Ron Blake, CEO of Rewards Network tells us about loyalty programs and access to capital.

Rewards Network is a market leader in one of the alternative capital-raising markets. They tie national consumer rewards programs for companies such as American Airlines, Upromise and Delta to a cash advance system that allows a restaurateur to raise capital against future sales to the rewards programs’ members.

At first glance, it seems to be a good way of raising money without mortgaging your future too much. Rewards Network basically doesn’t get paid unless you have the members of their consumer rewards programs dining in your restaurant. They appear to be willing to literally put their money where their mouth is and share in the risk with you.

We sat down with Ron Blake, CEO of Rewards Network and asked him to explain some of the company’s programs and costs.

Q Ron, basically, what does your company do for restaurateurs?

We provide marketing, access to capital, business intelligence and loyalty programs principally to the sole proprietor, independent restaurant.

Q Do you work with any kind of restaurant, or do you target a specific type?

I think the spot where we fit the needs of the restaurant owner the most, is the independent or small chain. They’re ones who come to work at 8 in the morning and leave at 2 a.m. the next day. They’re the cook, the chef, the payroll office. They serve, they work the bar, and they also wait on customers.

Q The market is pretty saturated with rewards-style programs. How do you differentiate your product?

Well, I think ours is one of the easiest to use, and doesn’t require a consumer to do anything, other than register their card with us. By having a credit card registered with Rewards Network, when you dine in one of our restaurants, you’re going to receive your reward, whether that’s cash back, whether that’s airline miles or a contribution to a 529 college savings account.

Q Can you give us a sample of the type of partner companies that use the Rewards Network for their loyalty programs?

Well, I guess I’d probably use the one that the restaurateurs certainly know the most about, which is Upromise; the 529 college savings program that uses a wide spectrum of vendors to generate savings and contributions into college savings accounts.

When you dine at one of our restaurants that participates in Upromise, and you’ve signed up for that program, you spend $100.00 at one of the restaurants, you’ll get anywhere from $8.00 to $15.00 credited back to your Upromise savings account.

Q Is there anything special about the diners that you’re driving into the participating restaurants?

They range from the traveler, who is flying a lot on the frequent flyer programs, to the person who’s very focused on helping to save for college, to the person who’s just kinda cheap and likes to get cash back. That would be my category.

Q So what does a restaurateur have to do to get involved in the program? Is it a complex process?

No, not really, it depends upon which program they enter. First off, we do two different things. We can do a marketing, business intelligence and loyalty program for the restaurateur, or we can do one that includes access to capital.

So why don’t I start out with a comprehensive program which is going to provide marketing access to capital, business intelligence, and loyalty. We sit down with a restaurateur. We’re going to understand their needs, where they see their business going, and how they’d like to grow it, see whether or not there is an interest in selling us future receivables or dining credits, as we call them. We negotiate a price with them, and we actually are the buyer, not the seller in this transaction, in that we buy future dining from the restaurateur. We give them a check for that in advance, and then we redeem those credits over time, as our members come in and dine.

After the merchant is signed up, there’s very little he needs to do. The program is all turnkey. We will build a website. We will post it. We will advertise his restaurant to our members, whether that be in the airline programs, or Upromise, across the spectrum. They will see their restaurant promoted in special e-mails and programs.

Q How complicated is it for the restaurateur to keep track of the activity associated with the program?

Well, I’d say the best news about this is that because we have access to our members’ information, we can tell the restaurateur how many times our members have dined there, whether they were new, and whether they were repeat diners because we survey our customers at the conclusion of their meals. One of the unique things about our program is that you actually have to have dined at one of our restaurants to have completed a survey.

Q That sounds like a good idea, the obvious question is, how much does the dining credits program cost the restaurateur?

Well, as I said at the beginning, it’s really not a cost to the restaurateur. It’s us buying the dining credits from him at a discount, and taking on the risk, then, to sell them.

Q Can you explain how you get paid for the marketing programs?

Well, when one of our members dines at the restaurant, because we know his credit card number, we will match that up, and then a day or so after they have dined there, we will debit the restaurateur’s checking account for a pre-agreed percentage of the cost of the diner’s check, that we will take, in return for redeeming our dining credits.

Q Understanding exactly how effective a program is can often be hard for the restaurant owner. Do you have any tools to help them keep track?

Well, I think the ones that we have available are very powerful. I don’t know any other form of advertising that can demonstrate to you the number of people that were involved, the frequency, what they spent, how often they come back, where they live, and also, give you a rating and member feedback. I think all of those are extremely powerful tools. In terms of other forms of promotion and advertising, I’m not sure I found one that can do all of this.

Q How do you see this market developing over the next few years?

Well, I continue to see lots of opportunity here. The restaurant industry is one that employs 12 to 14 million people, and continues to grow at five or six percent a year. The average American eats out six to eight times a week, and I don’t see that slowing down. I think that there’s going to continue to be opportunities here. I also think that as we evolve over time, more and more of the services will be value-added, in terms of business intelligence and information that will help the restaurateur better run their business.

Q Basically, you provide restaurateurs with capital, and then you put diners in their restaurants to pay for it.

That’s a great way of saying it. It’s win-win-win across the board, and I think it truly is one of the most attractive loyalty programs out there.

After our conversation with Ron, I felt that Rewards Network definitely has an interesting product set. Their concept of driving diners into a restaurant is innovative and clearly not the hands-off approach you get from many of the straight cash advance, high-interest, alternative lenders.

It is clear that any form of financing has an impact on your operations moving forward and as such should be carefully considered. Arrangements such as those offered by Rewards Network have an upside component and some genuine marketing benefits. What is also true is that you have to be able to afford to accept a reduction in net revenue from future credit card receipts and should seek guidance from a qualified financial professional before making any commitments.

About Rewards Network