Restaurant Customer Retention: 5 Ways to Make Every Customer More Valuable

One of the first times I helped a restaurant with marketing, they asked me something I won’t forget.

“Adam, I’m hoping you can help me get off the new customer treadmill,” they said. “I feel like I can’t escape it.”

It’s such a great metaphor. Because we’ve all been there. Chasing the next new customer, never feeling like we can catch our breath. The slim margins most restaurants face make this a real concern.

There’s good news: Your best customers are actually your long-time regulars.

So we can get off the new customer treadmill if we figure out how to earn more repeat orders from the customers we have. This is our restaurant’s customer retention or guest retention rate.

Today, I’m going to share the best strategies I’ve seen work for increasing your restaurant’s reorder rate. Proven strategies I’ve seen work across 100’s of restaurants.

Before we get to those strategies, let’s answer this question first: Why bother?

3 reasons why retention is so important for restaurants

1. Regulars are your most profitable customers

Data shows regulars often make up to 65-80% of a typical restaurant’s profits. Unless you’re located in a touristy area, regulars really matter.

Sadly, many restaurants leave gobs of money on the table by not marketing to regulars.

The value of a higher reorder rate becomes clear once you play with the numbers. If you improve your reorder rate from just 5 to 10%, customers become wildly more profitable.

It takes time to pay off. But a customer's full “lifetime value” can grow a lot if you get them to reorder just a few more times per month.

2. One-time customers aren’t always profitable

Many one-time customers aren’t actually profitable after you subtract marketing costs.

Even without marketing, one-time customers usually aren’t worth much. Food costs and labor alone zap all profits from their first order.

Customers become much more profitable once you get them to reorder. Especially since it’s easier and cheaper to market to current customers. Email and SMS marketing cost pennies in comparison to flyers, ads, or promotions.

Not being able to turn one-time customers into regulars is a top reason why restaurants fail.

3. Most restaurants need reorders to survive

Food that’s ordered frequently is also more likely to be a takeout or delivery order. When that’s the case, repeat orders are what make the math work.

Dine-in customers are more likely to order high-priced, higher-margin items. Especially stuff that can’t be delivered—like alcohol.

As a result, quick service and takeout-heavy restaurants rely on reorders.

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Costs for everything are rising. DoorDash charges 30%. It's become necessary for quick-service restaurants to earn repeat customers.

That way, their customers are valuable enough to make up for the lower-margin orders.

5 strategies to improve guest retention for restaurants

There are a lot of tactics you could try to increase guest retention. But I only want to share the proven strategies that work.

I’ve seen these strategies work across hundreds of restaurants. I’ve seen them drive tens and even hundreds of thousands of dollars in revenue over the long term. So let’s get into it:

Strategy #1 – Convince guests to return with email marketing

The most successful owners I know spend the least time on their restaurant’s email marketing. Here’s why:

• Struggling restaurants only send hand-written emails once in a while.
• Successful restaurants send automatic emails every single day. And 90% of their emails are “set it and forget it.”

That’s the secret.

I’ve studied the data from hundreds of thousands of emails we’ve sent through Owner.com. I’ve found there are 4 campaigns every restaurant must send to earn more reorders.

1. First-order feedback email

The first 24 hours aren’t the time to nudge customers to reorder. You’re not sure if they enjoyed their meal.

So let’s ask. By sending an email asking for feedback, we have a chance to fix any issues. We can also ask a customer for a review or talk to them directly.

My friend Antoinette of Ottavio's Italian Restaurant sends a great email in this style.

One hour after an order is delivered, an email goes out and asks guests to score their experience. If guests are unhappy, an automatic reply goes out promising that Antoinette will be in touch. Important: She actually does follow up with unhappy guests!

If guests rate their experience as five stars, the follow-up message asks if they’d post it online. Guests are even given bonus loyalty points for doing so.

It’s simple but powerful because it accomplishes so many things at once:

• Earns more positive reviews on autopilot
• Redirects unhappy guests so they get a resolution.
• Invites guests to leave constant feedback.
• Shows guests that Antoinette really cares.

2. “You might also like…” emails

There’s another key moment guests have soon after your feedback email goes out. And that’s the first week after their order—which is a great time to start staying top of mind.

