Loyalty systems for restaurants is an old, well-trodden topic that hasn’t seen much innovation. Although the market is huge! In the US alone, there are 750,000 restaurants and 163 million people visiting them at least once a week. However, the topic of loyalty platforms for restaurants might unexpectedly take off right now — but only with such an approach as this startup has.
Essence of the Project
Blackbird is a platform that enables restaurants to develop their loyalty systems for regular visitors.
The startup installs special devices (NFC-readers) to which visitors touch their phones upon every visit to the restaurant. These devices can be mounted at the entrance or under the table, in which case they react to a user as soon as he simply places his phone on the table. A user only needs to register with Blackbird once, after which the devices installed in any of the restaurants will recognize them.
Each restaurant creates its unique loyalty system on the platform with various levels (bronze, silver, gold, platinum, diamond) and corresponding perks and bonuses – which can be discounts, complimentary cocktails, or dishes on every visit or a specific occasion. The tracking of visits is done by Blackbird devices, and the platform automatically assigns levels based on the rules set by the restaurants.
The devices integrate with the restaurant management system and automatically inform the staff about the arrival of a guest from the Blackbird loyalty system. For additional interactions between the guest and the restaurant, the Blackbird application may be needed, where the count of restaurant visits and the levels earned in each of them are maintained.
As the founders say, the startup earns “a few cents on every visit to a partner restaurant” – this amount might depend on the order’s cost or the frequency of visits to a specific restaurant.
For each visit, the visitor also receives a certain number of points from Blackbird itself, the number of these points may accrue simply for the visit and/or depend on the order’s cost. With the accumulated points, a Blackbird user can pay in any partner restaurant of the startup.
From a technical perspective, the points are cryptocurrency tokens that accumulate in a crypto wallet installed on the user’s phone along with the Blackbird application. The choice of such a solution can only be explained by the founders’ desire to latch onto the Web3 theme because there is no strict necessity to use the cryptocurrency mechanism here.
The startup has just recently announced the completion of its pilot program of implementation and testing of its platform in 20 New York restaurants.
On this occasion, Blackbird raised a new $24 million in investments from a16z to expand its presence in New York and venture into San Francisco and Los Angeles. A year ago, the startup attracted its first $11 million in investments to launch the pilot program.
What’s interesting?
Loyalty systems for restaurants are an old and well-worn topic, and no major breakthroughs have been seen in this area. Indeed, does anyone seriously choose a cafe just because they get their tenth cup of coffee for free? 😉
More likely, it’s the other way around. It might be a pleasant bonus for those who already frequent that cafe for some other reasons. But what are those reasons?
The founders of Blackbird have come up with a “unified theory of restaurants,” claiming that all restaurants essentially fall into two categories: “clubs” and “eateries.”
In “eateries,” people come to eat quickly and leave. In clubs, they come for the ambiance, a combination of decor, comfort, the caliber of other patrons, and the staff who knows you by name, directs you to “your” table, and whom you can ask to “bring me the usual.”
A significant implication of this theory is that a restaurant cannot be both an eatery and a club. It has to choose.
Most loyalty systems are designed for eateries because they focus solely on dishes and their prices. And as everyone already knows, this approach doesn’t work very well.
Blackbird aims to create a loyalty system for restaurants that want to become “clubs” for their visitors, where “everyone knows their name.” It’s this kind of relationship that will bring people back time and again.
“Hospitality is not a transactional business,” the startup claims. “Restaurants solely focused on food miss the essence of hospitality. Living in a modern city feels like living in a hostile environment. A restaurant where you’re recognized and occasionally pampered becomes a sanctuary of tranquility and friendliness, a place you’ll want to revisit time and again.”
It does ring true. For instance, there are over a dozen cafes within a 3-5 minute walk from my current home. Where do I go every morning for coffee and to write these reviews? The one that offers me a discount or a free tenth coffee?
Or the one with a comfy sofa, my favorite table, where they greet me by name, where the owner stops by to say hi, where I don’t need to explain for the tenth time how I want my coffee, where they start preparing my coffee as soon as they see me, and where they automatically bring me a bottle of sparkling water without asking, just because I ordered it once?
Can all waiters and bartenders instantly remember every new visitor to turn them into regulars with personalized service? Can every new waiter and bartender get acquainted with all regular patrons and learn their habits?
It might happen somewhere, but it’s more the exception than the rule, and certainly not from the get-go. For it to become the norm and work efficiently, there needs to be a platform that helps staff remember, remind, get updated, and pamper consistently. That’s precisely what Blackbird aims to do.
What’s next?
35 million dollars in investments for a startup that has implemented its loyalty platform in just 20 restaurants? From a formal perspective, it seems disproportionate. So, what are the investors banking on?
Firstly, restaurants and their visitors represent a massive market.
There are about 750,000 restaurants in the US.
163 million Americans, or 64% of the adult population, visit restaurants at least once a week, spending a total of 602 billion dollars annually.
If Blackbird, through its novel approach, manages to tap into a significant number of these 750,000 restaurants and 163 million visitors, even earning “a few cents on each visit,” the startup stands to make a substantial revenue.
Secondly, the rise in popularity of online orders has been undermining the traditional restaurant market. On one side, dark kitchens, which operate delivery-only, have been crowding out traditional restaurants online. On the other hand, when working with delivery, restaurants are forced to give away about 30% of their money to food delivery service aggregators. Furthermore, people have started visiting restaurants less frequently since they can order food online and eat at home.
If we look at it purely from an “eating” perspective, ordering food online is simpler and even cheaper. Therefore, for traditional restaurants, competing with online deliveries when positioned as “eateries” is challenging.
The only conceptually feasible way for them to combat this trend is to transform into “clubs,” places people would want to visit not just to eat but for a special experience that can’t be delivered online 😉
Blackbird supports precisely this approach. As a result, it could potentially cater to that “significant number of restaurants and their visitors.”
Thus, we see that today’s startup brings a new solution to an old problem in a vast market. Most importantly, it does so at a very opportune moment when traditional restaurants are forced to combat the recently popularized trend of online food delivery. This positions Blackbird at the forefront of an anti-trend – which, paradoxically, is a trend for offline restaurants that have no intention of disappearing altogether 😉
All of this makes Blackbird a timely and intriguing model for inspiration and emulation, which is certainly worth experimenting with.
About the company:
Blackbird Website: blackbird.xyz
Latest funding round: $24M, 04.10.2023
Total investments: $35M, over 2 rounds.