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Restaurant gift card sales show restraint

Customers are buying more gift cards, but loading smaller amounts

As restaurants gear up for the holidays, consumers remain budget-conscious when it comes to gift cards, according to First Data, a global payment-processing firm.

Data for the month of October compiled by the firm found that consumers are redeeming their own restaurant gift cards more than they did last year, while loading smaller amounts onto the cards they buy for friends and family.

Industry watchers greeted recently released October retail sales figures from the U.S. Commerce Department as a reason to hope for improved holiday spending this year. According to the data, year-over-year retail and foodservice sales rose 7.3 percent last month.

Many shoppers do appear to be getting into the act early across the country, with activations of new gift cards in October up 17.8 percent year-over-year at quick-service brands and up 1.3 percent at casual-dining restaurants, according to First Data.

However, while consumers are buying more restaurant gift cards, they're loading less money onto each, the firm found. For example, quick-service gift cards showed year-over-year dollar volume growth of 16.9 percent in October, but the average ticket fell 0.8 percent to $13.12.

Casual-dining gift cards fared worse, with the total amount spent on gift cards in that segment falling 3.1 percent in October and the average amount loaded onto cards slipping 4.4 percent to $28.83.

Restaurants registered their best redemption numbers for existing gift cards in October, however, with spending and transaction growth via gift cards outperforming levels from earlier quarters of 2010.

The total dollar volume of gift card redemptions at casual-dining brands increased 6.7 percent in October, up from 2.9 percent in September, which was the category’s highest year-over-year growth result since April, First Data said. The dollar volume of quick-service gift card redemptions rose 43.8 percent in October, up from 38.8 percent in September.

The number of gift card transactions increased 6 percent year-over-year for casual-dining restaurants and 34.5 percent for quick-service restaurant brands in October.

Yet in a development exemplifying customers’ ongoing preference for value items, the average check for meals purchased with a gift card inched up only slightly. The October average check for gift card redemptions in casual dining rose 0.7 percent, to $23.48 from $23.33 a year earlier, while quick service’s average redemption rose 6.9 percent, to $4.33 from $4.05 a year earlier.

Several restaurants brands are packaging their gift cards differently, including digitally, to drive sales during the holiday season.

Chicago-based multiconcept operator Lettuce Entertain You Enterprises, for example, offers customers a free $25 gift card for every $100 in cards they buy to give to others. Buffalo Wild Wings gives $5 gift cards back to any customer purchasing $25 in gift cards this holiday season.

Applebee’s similarly offers a $10 bonus card to customers who buy $50 in gift cards. The nation’s largest casual-dining chain also is one of several brands to feature electronic gift cards that can be given to friends and family via e-mail or social media, such as Facebook. Chili’s also will push electronic gift cards this year.

Quick-service chain Culver’s launched eGifts this year, sending offers via e-mail and Facebook to consumers to redeem one of six specific Culver’s signatures: the Double ButterBurger Deluxe, the Turtle Sundae, Wisconsin Cheese Curds, the Double ButterBurger with Cheese, a medium Concrete Mixer and a one-scoop fresh Frozen Custard.

First Data also found that consumers were reloading their restaurant gift cards at a healthy clip, at least at quick-service concepts. The dollar volume of gift card reloads in October skyrocketed 78 percent at quick-service brands, but fell 13.2 percent at casual-dining restaurants.

The number of gift card reloading transactions declined 6.1 percent in October for casual-dining brands but soared 96.2 percent in the month for quick-service cards.

The average reload total for both industry sectors fell in October, however. The average reload for a casual-dining gift card declined 7.5 percent to $93.19, while the average reload on a quick-service gift card declined 9.3 percent to $24.07.

Contact Mark Brandau at [email protected].

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