The restaurant sector is in a crisis. A combination of rising rents, food prices and wage costs, plus a decline in consumer spending, is causing more businesses to close.
Research published in September exposed the scale of the problem. According to accountancy firm UHY Hacker Young, the number of restaurants closing in the year to end of June 2019 rose 25 per cent to more than 1,400 — that’s equivalent to around 27 restaurants closing every week. And there have been some high-profile casualties this year — Jamie’s Italian, the chain belonging to celebrity chef Jamie Oliver, had to close 22 high street locations when it went into administration.
Clearly, restaurants need help getting more customers through the door if they’re to survive the downturn. One company looking to do exactly that — while turning a profit for itself — is discount diners’ club Tastecard.
“Restaurants are getting squeezed from every angle, at the same time that people are spending less and looking to tighten their belts,” says Matt Turner, co-founder and chief executive of the company.
Tastecard — which also runs other schemes like Gourmet Society and Hi-Life, and created Meerkat Meals for price comparison site Compare the Market — sells membership cards that offer two-for-one meals or 50 per cent off food bills at select restaurants across the country, plus other benefits. An annual membership currently costs about £35.
Steaks are high
While Tastecard helps consumers save money, it also helps attract more customers to restaurants — which they desperately need, especially during the current sector downturn.
“It’s been a tough time for restaurants. But some of the forecasting I’ve looked at has said that while the independent sector will continue to struggle in the next year, with around three per cent closures, the branded sector looks like it’s on the road to recovery.”
Turner’s reassurance is worth listening to. He’s had a long career in the dining sector, starting back in the mid-90s when he was washing up dishes in a Lancashire restaurant as a teenager. By 2004, he had opened his own restaurant in Huddersfield.
“We were doing around 90 per cent of our revenue on Friday and Saturday nights. During the week we’d take what we could get — which was not a huge amount,” he recalls.
In response, he trialled a simple two-for-one offer during the week. The deal, which he describes as “a mini-version of what ultimately became Tastecard”, worked well enough that Turner decided to sell the restaurant, and in 2005 he co-founded Tastelondon. It was later renamed to Tastecard in 2010 to include the rest of the UK.
The initial launch in 2006 offered members discounts at 300 restaurants in the capital. Today, Tastecard is accepted in over 6,000 locations, and has three million cardholders. The company’s turnover is £24m.
Turner describes the business as a co-operative that works to help both restaurants and consumers. He credits success with the commitment to keeping the scheme simple.
“We gave restaurants a choice of two offers: the first was two-for-one across all courses, the other was 50 per cent off the food bill. They could exclude Friday and Saturday evenings, which some do and some don’t,” he explains.
“So it worked for the restaurants and it worked for the customers, because they could order whatever they wanted and get a deeper discount than they could elsewhere.”
Tastecard is obviously just one of many discount schemes. But Turner argues that its specific business model is particularly attractive to restaurants.
“Other schemes charged the restaurants for participating or being listed on their website. Restaurants were paying upfront with no guarantee of any footfall or revenue on the back of it,” he explains. “We flipped that model and said to restaurants ‘don’t pay us anything, ultimately you will give discounts and that’s how you pay, but you only pay if we get people through the door for you. If no one comes, there’s no cost to you’. The restaurants quite liked that. They understood that we were a marketing tool.”
As well as helping to advertise the restaurants and attract new customers, Turner claims that Tastecard holders dine out twice as often, and their spend per head is higher.
“Customers are buying more courses or upgrading on their wine and beer, and staying for longer — so the restaurants are really happy about that.”
The waiter’s worth it
Tastecard has branched out from just selling memberships directly to consumers. It also generates revenue from its employee benefit scheme, where businesses offer their staff discounted memberships that are deducted from their salary, or else given to employees for free as a way to save money on company dining expenses.
The other revenue stream is Tastecard’s business-to-business partnerships. As well as creating the Meerkat Meals offer for Compare the Market, the company works with banks such as Natwest, Lloyds, and Barclays, which offer its cards as part of their packaged account benefits.
“The B2B revenue stream is a big growth area for us. It’s a great acquisition tool and a great loyalty tool for those companies as well,” adds Turner.
There are plenty of other challenges facing the restaurant sector, including the rising popularity of takeaway services like Uber Eats. So I ask Turner what’s his advice for struggling companies looking to attract customers? His first suggestion is that they need to keep their act together.
“The general public are more aware of where they’re eating and what’s going on these days. You can’t get away with sloppy service or poor quality food anymore,” he says.
He also advises that restaurants need to be on top of the latest food trends, especially the current move towards healthier eating.
“People are conscious of the quality and nutrition of the food they’re putting into their bodies. You only need to look at the vegan trend and see that early adopters of vegan menus, the likes of Zizzi and Ask, are performing really well, because they were there at the beginning.”
Clearly, there’ll be more victims in the dining sector in the short term, but at the same time, people will always want to dine out. Tastecard aims to leverage that desire while helping consumers to eat out more economically, and in doing so help restaurants attract business. That sounds like a recipe for success.
Main image credit: Getty