Free Food for Personal Data Is a Trade Some Diners Won't Make

(Bloomberg) -- When Starbucks baristas in Calgary, Canada, call across the café to let “Jonah” know his iced coffee with almond milk and caramel syrup is ready, it’s Rhonda O’Blenes who heads to the counter to collect the drink.

That’s because O’Blenes, a 46-year-old social worker who doesn’t even know a Jonah, uses a fake name in her Starbucks Corp. rewards app. Her kids’ names used for drink orders are aliases too, and the address provided to Starbucks is a condensed version of her real one. For as loyal as she is to the coffee giant, O’Blenes wants to give her app as little real information about her as possible.

She’s not alone. As coffee chains and restaurants increasingly entice customers to download loyalty apps and share information in exchange for customized service plus perks and rewards, some consumers may be starting to wonder if the treasure troves of personal data they’re trading for lattes are worth the risk.

“I wouldn’t be surprised if we start to see more privacy restrictions placed on data in the U.S. similar to what they have in Europe, where people have a lot more control over their personal data,” said Jennifer Bartashus, Bloomberg Intelligence restaurant and retail analyst. “It could have some ramifications for the restaurant industry.”

Surging Sign-Ups

The use of online ordering and in-app loyalty programs has been expanding rapidly as diners increasingly expect ease and customization at the pick-up counter. A survey released by The Manifest in May found half of smartphone owners regularly use branded restaurant loyalty apps.

Membership in Starbucks’s loyalty rewards program grew 12 percent over the last year to almost 15 million, executives said on their second-quarter call, while Dunkin’ Brands Group Inc.’s Perks program signed up an additional 500,000 users during the first three months of the year to bring its total to nearly 8.5 million.

Spokesmen for Starbucks, Dunkin’ and Domino’s Pizza did not return requests for comment.

But while food-related app use had been growing at the start of the year, it’s possible some consumers pulled back after news broke in March of data analysis firm Cambridge Analytica misusing Facebook Inc. users’ data. Although Bartashus said it’s too soon to tell whether that hit growth numbers in the latest quarter or if it will shift consumer attitudes long term, researcher NPD Group found that concern for security is a chief reason those without rewards accounts don’t sign up.

“Retailers and restaurants are not traditionally tech companies and so the question is do they have the appropriate levels of safeguards and insurance in the event that there are data breaches of some sort,” Bartashus said.

Stronger Systems

Some restaurants have indicated they’re bolstering resources to ensure customer information is secure in their ordering and rewards systems, with everyone from national fast-food chains to three-star French bistros upgrading their sales, inventory and other processes to abate their concern for data security. Yet the long-time focus has been more on better securing transaction data, rather than personal user data.

“The volume of data and the sensitivity of the data that’s just involved in any credit transaction -- there’s so much greater potential for harm from that, for the customer and for the brand,” said Don Fox, chief executive officer of sandwich chain Firehouse Subs. Brands will go to “different lengths” to invest in more advanced technology depending on the cost and what customers expect, he said.

Related: Scared by Facebook? Wait Till Millennials Are Selling Their Data

Privacy fears aside, not every consumer or restaurant is changing their tune. Catherine Squillace of West Deptford, New Jersey, who uses the Domino’s app, said none of the recent news over data privacy concerns has changed her view of sharing her personal information.

“I’m kind of an open book. I’ve yet to come across something that I wasn’t willing to answer on an app,” Squillace, 26, said in an email. “The only thing that really changes how often I use restaurant apps is if I’m on a diet or not.”

©2018 Bloomberg L.P.

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