Restaurant reward members are becoming greater contributors to in-store traffic and sales, as digital technology in the fast-casual space grows.
In its second-quarter earnings call in the beginning of April, executives from Irvine-based Kura Sushi USA (Nasdaq: KRUS) reported a large uptick in reward membership over the past five months. Around 200,000 people joined the sushi chain’s rewards program since last November, bringing the total number to 700,000.
Newport Beach’s Chipotle Mexican Grill Inc. (NYSE: CMG) counts around 30 million reward members while others like El Pollo Loco Holdings Inc. (Nasdaq: LOCO) in Costa Mesa total around 3.2 million.
Kura Sushi Chief Executive Hajime Uba partly attributed this jump to reallocating some of its digital advertising last year—the revolving sushi restaurant chain began target marketing with Google in December.
This growth aligns with a 17.4% increase in the chain’s same-store sales during the second quarter, which also saw a 7.4% rise in foot traffic.
Kura Sushi reported total sales of $44 million for the quarter, representing 40% revenue growth compared to the prior year.
“The guests are eating more per plate,” Uba said, with VP of Investor Relations and Business Development Benjamin Porten translating. “Our average check has grown to about $28.”
He told analysts that a quarter of restaurant sales are accomplished through the rewards program and pointed out higher consumption among members.
The chain’s reward members tend to visit about six times as frequently as a non-member, according to Kura Sushi metrics. Average checks among members are about 20% higher because of the coupon and giveaway points, Uba added.
The 45-store chain, which went public in 2021 at a share price of $14, counts a valuation around $740 million. Shares were trading around $65 as of last week.
Waiting to be Seated
Kura Sushi has been building upon this momentum through another digital addition to the guest experience.
A new app called Waitlist is the immediate priority for the tech-forward sushi concept, according to Uba. Currently, there is a waiting list feature only through the restaurant company’s mobile app.
The Kura Sushi team is revising Waitlist’s algorithm to improve the current wait time estimate with a focus on closing hours. Kura Sushi is testing Waitlist in five stores at the moment, and expects a restaurant-wide release by the end of the fiscal year.
The CEO shared a tangible improvement of the algorithm’s performance, citing that upward of 85% of wait times have been accurately estimated within five minutes.
“By having that more accurate wait time, that unlocks greater operational efficiencies for that last hour” of the day, or even weekday lunches, Uba said.
Uba told analysts that the incoming app has the potential to be the company’s biggest implementation of the 2023 fiscal year. The sushi chain’s most notable rollout of 2022 was its robot server, the Kura-Bot.
The new app may also drive additional traffic during off-peak hours, Uba added.
Another highly anticipated rollout for 2023, Uba said, was an upcoming brand partnership with DC Comics for the summer, which is usually the best quarter for Kura Sushi.
This will be its first campaign with a major mainstream U.S. intellectual property.
“We think it’s going to get us in front of a new and different audience from what the past collaborations have done,” Uba said.
