The prepaid Jack in the Box gift card.

by Bruce Horovitz

After watching the rest of the retail world get fat on the popularity of reloadable gift cards, the restaurant industry is jumping into the fray just in time for the holidays. Everyone from McDonald's to Dunkin' Donuts to Jack in the Box has added, or soon plans to add, "stored value" cards you can reload with more bucks.

"It's become the greens fee for being a serious player in the restaurant business" says John Glass, analyst at CIBC World Markets. And why not? Gift card sales at all retailers are expected to top $17.3 billion this year, reports the National Retail Federation. Gift cards will be the top holiday gift this year; even surpassing apparel, reports Deloitte & Touche.

Restaurants were slow to nibble. But the success of the Starbucks Card—it accounted for 11% of Starbucks' North American revenue in fiscal 2004—changed everything. In a new, likely to be lucrative holiday twist, Starbucks started a program that lets parents reload kids' Starbucks cards monthly, tied to a bank card. With Starbucks as a major driver, restaurant gift card sales nationally jumped 30% from 2002 to 2004, says Tara Weiner, national managing partner of consumer industries at Deloitte & Touche.

Among the latest on board

  • McDonald's. It's testing stored value cards in three markets: Bakersfield, Calif., Kansas City, Mo., and western Washington. Next year, they go national, spokesman Bill Whitman says.
  • Dunkin' Donuts. The chain is rolling out reloadable cards in 1,000 stores in the Northeast. Executives say they like them because stored value keeps folks coming. That's one reason for their new slogan: Bring yourself back. Many consumers who come to buy the cards as gifts buy additional cards for themselves, says John Gilbert, vice president of marketing.
  • Panera Bread. Panera Card sales are up 200% so far this year vs. 2003, when they were launched, spokeswoman Julie Somers says.
  • Jack in the Box. Reloadable gift cards, with a picture of Jack, are new this month at the 2,000-restaurant chain. Since Jack has icon status, the card also has become a collectible "for our loyal Jack followers," says Susan Pacheco, marketing services manager.
  • Chili's. The chain's gift cards are sold at retail outlets including Safeway, CVS and Walgreens, spokesman Chris Barnes says.
  • Back Yard Burgers. The chain just introduced stored value cards. President Michael Myers says he likes them because "64% of those who get a gift card will spend above the amount on the card."
  • Smoothie King. The fruit shake chain with 364 stores in 32 states replaced gift certificates with cards and is seeing a fourfold increase in gift sales, says Rocky Gettys, operations director.

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