I recommend starting with Owner’s “You might also like…” email campaign.

Rahul from Saffron Indian Kitchen sends one of my favorite examples.

Rahul wanted to send guests who order online the same recommendations he gives in person.

So he used Owner to create a new email campaign. After a customer’s first order, they will get recommended new, similar dishes by email.

The emails feature photographs of the recommended dish and a button to reorder in one click. All sent automatically by Owner.

The results were almost instant. Rahul earned $4,000 in repeat orders in just 30 days after setting these emails live.

3. Repeat order emails

We’ve set up emails for new customers. Now it’s time to stay top of mind with guests who’ve ordered many times—our regulars. This is the bread and butter of email marketing. 

Discounts and special offers are a powerful way to do this. But we need to be mindful of profit margins and not train customers to always expect discounts.

I recommend using the discount ladder approach, created by business owner Drew Sanocki. Here’s how it works:

After a short period of no orders (~30 days), send them a small discount (e.g., 5-10%). If the customer doesn’t bite after the first offer (~60 days), the discount increases (e.g., 10-20%). Then, if a customer begins slipping away (90+ days), the discount reaches its highest level (e.g., 20-30%).

Here’s a basic series of emails you can use to create your own discount-focused campaign. Remember, not every email needs to include a discount!

1. Initial discount. In the first 7 days, send a small, straightforward discount.
2. Loyalty program enrollment. In the first 7-14 days, ask guests to join your rewards program for even more chances to save.
3. High-margin bonus offer. Send customers an offer to get a free side with a minimum order. E.g., free dessert for orders $10-15 and up.
4. New rewards are unlocked. Automatically send guests an email when they earn rewards in your loyalty program. Have this email show them the next reward, too.
5. Special app offers. Offer regulars a generous discount to download and order from your app. 20-30% will often do the trick.
6. VIP offers. Some guests order a lot. Send them special discounts and combo offers that aren’t available to every customer.

4. “Win-back” regulars with one email

Sometimes, regulars stop ordering just because they get busy.

These “inactive” regulars are a potential goldmine. They already enjoy your food. You just need to give them a reason to return.

Nudge these customers to re-order with a “win-back” campaign. Phillip, the founder of Sushi Me Rollin’, sends a great one. He uses Owner to message guests:

• who have ordered at least 3 times (i.e., regulars), but…
• …who haven't placed an order in 45 days

These are regulars who are slipping away. So Phillip uses Owner to automatically send these customers emails and texts. These messages show guests their past orders and offer a special discount to reorder.

This campaign worked right away. Phillip saw direct sales increase by over $1,500 in less than a month.

Strategy #2 – Offer your own custom mobile app

Domino’s says 75.2% of its online orders now happen through its mobile app. But you might be wondering: Do mobile apps really work for independent restaurants?

We’ve built hundreds of apps for customers. Owner’s data is clear: restaurant mobile apps are wildly effective.

Restaurants with apps get 85% more return customers than restaurants without an app.

That’s to say nothing of the improved experience for regulars. Guests who order often love that they complete orders in a few taps—all from their phones.

We’ve now built custom mobile apps for every type of restaurant imaginable. Mobile apps that have earned thousands of 5-star reviews. We know what works.

You can use a product like Owner or pay an agency. Just make sure you build the 3 must-have features your mobile app needs to succeed:

1. Fast and easy online ordering

The most valuable thing guests do in your mobile app is place orders. So placing orders should also be the easiest thing to do.

That’s why I highly recommend using a floating Add to Order button that appears on menu listings. Also, list the item’s price needs on the button. That way, guests won’t hesitate wondering what the price is. Or run into any unpleasant surprises once they reach checkout.

It also must be easy to reorder. Regulars use your mobile app and they’re quick to get into a routine. Especially for foods they reorder often. Think about it. Your favorite coffee, your favorite sandwich spot—you probably have a go-to order.

So let’s make reordering go-to’s as simple as possible.

Add a feature in your app that acts as a “Likes” or “Favorites” option. When guests tap it, this feature should save the selected item to their favorites. That way, they can find these dishes quickly.

Next, add a section to your app that shows guests their previous orders. Let them reorder anything listed there in two taps: one to add to cart, and one to check out.

This can’t-be-beat convenience is why guests reorder from apps so often. Make sure your mobile app has these features, too.

