idine - how it works
 

I just talked to a restaurant owner who recently signed up with idine. Here is what I was told:

idine gives the restaurant a check for $10,000 and receives $20,000 in food revenue back. The total ticket less tip and taxes goes to idine until the debt is repaid.

This particular owner had no idea that miles can be awarded in lieu of the 20% discount.

Once the credit is repaid, the restaurant has the choice of another credit or dropping out of the program. This explains why so many drop in and out so quickly.

The $10,000/$20,000 deal is the lowest a place can sign up for.

That is an interesting arrangment - 10K up front for 20K back.

However, I was concerned that the restaurant owner in question had no idea about awarding miles. If so, the does Rewards Network (unilaterally) make the 5/7/10/12/20-miles decision? Seems unlikely.

My guess is that the owner actually chooses some sort of payback plan that translates into these options.

How could the owner choose a payback plan? Sounds like he (and thus iDine) just have to wait until iDine particpants come in and pay with a linked CC.

Another thought - if the restaurant gives up $20K of revenue, and the diners earn a 20% cut of that = $4K (assuming 20% cash back or 2 cpm and 10 miles/$), iDine is getting 60% interest on the loan ($6K/$10K). Pretty good if they get paid back in a year to 18 months - those are VC type returns. OTOH if it takes 3 years not so great for iDine.

Some random thoughts on the topic
 

Well, a payback plan is set by choosing blackout dates, for example. If Saturdays don't count, it will take longer to pay back the loan. (I should say the probability increases that the life of the loan is lengthened). I don't know any of this for sure, but will query the owner for more info when I see him again.

I have a feeling that depending on past revenue of the restaurant, idine determines which options/blackouts the owner is allowed to set. The higher the average revenue, the quicker the payback of the loan. A high revenue restaurant must be allowed to set blackout dates as it is otherwise a crappy deal for the restaurant because the loan is paid off too fast.

Another option is to not take the entire guest check as payback but just half to lengthen the time of the loan. In this case, the guest kickback is only 10% or 5 miles. However, lessening the kickback results in a lesser likelihood of people choosing this restaurant for miles.

I assume one of the idine selling points to the owner is an increased, new customer base that otherwise would not have spent money there. So basically they tell the restaurant that the loan is paid by new customers or incremental revenue that otherwise would have not existed. The restaurant owner gets cash from the loan and more exposure, idine gets a 60% return on their money. How fast the loan is paid back is determined by blackout dates, how much is taken out of the check which in turn determines the bonus the guest earns.

Ah-ha.. interesting!
 

Good and very interesting information. Any way you can get a copy of the contract and post it? I suppose a google search for idine will lend some results of how the program works in detail.

This definately explains the drop-in and drop-out rate of the restaurants in my town. It ALSO explains why many of the participating ones are new ventures, quickly go out of business, or just never sign back up as noted above.

Thanks for the post.