Panera today announced the launch of an unlimited drinks subscription for all self-service drinks, an offer that comes as food prices rise. As pandemic restrictions continue to lift, Panera and other restaurants aim to lure more customers into stores with subscriptions for everything from lemonade to tacos.
Subscriptions are a way to build loyalty, which is perhaps why so many restaurants have recently embarked on the subscription model. In February 2020, Panera launched unlimited coffee and tea for $8.99 per month, and the new subscription now extends that to 27 other beverage choices, including sodas and lemonade for $10.99 per month. . The subscription pays for itself after four drinks, the company said.
In September 2021, Taco Bell tested a 30-day taco subscription in Tucson, Arizona, with prices ranging from $5 to $10 per month, to drive more frequent visits. Pret A Manger also launched a monthly coffee subscription plan across the United States last year.
What about restaurants?
Restaurants make more money from customers who dine in person than from delivery. Panera said unlimited drinks could attract customers during the later hours of lunch and dinner, when menu items tend to have higher prices than at breakfast.
The model could also help create consistent customers. According to data from reservations site OpenTable, restaurant traffic continues to fluctuate, with covid-19 cases rising and falling in the United States and workers still not coming to the office as often as before.
Panera said subscriptions attract diners who spend more than the average customer. If a customer makes the effort to walk into the store, they’re likely to buy something with the drink, said Raghuram Iyengar, professor of marketing at the University of Pennsylvania’s Wharton School of Business. At the same time, companies need to be selective about what they offer by subscription if they want to make money. “If they start including food as well, then it’s unclear where the margins are,” he said.
There is also psychology behind the subscription strategy. When customers pay a flat fee up front, like an unlimited transit pass, they feel like they’re getting something for free and encourage more usage, said George Lowenstein, an economist who studies consumer behavior at Carnegie Mellon University.
The cost of subscription models
A good deal can have a price.
Lowenstein, who has researched mental accounting, which refers to how our brains try to come to terms with spending, said one of the concerns focused on health. “It is very likely that this will induce even more overconsumption of sugary drinks than what we are already seeing,” he said. This may be at odds with Panera’s efforts to market itself as a restaurant with healthier choices on the menu.
For now, subscriptions are a way for Panera to stand out, Iyengar said. But, he added, the company must also be ready for many competitors.