2. Simple (but powerful) in-app rewards

Mobile apps and loyalty programs work well together. First, loyalty programs are a great reason for regulars to download your app.

But the big payoff is that mobile apps are already home to your best customers. Since that’s the case, there’s one main bit of advice if I have to rewards programs in mobile apps:

Remind guests of their rewards progress when they’re ordering. Make the rewards visible. Knowing you have “50 points left” until a free mac and cheese is great. But it's better to know your favorite sandwich will definitely earn you enough points.

I recommend reminding guests of rewards in these two ways:

• “Next reward” banner. On individual menu items, show guests how much closer this order will get them to their next reward. Show how their favorite bacon cheeseburger will move them closer toward a free shake.
• Rewards overview page. Add a page explaining how rewards work. On this page, tell guests how many points they have left to go for each reward tier.

3. Mouth-watering menu that’s easy to browse

The number one rule of great menus: Guests eat with their eyes. Restaurant owners get this. So they invest in great photos and descriptions for their paper menu and website.

Maybe it’s the smaller screens, but I see people forget that this rule applies to mobile apps too. Here’s my best advice for creating amazing-looking menus inside your app.

First, don’t be shy about investing in incredible food photography. Modern phone cameras can take great photos. However, pro photography is one of the best uses of outside help to improve your restaurant. Great quality photos can pay you back for years—so they’re usually worth the cost.

As for menu descriptions, they are a tightrope walk. You want to share the key facts of the dish, but you also need to spark a guest’s imagination. I like to do this with two groups of adjectives:

1. How it’s prepared: Grilled, poached, marinated, encrusted, shredded, etc.
2. Flavors and senses: Sweet, tart, rich, flaky, smoky, etc.

Timirie Shibley, owner of Doo-Dah Diner, writes great descriptions. She whets guests’ appetites with strong adjectives—”crispy,” “thick,” “your way.” She’s also able to fully describe what’s in the dish so you know if it’s right for you.

Strategy #3 – Create a loyalty program for regulars

Top brands know rewards programs work. Starbucks recently shared that 57% of its revenue comes from its rewards program.

Mobile apps are the best way to offer rewards for regulars. That’s why every Owner app has them built in.

But there are other key factors that determine whether your rewards program will succeed—or lose your money. You must do the following:

1. Offer engaging ways to earn points (and yes, it should be points-based)
2. Reward guests with low-cost, high-margin items (that pair well with entrees)
3. Market to guests based on their rewards progress (and make it transparent)

Let’s explore these in more detail:

1. Give customers points, not cash

Major brands like Chick-fil-A and Starbucks use points for their loyalty programs. Why is that?

I dug into the research. It turns out, points-based loyalty programs encourage people to order more often.

One big reason why is thanks to this concept called the Endowed Progress Effect. Which is just a fancy way to say people like to “complete” things when they’ve already made progress.

In the original study, they gave two groups of people which they could get stamped after every car wash. After enough stamps, they’d earn a free car wash. There were two groups:

• In the first group, the card required eight stamps for a free car wash.
• In the second group, the card required ten stamps but two stamps were already placed on the card.

The second group purchased far more car washes.

This is why it’s smart to offer a points-based rewards program that starts guests off with a few points for free. That way, they’ll be more motivated to order enough to reach the first milestone. first reward.

2. Reward guests with low-cost, high-margin items

Restaurant owners tell me that they’re worried about margins when offering rewards. After all, the rewards are usually discounts or free food.

Here’s the solution. Pick items from your menu that complement your main dishes and already have high margins. Then use those items as rewards.

For example, pizzerias can offer cheese sticks or garlic bread as a reward. These items pair great with pizza and the food cost is low. Drinks, desserts, and other appetizers also fall into this high-margin category.

When you offer these sorts of items as rewards, the customer still feels great. But you don’t eat into the slimmer margins for your higher-ticket items—like meat-based dishes.

The reward item already pairs well with your entrees. So will likely encourage guests to “complete” their order with one. Whenever I get free French fries, I always grab a burger.

3. Market to guests based on their rewards progress

Rewards work because they “gamify” the act of reordering. This means a clear goal and visible progress make things easier to complete.

