Restaurant gift card sales rose 10% in 2018

Dive Brief:

Overall restaurant gift card sales grew 10.4% in 2018 compared to 2017. QSR restaurants experienced the most gift card sales increasing 18% in 2018 followed by casual dining (10%), fast casual (3.6%) and a 0.8% decline in fine dining, according to Paytronix's annual Gift Card Sales Report 2019, which looked at 190 restaurant brands.
Fine dining had the highest average dollars loaded to gift cards with just under $150. Quick-service had the lowest average dollars loaded at about $17. Casual dining gift cards averaged a value of over $45 while fast casual had gift cards worth about $24.
While QSRs had the highest six-month redemption rate at 75%, store visits skyrocketed to 138% when combined with a loyalty card.

Dive Insight:

The QSR space is seeing continued success with gift card programs, which are described by some as a great tool to increase sales and build loyalty. Not only does a gift card sale increase revenue by increasing margins once the card is issued, but it can also drive repeat visits. The most successful gift card programs are ones that incentivize recipients to keep reloading the card, much like Starbucks' program. Gift cards may also help convert new consumers who may have never heard of a particular restaurant or never had an occasion to visit.

While gift cards can build loyalty, they also typically result in higher sales, especially when ordering online. QSRs had a 6% increase in check size for online orders paid with a gift card, according to the report.

There's also the fact that about one-third of gift cards are never actually redeemed, padding margins without requiring much output. This figure is even higher for digital gift cards. According to the Paytronix report, roughly 8% of digital gift cards are redeemed on the same day they are purchased.

Although digital gift cards may be easier for diners to buy, recipients seem to prefer physical gift cards, but the trend is decreasing. The preference for plastic or paper over an e-card slipped 3% during 2017, with three-quarters of gift card redemption still happening with tangible cards or pieces of paper. But this may be changing. Over half of consumers said they would give or receive a gift card that can be easily added to a smartphone or digital wallet.