The key to a successful restaurant loyalty program depends on understanding how it really works and what it can and cannot do.

The purpose of a restaurant loyalty program is to increase order frequency and spending from your most loyal customers. The first thing to realize is that unless you are a fast food franchise or other discount eatery, your most loyal customers return for your food, not your prices. Price driven customers will visit you only when they can get a deal. A loyalty program is not going to entice cheapskates away from low end eateries. Instead, it should make loyal customers feel special. This in turn will encourage them to come back more often and to spend more at your restaurant during each visit.

Who Are Your Most Loyal Customers?
Most restaurant owners believe that about 60% of their customers are frequent buyers, but an analysis of over a million credit card transactions show that about 15 percent of your customers purchase from you frequently. On the other hand, the small number of loyal customers account for over 33% of most restaurants’’ revenues. This small group is who your loyalty program should target. The goal is to encourage this small loyal following to come back more often and spend more money when they do.

How To Achieve it?
Your loyalty program needs to meet some specific, but basic conditions to achieve maximum efficiency. Luckily, Two professors, Xavier Dreze and Joseph Nunes of the Wharton School of Marketing have conducted extensive research on loyalty programs. Their findings are very instructive on how to structure a loyalty program.

One of Dreze’s and Nunes’ more significant findings shows that as people make progress towards a loyalty program goal, their efforts to achieve the goal increase. That is, the closer customers are to receiving their loyalty reward, the more frequently they purchase from the restaurant. This is a key driver behind loyalty programs.

PRACTICE TIP: It is critical that customers know their progress towards reaching the program goal. With an online loyalty program this is done automatically. Every time a customer signs in to their account, they see their loyalty program points. With paper or card based programs, they should see a punch card or some tangible evidence of their progress.

Dreze and Nunes also discovered that when progress is measured by points rather than total dollars spent, customers will try harder to reach the program goal.

PRACTICE TIP: Assign points to customer activities, such as dollars spent or visits within a month and measure the customer’s progress in points, not dollars.

Finally, Dreze and Nunes learned that customers are more likely to participate actively in the loyalty program if they are given a reason for doing so, even if it is as basic as “Thank you for utilizing our online ordering system. As our way of saying thank you, we invite you to take part in our VIP reward points program.”

PRACTICE TIP: Connect or tie membership in your loyalty program with some activity or behavior by the customer.

How to Reward
The biggest mistake a restaurant owner can make when selecting a loyalty reward is to offer some sort of discount. Remember, your most loyal customers are there for the food, so reward them with something tasty, imaginative and above all, edible. Loyal customers don’t care about discounts, they care about food. You have plenty of ways to deal with bargain hunters, but your loyalty program should not be one of them.

Ideally, you want to have a number of enticing and delectable rewards to please a variety of palates. Dreze and Nunes found that the value of the reward is not a primary factor. It is far more important that the reward be intrinsically desirable to the customer. Get creative with your rewards. For example, offer sample combos of some of your more popular entrees. Not only does this seem special to the customer, but may lead to future purchases of the item since it lets customers try before they buy.

PRACTICE TIP: Reward with food items, not discounts, and give your reward members choices on what they can redeem with their points.

BONUS PRACTICE TIP: Use your loyalty reward program to maximize your restaurant’s occupancy throughout the day and week. If Tuesdays are slow, consider awarding double points for Tuesday visits. If you are slow from 4-6, Mondays through Wednesdays, consider awarding double points then.

BONUS PRACTICE TIP #2: Make sure you get an email address from all your loyalty rewards members and add them to your email list for weekly or monthly specials, birthday offers, and other special events.

Putting It All Together
An effective restaurant loyalty program achieves its goal by:
• inviting each customer to participate
• associating membership in the loyalty program with some behavior of the customer
• providing a selection of dining rewards (not discounts) for the participants to choose from
• measuring the participant’s progress in points, not dollars, and
• keeping each participant advised of his or her progress towards award level.

If you are a restaurateur thinking about ways to increase sales, increasing marketing, making capital expenditures, or otherwise investing in your business and looking for a restaurant loan, try Advance Restaurant Finance, LLC (ARF). ARF has been making short term business loans to restaurants for almost a decade. Despite the economy, ARF never stopped making business loans to restaurants, and ARF makes restaurant loans up to $1,000,000 per location. If you are looking for a restaurant business loan, ARF is one of the first calls you should make.

