Inflation Takes Its Toll on Starbucks, QSR Loyalty Programs

Starbucks and major restaurant chains are rethinking their loyalty program strategies amid worsening economic conditions.

The coffeehouse chain, the world’s largest restaurant brand by revenue, is making changes to its rewards offerings, making it more costly to earn many popular items and less costly to earn a handful of others. The company notified program members Wednesday (Dec. 28) and updated its Starbucks Rewards Terms of Use page to reflect these changes, set to take effect Feb. 13.

For instance, the number of rewards points, or Stars, it takes to earn brewed hot coffee, bakery items and hot tea has doubled, and the number it takes to earn breakfast items, specialty drinks and packaged food items has also increased. However, the number of Stars required for iced coffee and tea and for packaged coffee has decreased.

“We occasionally need to make changes to ensure the long-term sustainability of the Starbucks Rewards program and to meet the changing needs of our members,” a Starbucks spokesperson told PYMNTS via email.

The news comes just months after competitor Dunkin’ made a similar modification, changing its DD Perks program to Dunkin’ Rewards and unveiling a new point structure that made it more difficult to earn popular items.

Reactions from Dunkin’ customers on social media platforms showed frustration that, although points are now rewarded in higher values, they cannot be redeemed for as much, giving consumers less rewards bang for their buck.

“When we set out to improve DD Perks, we asked our members what they wanted to see in a new program,” Scott Murphy, head of the beverage-snack category and president at Dunkin’, said in a statement at the time. “They told us three things: flexibility, variety and recognition. And we did just that. We solved the three biggest constraints to bring a new and improved customer experience to Dunkin’ fans.”

Additionally, in the past few months, customers of fast-casual giant Chipotle Mexican Grill have been observing on Twitter and Reddit that the number of points required to redeem a free entrée is on the rise.

Chipotle did not immediately respond to PYMNTS’ request for comment.

These changes come amid soaring food prices, with restaurants’ margins taking a hit as they attempt to absorb much of this inflation. Data from the U.S. Bureau of Labor Statistics (BLS) revealed that in November, the most recent month on record, food prices overall were up 10.6% for consumers, while restaurant prices only increased 8.5%.

Yet, even with the economic strain of keeping price increases relatively low, some restaurant brands believe that the way to succeed in this inflationary period is not to pare back rewards but rather to scale them up.

“With some of the macroeconomic trends ahead, I think it would make sense if rewards programs started to become more generous, and more restaurants are participating in them,” Or’el Anbar, director of analytics at fast-casual chain Just Salad, told PYMNTS in an interview. “Because it’s easy to roll out to a lot of point-of-sale systems and use the technology restaurants already have in place to now offer rewards functionality, and customers are going to be looking for value.”

Indeed, loyalty programs can be essential to driving direct restaurant orders in the face of competition from third-party marketplaces. Research from the October edition of PYMNTS’ Restaurant Digital Divide report, “The 2022 Restaurant Digital Divide: Restaurant Apps and Websites in the Spotlight,” which drew from a survey of nearly 2,000 U.S. consumers, found that 45% of frequent first-party app and website users cited better access to discounts or rewards as an influential feature impacting their preferences for these first-party channels.

They can also be a helpful tool in the fight against trade-down to food-at-home options, as consumers mind their spending amid rising prices. Research from the August edition of PYMNTS’ Consumer Inflation Sentiment study, “Consumer Inflation Sentiment: Inflation Slowly Ebbs, but Consumer Outlook Remains Gloomy,” revealed that, in response to inflation, 78% of consumers were eating at home more. Plus, 38% reported they were opting more for lower-priced restaurants.