping their gift cards with extra perks to tempt shoppers.
Many chains are offering such rewards as free food and separate gift cards for purchasers and independent restaurants are even banding together to offer gift cards, all in the face of forecasts for a weak holiday shopping season. This year the National Retail Federation expects total holiday gift card sales to decline more than 5 percent from last year. The federation added in a survey released last month that nearly 11 percent of consumers said they would rather shop for bargain-priced merchandise.
Restaurants are responding: Buyers of $100 in California Pizza Kitchen gift cards will each receive a $20 CPK Rewards Card; T.G.I. Friday's is giving away $5 Bonus Bites cards with each $25 gift card purchase; and IHOP is handing out $5 coupons to any customer who buys a $25 gift card.
Higher-end chains are using a similar strategy. Ruth's Chris Steak House said on its website that customers who buy at least $250 in gift cards will receive 10 percent of their purchase price in a bonus card. Another steakhouse operator, The Capital Grille, is offering the same deal for purchasers of at least $500 in gift cards.
Others are offering free food or other items. Papa John's Pizza is giving a certificate for a free medium one-topping pizza to each customer who buys a $25 gift card, and BJ's Restaurants is handing out special edition pint glasses to purchasers of $50 gift cards. At Jamba Juice, customers who buy a $25 Jambacard can get a free 16-ounce smoothie or 12-ounce breakfast item.
Smaller operators also are looking to score in the gift card game. Union Square Hospitality Group, whose portfolio includes such well-known New York restaurants as Union Square Cafe, Gramercy Tavern and Eleven Madison Park, is partnering with American Express in its holiday gift card promotion. Customers who use their AmEx cards to buy a $100 gift card will receive a $25 bonus card, USHG said.
Consumer cutbacks in gift card purchases may come from fear that the restaurants they choose to frequent will close before the cards can be redeemed. The industry has seen such bankruptcies or mass closures like at Bennigan's, Ryan's or Shells Seafood. According to last month's National Retail Federation study, more than 3 percent of respondents said they would indeed cut back on gift card purchases for that reason. However, Orenstein said the Cleveland Independents program can offer peace of mind because each gift certificate can be used at several restaurants.
"There are always people left with gift cards they can't redeem," she said. With a Cleveland Independents gift certificate, she added, "If you can't redeem it at your first choice, then you can redeem at your second choice."
Ellen Davis, a spokeswoman for the National Retail Federation, offered up a bit of good news for restaurants, saying that the recent decline in gas prices could make consumers more likely to stop for lunch or a cup of coffee while they are out shopping. In addition, restaurant gift cards may be a more popular choice for holiday shoppers over other retailers.
"Dining out in a restaurant is an experience that many people have been [cutting back on] for many months," she said, "so people may like the idea of giving a gift card to a restaurant because it provides an opportunity that they've been denying themselves."