Customer Lifetime Value for Restaurants

Customer Lifetime Value  for Restaurants

Understanding and prioritizing LTV is key to restaurant growth, better margins, and steady growth without ballooning advertising expenses.

Customer Lifetime Value, sometimes abbreviated as LTV is usually a term you'll hear applied to technology businesses. It matters for every single business, especially retailers and F&B businesses with high competition. Understanding and prioritizing LTV is key to restaurant growth, better margins, and steady growth without ballooning advertising expenses.


Let's break it down. Traditionally, restaurants fail by not focusing on service, retention, and cost. If a restaurant manages to have repeat customers and a constant flow of new business, most cost & pricing issues can be resolved over time. That makes great service + customer retention one of the main contributors to higher customer lifetime value.

How LTV + Retention Work for Restaurants

Here are some stats to think about:


75% of a restaurant's profitability will come from 10% of their customers


65% of business sales will come from loyal customers


You read it right. 75% of profitability comes from 10% of customers. The difference between running a profitable restaurant and an unprofitable one is retaining 1 in 10 customers. Ignoring LTV is one of the root causes of 80% of failure within 5 years of opening. It's simple math, if most new customers end up being repeat customers, you've already won.

A Recipe for Retail that Doesn't Fail

You bring in 100 customers today, and 10 of those customers decide to come back tomorrow. 20 decide to come back in a week. 50 decide to come back in a month.


If every customer pays you an average of $15 on each visit, you've effectively divided your marketing expenses, aka acquisition costs throughout multiple visits.  The longer you keep people coming back, the cheaper your per-customer acquisition cost becomes. If a customer costs  $20 in marketing expenses to acquire, and that's spread over 20 visits/year, you've successfully brought them in for $1. Maintaining this cycle is key to steady growth.

Do everything you can to bring customers back


It all boils down to bringing customers back. Most successful, independent restaurants and coffee chains have a non-structured retention strategy. We've all been through the experience of getting a free dessert or replacing an item after it's been ordered. Starbucks understands the value of retaining customers, even if it means a single unprofitable order, as demonstrated below with their "Barista Promise".


Create your own retention strategy, even if it's a manual process, then graduate to a loyalty program where every customer runs through the same process.


Customer Lifetime Value, sometimes abbreviated as LTV is usually a term you'll hear applied to technology businesses. It matters for every single business, especially retailers and F&B businesses with high competition. Understanding and prioritizing LTV is key to restaurant growth, better margins, and steady growth without ballooning advertising expenses.


Let's break it down. Traditionally, restaurants fail by not focusing on service, retention, and cost. If a restaurant manages to have repeat customers and a constant flow of new business, most cost & pricing issues can be resolved over time. That makes great service + customer retention one of the main contributors to higher customer lifetime value.

Loyalty Programs Bring Structure + Trackability to Customer Complaints & LTV.

Here's the key to standardizing retention + increased LTV - offer a loyalty program where customers are rewarded with points or stamps on each visit that they can later redeem for free items. Take it a step further, and handle complaints by awarding customers loyalty points by bringing trackability to the process and accountability to managers.


It doesn't stop there, a loyalty program gets customers to be invested in your brand - it's a form of currency that they can exchange later on - so frequent visits end up being the norm.

If someone forgets about your brand, you now have their permission + information to re-target them with specials, promotions, and new announcements triggering more visits.

Last but not least, handling complaints that are a fact of life becomes a breeze - if you do this right you have the ability to turn an upset customer into an evangelist.