A Social Media Tool That Restaurants Are Hungry For

Courtesy of Foursquare

Location, location, location, the old business mantra went. Location still electrifies restaurateurs—but today's obsession is driven in part by smartphones, GPS, and specifically an explosive young startup known as Foursquare that has attracted 3 million users in its first two years.

In May, close to 100 restaurant owners packed into a Chicago conference room to learn how this social application functions, and, more importantly, how it can help their businesses. At the panel, hosted by the National Restaurant Association, the restaurateurs learned about geolocation—about how people now use Foursquare on their iPhones and BlackBerrys to "check in" to business locations on a virtual map when they visit them in real life. They can interact with nearby friends, rate the spot, and, for better or worse, broadcast their peripatetic ways in real time. Often people sync these Foursquare updates (John is at Chipotle, for instance) with their Facebook and Twitter accounts. Businesses, in turn, can reward visitors with deals, like free bread sticks for frequent Pizza Hut customers. Although several applications use geolocation, Foursquare dominates the market, so much so that venture capital firm Andreessen Horowitz invested $20 million in the startup this summer. Partner Marc Andreesen is the legendary founder of Internet browser Netscape and was an early investor in heavyweights Twitter, Digg, and Skype.

Any business can market itself with Foursquare, but restaurants are especially well-suited to capitalizing on it. National Restaurant Association research shows that 52 percent of consumers say they prefer restaurants that offer loyalty and rewards programs, "essentially what Foursquare promotions are" according to media relations director Annika Stensson. Stennson emphasizes that unlike when people buy other sorts of products, when they dine out they seek not only a great meal but also an experience. Foursquare offers customers that extra sense of playful interaction. People also tend to become regulars at restaurants more often than at other sorts of businesses—something Foursquare can reward with special discounts for a location's "mayor," the most frequent visitor. Furthermore, Foursquare can help the restaurants themselves. In April, Foursquare began offering businesses free analytics tools—offering valuable insights like data about customers' genders and when they check in, all without any fees.

Restaurants responded in force to these new opportunities, and Foursquare has attracted big-time partners. In April, McDonald's hosted a Foursquare promotion that yielded a 33 percent increase in check-ins. In May, Starbucks began giving mayors a $1 frappuccino discount. And in mid-July, Chili's partnered with Foursquare to offer free chips and salsa for a simple location check-in. But not only national chains recognize Foursquare's value. Even the Zagat Survey integrated Foursquare with its own smartphone application in August, and in Washington, D.C., for example, Foursquare specials include a 19-percent tab discount for every third visit to 19th Bar and free wine for the mayor of Zola Wine & Kitchen. Discounts can be creative—not just for mayors or check-ins. A business can reward a person for a second visit or a fifth or create incentives using Foursquare's campy, addictive features, like the medley of badges awarded for different roaming behavior (the Barista badge for checking into five different Starbucks, for example). One compelling motivation for restaurants to use the service, explains Rob Birgfeld, former director of online services for the National Restaurant Association, is control—they're on Foursquare's map whether they want to be or not. Offering Foursquare specials and personal touches gives restaurateurs more power. Specials also pop up on the smartphones of any Foursquare users in a participating restaurant's vicinity, helping to bring in customers.

Joshua Kaufman/flickr

One restaurant that has experimented with Foursquare this past year is sustainability-focused D.C. frozen yogurt and salad chain Sweetgreen, which tries to cater to a more technology-fluent demographic. Since February, more than a 1,500 people have used smartphones to report visiting its six locations. Sweetgreen also ensures its employees understand how Foursquare works, so they're not confused when customers try to cash in on discounts (something other restaurants haven't always done as well). One man has checked into the Dupont Circle Sweetgreen alone 43 times. As location mayor, he receives a free frozen yogurt with his orders.

Phil Moldavski, marketing director for Sweetgreen, cites the loyalty of "incredibly passionate, cult-like people" as being critical to any business. Foursquare simply helps that cult-like passion along. But he adds that "it's a slow build-up on the Foursquare front": building communities around brands takes months or years. As the National Restaurant Association panel's takeaway points emphasized, social media like Foursquare shouldn't "be considered a 'quick fix'" so much as "a way to reach a large number of potential customers over time." Social media can offer fantastic returns for relatively little investment, Moldavski says, provided it's done well.

Despite restaurateurs' enthusiasm, there is at least one possible downside to Foursquare: Many people still vocally object to broadcasting their locations. Foursquare can seem creepy, a harbinger of a world without privacy. What might be a restaurant marketer's dream could also be, as The Guardian writes, "a stalker's dream" that poses risks and could help aspiring thieves. Fair charges, Birgfeld acknowledges, but he suspects hype, pointing to other GPS-based tools—privacy norms had to adjust with Twitter and Facebook, too. (In August, Facebook announced its own geolocation feature, Facebook Places, allowing its 500 million users to broadcast their locations online.)

Foursquare seeks to move past mere check-ins, recently rolling out new features such as Tips and To-Dos with Foursquare 2.0. But at the end of the day, how much does Foursquare actually help businesses? That largely depends on individual strategies. Yet restaurateur enthusiasm and the numbers are promising. Explaining Andreesen Horowitz's decision to invest, Ben Horowitz noted the more than 200 million people around the world with smartphones and a Foursquare growth rate that is faster than Twitter's was at a similar stage. Birgfeld believes Foursquare's recent growth only scratches the surface of geolocation. Foursquare has remained an urban game, but he sees suburban potential. The big challenge, Birgfeld says, will be for businesses to find new ways to stay meaningful for customers.

"Foursqure's been smart about having a personality," Birgfeld says, alluding to the application's game-like nature, "but what will businesses do to make this better? Check-ins will wear off. What will resonate? A coupon doesn't matter if it's not worth much."