How to Start a Restaurant Subscription Service
Restaurant margins have always been tight, averaging between 3-5%. Having a steady and bankable incoming revenue stream has rarely been a reality for beleaguered restaurateurs facing sometimes insurmountable odds. While it’s impossible to fully gird yourself against the dangers of the future, starting a restaurant subscription service is a great way to develop customer loyalty, provide long-term value to your guests, and institute a steady, recurring revenue stream. Read on to learn how to start a restaurant subscription service, from market research to daily operations.
The History of Subscription Services
Before we go any further, let’s clearly define a subscription service. A subscription business model is an agreement wherein a customer pays in regular intervals for a recurring product. This model was pioneered in the 17th century by book and periodical publishers, which corresponded with the increasing commonality of printing presses. Once subscriptions proved viable, a variety of businesses developed based on that model. This includes everything from memberships to the gym or grocery stores to entertainment outlets like Netflix or Disney+. Let’s look at some examples of restaurant subscription services.
Types of Restaurant Subscription Services
Many restaurant operations offer subscription services, so we won’t name every single one. Still, getting an idea of what’s out there and what has worked may help inform your decisions. Below is a shortlist of restaurant subscription services to help you on your path.
- Olive Garden – The Never Ending Pasta Pass lets guests mix and match — cafeteria-style — any of the chains’ pasta dishes.
- Panera – With their endless coffee subscription, guests can, well, drink as much coffee as their hearts and bladders can handle.
- Takoi – A smaller operation, this Detroit-based restaurant offers meal kits at a monthly premium.
- BJ’s Brewhouse – This beer subscription service lets customers sample small-batch brews delivered each month.
While there’s anecdotal evidence that subscriptions succeed, it’s important to determine if they’re a good fit for your operation. For example, if you offer a coffee subscription or a meal kit, will you face challenges from other local businesses? Is there a niche that you can fill in your area that might be untapped?
Start with some market research to see what unique service you could provide to your guests. Once you start to get an idea of what works for you, run a pro forma to help determine your food costs. That will inform your choice as to what item you pick. Remember, you might find something that surprises you, or you might find that a basic and popular menu item that you already offer fits the bill. Furthermore, you may even gain a little insight into your menu engineering efforts.
Setting Your Subscription Price
In this instance, our imaginary business is a hot dog stand, and we’re offering a, well, hot dog subscription. For our needs, a hot dog costs 75¢, the bun costs 25¢, and the toppings are another 50¢. That’s a total of $1.50 altogether. It’s a popular menu item that sells for $4.50, a markup that considers the totality of your operational picture, from the cost of the ingredients to your staffing costs and rent.
You can use data analytics, part of a robust restaurant technology platform, to determine both the average number of hot dogs sold per month and the volume of customers that come through. Here, we’ll assume that your data indicates that you sell 500 hot dogs per month and that you have approximately 2000 transactions per month.
That data pool would seem to indicate that ¼ of your sales are hot dogs to 500 customers, but keep in mind the variables in this equation—first, transaction ≠ customers. You might have multiple customers that come through one transaction. Likewise, you might have multiple hot dogs purchased by one customer in a singular transaction.
Still, it gives you an idea of the total number of hot dog units moved while simultaneously painting a picture of how they move. You know from your analytics that you average a total of $2250 per month, and you can make an educated guess that around 500 or so people are buying hot dogs each month. If you set your monthly subscription cost at $25 per month and that same 500 people buy them each month, you have $12500 in overall sales.
So in this example, we’re going to go with $25 as our monthly subscription figure with a maximum of three hot dogs per week. Capping the subscription volume is important in ensuring that your endless buffet doesn’t eradicate your budget. Make sure that you clarify this in your marketing efforts, or you risk losing or upsetting guests.
The Technology of Restaurant Subscription Service
Once you’ve decided what you want, the next step is securing the necessary technologies to realize your dream. In this example, we’ll go through a typical guest transaction from the point of sale (POS) to the back-of-house (BOH) and the hand-off to a happy customer.
Point of Sale
As a guest arrives, they approach your cashier station. Once they present their membership criteria (more on that in a moment), the cashier enters the appropriate order, a predetermined keystroke. Typically, that order goes from the POS to the kitchen display system (KDS) in the BOH, unless your restaurant has an API that communicates directly with the BOH. At the front end, make sure that you have a clearly defined line item in your POS, which will impact your data analytics later; it’ll benefit you to know not just how many hot dogs were sold but also how many were sold through your restaurant subscription service.
Back of House
Once in the BOH, your kitchen staff can get to work. From the POS, the customer’s order goes to the KDS. Remember, your cashier can update each sale to include any special directions. For example, your guest may not want relish on their dog, which you can single out. A good KDS will show each item line by line, organizing each order by their respective cook times through delayed routing and coursing to ensure that each meal comes out fresh and on time.
At this point, the order goes to the expo station and subsequently your guest, but your work isn’t quite done. To best realize the potential of your restaurant subscription service, make sure you look at your data analytics regularly. For starters, you want to ensure that you aren’t giving away the farm (so to speak!). Since a subscription service represents pre-sales, you have an idea of what to expect for your future. Data analytics tell you what has and hasn’t worked over time, allowing you to better plan for tomorrow today. Keep your data analytics in mind as an integral step in measuring your own success.
Using the aforementioned data analytics, you can better plan for your bin management needs. As the name implies, bin management is a way of managing the bins of ingredients needed at any given time. If you see historically that your restaurant subscription service yields more business at specific times, you can plan ahead. A sophisticated restaurant technology platform allows you to program your KDS to prepare for those needs, freeing your kitchen staff from the worries of running low on any one thing (hot dogs!) at a time where they might be the most needed.
Marketing Your Restaurant Subscription Service
All restaurant subscription service-related marketing should occur before and during your process. If you know that you’re about to offer a one-of-a-kind subscription, you might be able to make national news. Begin by gathering marketing materials, including promotional materials, written collateral, and a brief press kit. Ensure that you regularly update your social media channels to include any relevant updates, caveats, or successes. Likewise, use tools like geofencing or Facebook ads to bolster your guest reach and potential customer base.
Restaurant Subscription Service Conclusion
As you embark on your goal to realize your restaurant subscription service, remain steadfast and diligent. It’s imperative to stay consistent throughout, both in your messaging and in your methodology. That means that following up on sales data is and communicating relevant info to your guests are critical steps to consider as you move forward; if it doesn’t work, you can always discontinue the service. With work, you can ensure a steady and relatively predictable revenue stream while building on your existing customer base.
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About the Author
Syd is a content marketing specialist, which are fancy words for writing pretty to tell a good story. He likes writing things about food, drinks, and music. He’s a musician himself, a father of two, and loves his wife a whole lot.