Restaurant loyalty programs give guests both clear goals and visible progress. Just make sure you take that second one literally!

Guests are much more motivated to hit milestones when it’s easy to see how close they are to their next reward.

You can take this even further. Send targeted emails to guests once they unlock the next reward or level in your rewards program. Or right when they’re about to unlock a reward.

This ideally happens whether they order in your app or online.

The key to these emails is to visually show guests what rewards they can claim. High-margin sides are best because they get guests to “complete” their order with an entree.

Strategy #4 – Offer an online experience like the big chains

Wait, isn’t online ordering important for first-time customers?

It definitely is! But it also affects whether customers are willing to give you a second chance.

In fact, 62% of guests say a bad online experience has discouraged them from reordering from a restaurant. That’s a lot of potential lost customers.

Guests are willing to reorder from you directly. They’ll skip the apps.

But your online ordering experience has to be super convenient. It needs to be as good as the popular sites like Domino’s or DoorDash.

There’s good news. Through my product, Owner.com, I’ve seen the data for thousands of restaurant websites. And I’ve seen one winning formula work extremely well regardless of restaurant type:

1. Nail the first impression on your website

So how do you provide an online ordering experience that’s so good guests don’t mind using it again and again?

The best thing to do is focus on what we know guests expect to see:

• Guests want to see your menu. And they’d really prefer to not have to scroll through a long and confusing PDF on their phone.
• Guests want to see pictures of the food. We eat with our eyes. Guests are always more likely to pick out items paired with mouth-watering photography.
• Guests want to order in just a few clicks. Extra hurdles like a multi-step process to create an account are sure to scare guests away.
• Guests want to know if they can pick up or get delivery. Key information like this should be front and center on our website.

All of the above is why we design websites on Owner to focus on what works.

That’s why menus built with Owner feature photos and accelerated checkout options. Speaking of...

2. Follow a proven formula for online ordering

A great first impression gets guests to stick around. Now we need to make placing an order simple and appealing enough to do.

We’ve tested this extensively at Owner. Here are 3 things your online ordering must have:

• Accelerated checkout. I specifically mean checkout options like Apple Pay. Some guests love these options and will default to using them everywhere.
• Detailed photos. All of our menu items must be paired with great food photography. This helps catch and keep a guest’s interest when they’re browsing specific menu items.
• Social proof. Guests ask themselves, “What do people in my community think of this place?” So I always recommend showcasing a star rating next to menu items.

These are simple but powerful features. I’ve seen them increase conversion rate over 2-4x vs. a clunky online ordering experience.

Strategy #5 – Don’t forget, menu-market fit matters most

Food is still the #1 reason why guests come back to a restaurant. You can do everything else right and still struggle to retain guests without great food.

“Food matters” is pretty standard advice. But there are two more advanced tactics I have to share with you. And that's to think about your food from a “menu-market fit” and “brand” perspective.

Here’s what I mean:

1. Find (or improve) your menu-market fit

Menu-market fit is one of the top reasons why restaurants fail. Your menu must meet the demands of the market you’re in. Even a great restaurant can fail in the wrong market.

Menu-market fit means how well your menu fits the demands of your local market. Finding menu-market fit comes down to market research.

That might seem complicated. But there’s simple market research we can do ourselves with free online tools.

Check Google for unmet demand

People search Google for food when they don’t have a place they already love. If they did, they wouldn’t need to search. That makes Google a great way to check for unmet demand in your local market.

Here are the steps I take:

1. Head over to the Google Keyword Planner tool (which is free)
2. Type in terms that are related to your concept. I recommend checking both the concept and popular cuisine types. For example, “Italian restaurant” or “best pasta” and then select the city I’m in.
3. Then, see how many competitors sell something similar. And be sure to check their reviews.

What I’m looking for is the Search Volume to Restaurant ratio. And I want to see it off balance.

That’s when lots of people are searching for a specific cuisine, but there are few great menus available. This means there is clear unmet demand.

To see if any great menus already exist, we need to check out the competition. I’ll cover how to do that next.

Check competitors for market pain

Guests have no issue sharing critical feedback. Their reviews will reveal where local competition has left market gaps open.

