Rewards Network Guilt?
 

I've recently been using the Rewards Network, and have noticed that many of the restaurants in it conform to some basic criteria:

1. Smaller mom-and-pop places
2. Struggling chain restaurants (franchises?)
3. Newest of the new in out of the way places
4. Offbeat places that seem out of place

I have to say that many of these things appeal to me. I always try to frequent places owned and operated by individuals instead of mega corporations. And I love offbeat and unusual places - that's one of my main tactics to make business travel bearable!

But I tend to feel a wee bit guilty about using RN at these places. I know about the company's business model, that they're siphoning off a huge percentage of my check and possibly accelerating a usurious loan. I know that they target these smaller places for the same reason payday loan stores cater to a certain clientele: They really need the money.

I'm glad to try new places, and have gone out of my way to recommend them to non-RN folks, hopefully providing serious help to the owners. In fact, I think my co-worker and I probably singlehandedly doubled the business at a sushi place in Dallas because of my RN-initiated visit! Plus, I always tip well...

So how about you - do you feel guilty about using RN? Do you feel like you're helping a big-bad company (RN) to take advantage of the little guy?

No, I don't feel guilty about it; moreover, as tips earn miles, I tend to tip slightly higher.

That's one thing you should not stress about... These places would have got $0 in revenue and $0 in profit as I did not know they existed without RN. As is, they receive in some cases $500 dollars in revenue per dine at about 80% of that going to them. If you assume that most restaurants sell product at 100% markup, I would say that they generated (500/2*.8) or $200 in profit for my dine.

If you are only using RN as your only form of marketing, then running a restaurant may not be your best bet.

Which is great logic if you only go to the restaurant because it's on RN, but in my case, I only joined RN because it had a couple restaurants that I was already eating at regularly.

Do I feel guilty that I'm diverting a decent portion of the profits from my neighborhood Thai joint to gain a much smaller benefit for myself? A little, in the same way that I feel guilty for ringing up a $1 greeting card at my local book store on my card just to get the extra reward points, when I know it's costing them merchant fees.

But then, they have a choice: if they wanted to give me a discount for paying with cash, I'd be happy to do that instead, and cut out the RN/Visa middleman. And if the studies I've seen are correct, the stores and restaurants also benefiting from the fact that people, on average, spend more when paying with plastic than when paying with paper. So I figure the extra money that's being spent must cancel out the fees. . .or they'd start encouraging cash sales.

I agree with this statement also for American Express. If a store does not take it, I inform the manager that this will be both my first and last visit if they do not accept AMEX.

Only at one restaurant. The owner greats us every time we come. We were regulars before they joined I-dine. I also use a coupon at www.liketosave.com (a great web site for discounts) that gives us an additional 20% off, so the combination of the 2 costs him some profit.

Did you feel at all guilty about charging your meals before joining iDine? .. because AFAIK they take a cut of every cc transaction -- member or not.

/.

When I eat out, I'll choose a restaurant that offers RN points. I look at it as advertising expense, no more, no less. Its better than advertising, since RN only profits if the restaurant profits.
Plus, we're in a recession (well, maybe, kinda, sorta, or maybe not:rolleyes:). People who are looking for a reason to justify the cost can use RN. It creates demand where before there was none.
Its a good thing.

I can think of 2 occasions in the last 6 months where I picked an i-dine restaurant for a group dinner which I was going to expense (bills were around $350 and $500 each), and someone else (who I'm sure knew nothing about i-dine) scooped up the bill! So those merchants definitely benefited from being signed up with i-dine!

This is exactly what I was trying to get at. These are struggling mom and pop places, and RN takes a huge cut of the gross paid by me. Much much much more than the 3% to 5% added by MC or AMEX.

There's also the other idea - that these places are struggling to keep the doors open. I sure hope they're making some net off my dines...

Even though I wouldn't have gone there if not for RN, if it's a loss each time I dine then they would be better off without me!

If the marginal costs of the meal (food, water, power) are more than the Idine cut, the eatery has big problems. And, it has to be rare that an Idine place is so busy that Idiners are blocking other customers. As for me, I just order Holy Water with my meal…problem solved.

RN's cut
 

According to the owner of my favorite restaurant, here's the deal he got from RN:
He needed loans to start up. Banks, friends, relatives provided most of what he needed, but not all.
RN fronted him money in several increments, totaling about $100,000.
He could either:
- give RN 100% of the money received from RN customers, less a calculated amount for tip and tax, until he'd paid 135% of the "loaned" amount, or
- give RN 25% of the total money received from RN customers, until he'd paid 200% of the "loaned" amount.

He chose the first option, and now that he's paid RN off, he's out of the program.
Did he think it was a bad deal? Hardly. He figured all the "loan" cost him was the wholesale price of the non-perishable items served. And he gained new customers. If he needs fast cash in the future, RN is the first place he'll go.

So no, I don't feel guilty at all.

Update: the restaurant described above is back in the program. It's a successful, high-end place. So the owner must find the RN program useful, or he would not have re-upped.

Ok, so if you don't feel bad about using RN at a local place, what about this scenario:

1. The restaurant is a member of rewards network.
2. It is also a member of restaurant.com
3. It is also a member of entertainment.com
4. It also sends out coupons for free drinks and dessert monthly to customers like me

The sight of me and my family no doubt causes eye-rolling as we pull up in the parking lot, but, hey, we have to eat.

p.s. I am trying to get them to join opentable.com so I can get points on my reservation....

Surprised this place you describe is still in business.
I can't help but think there might be a little something "extra" in your food if the owner happens to be spiteful jerk.

When I go to that (Mexican) restaurant, I see it is generally busy, especially at Happy Hour or Sunday brunch, which I don't bother with. I may be deluded, but for some reason, I don't think much of their business comes from people looking for points, although there is no way of knowing that. (I don't know what a Flyertalk points-crazed individual "type" looks like, but, I am taking a wild guess that that particular North Hollywood clientele is more interested in the cerveza than elite frequent flyer status.)

However,I do think people go there with the entertainment card, which I also use. But if the management cared at all, they should punch the back of my card so it becomes a single use thing, which they don't do. So, each time I go, I either use the entertainment card for a free meal (plus pay on a points credit card) or I might use a restaurant. com certificate, which I pay $4 for, and get $25 off the meal. I do have to spend $40 - 50 on food only when I use the certificate, so I wait for a family dinner for that one.

And I noticed those coupons for a free drink or a free dessert haven't been coming in lately--wonder why....