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gift card photo by alicia.jpg Photo courtesy of Alicia Kelso
Nearly half of restaurant gift card sales come during the last two months of the year.

In the digital era, gift cards are more critical than ever for restaurants

Nearly half of all gift card sales occur in the last two months of the year and most of those redemptions happen in Q1, a historically slow time for restaurants.

MrBeast Burger announced today it is adding a gift card program to its quickly growing restaurant business. The 2-year-old brand is offering physical and digital gift cards available for $25, $50 or $100.

MrBeast Burger is a mostly virtual brand, perhaps illustrating just how important it is for restaurants of all kinds to have a gift card program in place now. That is especially true during the holidays, when the industry sells a majority of its gift cards for the year. According to Credit Suisse, the average casual restaurant generates more than half of its annual gift card sales in Q4, and nearly 40% of redemptions happen in Q1.

This isn’t necessarily a new trend. What is new, however, is that the promotional push has become a bit more aggressive in the past three years as restaurants diversify their revenue streams amid crises. Further, that promotional push has largely come via ecommerce channels as consumers have become more digitally dependent. Consider Paytronix data, for instance, which found that gift card sales on Cyber Monday jumped nearly 14% and 18% in overall dollar sales. Digital cards experienced a 31% increase over 2021.

“Just like other parts of the industry, the pandemic helped cement the rise of eGifts. This year we saw that reflected in how restaurants promoted their gift card programs, but we’re also seeing it in other ways. eGift, for example, can underpin an online ordering solution in which people load money onto a card that they spend through an app. Starbucks is famous for this,” said Paytronix Chief Data Officer Lee Barnes. “It’s not just that consumers want digital gift cards – that’s been happening for a while – but brands now acknowledge that trend and are targeting their offers at the market.”

Whether physical or digital, it’s important for restaurant brands to be in the consideration set while consumers sprint for last-minute gift ideas. According to Givex, 51% of Americans plan to spend at least $100 on gift cards this holiday season, and 44% of consumers say they would prefer restaurant gift cards.

“When it comes to the uptick in gift card demand, it’s clear multiple factors are (contributing),” Mo Chaar, COO of Givex, said, citing inflation specifically. “Frugal shoppers are turning to buying gift cards that provide value and promotions or bonuses to them so they can stretch their budgets. More than half of (Givex survey) respondents said they would be more likely to purchase a gift card this holiday season with an offer for a discounted card, such as 20% off $100.”

Restaurant brands are answering the call. On Cyber Monday, for instance, Jersey Mike’s offered a free $5 gift card for customers who purchased $25 in online gift cards. The chain did this last year as well and nearly reached last year’s sales totals within the first four days of the current promotion, according to CMO Rich Hope.

“We think it’ll be a big year for gift cards,” Hope said. Since 2019, Jersey Mike’s has experienced double-digital gift card sales growth every year through its third-party retail sellers.  

The program is especially important this time of year for the brand, as gift cards become “currency on the street” in January and February, which is a historically slow time of year.

On the digital side, Velvet Taco launched its first eGift card in November 2020, as well as an online retail store to provide an opportunity to send occasion-based eGift card designs to anyone, anytime.

“Having a digital gift card storefront allows us to easily promote our eGift card program through several tactics without having to ship anything – influencer trades, philanthropic donations, gift card giveaways and incentives to obtain guest feedback,” said Cassie Pinckney, Velvet Taco’s director of marketing.

Velvet Taco timed its eGift card program launch specifically to coincide with the Q4 uptick and, in 2021, the chain experienced a 358% increase in December gift card sales versus its annual average.

Chipotle also dials up its gift card promotional efforts during peak holiday times. This year, for example, the chain is offering buy-one-get-one offers to incentivize consumers reaching various thresholds for a minimum purchase. Additionally, the company recently hid limited-edition, stainless steel $500 gift cards in mystery boxes to surprise shoppers. According to Stephanie Perdue, Chipotle’s vice president of brand marketing, the brand’s gift card program generates nearly half of its annual sales in the last two months of the year.

 “Gift cards are one of the top three most requested holiday items – a trend we are continuing to see this year,” Perdue said. “Chipotle gift cards expand access to our food, and we’ve seen strong double-digit growth over the past three years.”

There are few downsides to creating a gift card program. Chaar said the cards allow restaurants to generate immediate revenue and boost the bottom line as guests tend to spend beyond the cards’ value. Pinckney adds they serve as a marketing tactic to introduce new customers to the brand.

“With gift cards we’ve already secured the future purchase,” Pinckney said. “Win-win. The guest gets their Velvet Taco, and we win over a guest.”

Contact Alicia Kelso at [email protected]

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