Here’s where the 4Ps of marketing are actually useful. Look at reviews for competitors and place orders with all of them. Call them up to check their service, too. Then make notes in each of the four categories:

• Product: How’s the quality of available options? Do customers only like specific dishes? Is there a lack of a great option for a popular dish?
• Place: What does their location look like? How convenient is it to get there? Do they offer online ordering, or is takeout available?
• Price: Does the price match food quality? Do customers bring up the price a lot? Do the prices fit the local market?
• Promotion: Do customers mention how they found the restaurant? Is this place involved in any community events?

2. Fit your brand to the market

Brand is the expectations people have when they think about your restaurant. When someone places an order or tells a friend about you, “brand” is whatever they think of first.

The best restaurant brands are focused and specific. Unfocused brands make everything about running a restaurant harder. These issues are especially tough to overcome:

• You aren’t known for anything. Great restaurants stick out in customer’s minds for specific reasons. You never want your restaurant to fall in the messy middle. 
• Your menu gets out of control. Bloated menus make storage, training cooks and staff, and menu pricing more complicated.

The solution isn’t to pay for a pricey visual rebrand. At least not yet. It’s much better to start making sure your brand fits the “ideal customer” you’re targeting today. Here’s how:

Choose your ideal customer

Your ideal customer is who your menu feels perfect for. Try to use these sources to figure out who they are:

• Based on what you know about your market (see above)
• Based on a real customer who has spent an outsized amount at your restaurant

‍Talkin’ Tacos is a great example. Centered in Miami, they’re surrounded by a young, vibrant crowd. Their brand meets those expectations with vivid colors, bold art, and trendy dishes.

Shape your brand to match your customer

Once you’ve clearly described your ideal customer, shaping your brand feels like a puzzle. That’s a much better place to be than starting with a blank page.

Shaping your brand is about deciding what you sell, what you say, and how you serve customers. When these are all working together, your brand becomes clear.

Metro Pizza is an excellent example. They pride themselves on being the family pizzeria for the suburbs of Las Vegas. As a result, their brand is comforting, authentic, homey, and convenient.

3 ways to calculate retention for restaurants

We’ve covered the strategies for increasing customer retention at a restaurant. Now we need to go over how to measure success.

Good guest retention will show up in a few different ways. From my experience, here are the metrics you want to track:

1. Repeat Order Rate

First up, repeat order rate measures how many guests make a second order in any specified period of time.

We can calculate the repeat order rate for a given period with this formula:

(Number of customers who ordered more than once / Total number of customers) x 100

I strongly recommend you compare how this number is improving over time. For example, this month vs. last month or this year vs. the previous.

Most benchmarks I’ve seen say you have a “good” reorder rate at these percentages:

2. Customer Lifetime Value

Customer Lifetime Value is the total revenue you expect to earn from all of a guest’s orders.

It’s a rough estimate of how much the typical guest is “worth” to your business. Here’s how to calculate it:

(Average order value x Average order frequency x Customer lifespan)

CLV is a little bit tricky to gauge. What makes a “good” CLV varies quite a bit. Even within restaurants of the same type depending on their cuisine.

Do you know your prime costs? Then some back-of-napkin math may be all you need. You want CLV to be higher than how much you pay to acquire the average customer.

3. Customer Retention Rate (CRR)

Lastly, you want to get a sense of how many customers are returning vs. new. You can do this by calculating your overall customer retention rate.

Here’s the formula:

CRR = (Number of Returning Customers / Total Number of Unique Customers) x 100

For example, if you have 1,000 unique customers in a month and 300 return the following month, the retention rate is:

(300 / 1,000) x 100 = 30%

You can calculate retention for your online orders, in-person orders, and so on. That’s helpful for understanding where returning customers prefer to buy. Or just checking the health of specific channels.

Make every customer more profitable

Most restaurant owners know regulars are valuable. But, we still probably undervalue them:

• Regulars are more profitable because they order more often
• Regulars are more profitable because they refer their friends
• Regulars are more profitable because marketing to them is inexpensive

It’s no wonder that many restaurants see a small % of regulars make up a large % of profits.

Regulars are also the secret to getting ahead of the new customer treadmill. The more profitable your customers are, the more you can spend to acquire them. And that makes things easier for you and harder for your local competition.

Reorder or retention rate might not be the first metric you think of. But I'm here to tell you it's one of the most important!