ARF is a lender you can trust, and our team of experienced hospitality specialists provides a funding solution with no surprises, a quick and simple funding process, and professional and personal service.

Should your restaurant be on Facebook? Well, Facebook has over 400 million users, and it claims that 50% of its active users log in at least once per day. It’s a great way to promote your restaurant and its goings on and best of all, it’s free. So the question is really why you wouldn’t be on Facebook. To help get you started or to help you get the most out of your restaurant’s current Facebook page, we bring you 9 ways restaurants can use Facebook.

1. Create a Facebook Page
This one seems obvious. Creating a Facebook page is simple: Just sign up and fill out the basic information about your business. Click here to sign your restaurant up for its own business page. You can also designate yourself as a local restaurant under the “Local” option. Many smaller restaurants have abandoned their own website in favor of their Facebook page. Some restaurants have both and link them together.

2. Use Updates to Convert Fans to Your Marketing Goals
Posting simple status updates about your business — or really, anything you think is relevant — will be seen by users in their homepage news feeds. This is a great way to keep your “fans” updated with your goings on as well as to stay top of mind when your fans are thinking about dining out.

3. Interact with Your Fans as Much as Possible
When a customer approaches you in real life to tell you what they think of your business, you’ll listen. So why not on Facebook? You might hear some useful criticism, or some timely compliments. Also, when you respond, you’re more likely to get them to respond — this additional activity further increases the chance your fans’ friends will see and learn about you.

4. Create and promote events online and offline
Let people know about a special Mother’s Day brunch or a regular Friday Happy Hour by sending invitations and ask people to RSVP on Facebook. This can be a great way to increase viral marketing as information about Facebook Events travels through news feeds from your network of friends and family outwards to create a greater social media footprint.

5. Use Multimedia to Show Off your Food and Dining Experiences
Photos and videos say a lot about food, if not the overall style of your establishment. Make sure to let your fans see what you offer by posting your latest or most prized dishes. Also, photos and videos of events and happy hours can be great PR.

6. Integrate Your Page with Other Marketing Efforts
Are you also running some sort of contest or special on another site? Make sure your Facebook fans know about it. Integrate all your marketing channels. The more touch points you have with your customers and potential customers the better chance of success you have.

7. Use Existing Applications to Promote Your Story
Polls, quizzes and other types of applications are readily available within the admin section for page owners, and they just take a few clicks to install. Start off modestly, try a few, and see what works.

8. Make your Page engaging with applications
Show your restaurant’s great ratings by displaying the Zagat application or add a reservations widget through Open Table on your main page; display a video of the chefs making the house’s special; allow users to click through an interactive menu. The possibilities are endless.

9. Create an App Just for Facebook Fans
A little more advanced and this is for restaurants with larger marketing budgets, but it’s worth exploring whether or not an app would make sense for your users.

If you are a restaurateur thinking about ways to increase sales, increasing marketing, making capital expenditures, or otherwise investing in your business and looking for a restaurant loan, try Advance Restaurant Finance, LLC (ARF). ARF has been making short term business loans to restaurants for almost a decade. Despite the economy, ARF never stopped making business loans to restaurants, and ARF makes restaurant loans up to $1,000,000 per location. If you are looking for a restaurant loan, ARF is one of the first calls you should make.

ARF is a lender you can trust, and our team of experienced hospitality specialists provides a funding solution with no surprises, a quick and simple funding process, and professional and personal service.

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Today, offers to get your “credit score” for free are everywhere. When you rely on this free credit score, however, you find it can vary significantly from the credit score used by a lender making a credit decision. Why? Because these scores are just estimates of your general credit worthiness, and not the credit score used by your lender to make credit decisions.

What is Your True Credit Score
When making a lending decision, lenders only use credit scores provided by a limited number of organizations. The most widely used score is your 3 digit FICO score calculated (and owned) by a company called Fair, Isaacs (the 5 categories that make up your FICO score are discussed later in this blog). The 3 national credit reporting agencies – Experian, TransUnion, and Equifax – in addition to providing your credit report will also provide a 3 digit credit score that each calculates using its own proprietary formula.

Virtually every lender in the US only uses your FICO score or one or more of the scores provided by the 3 national credit reporting agencies when making a credit decision. Lenders may make a credit card or auto loan decision based on a single credit score, while others such as mortgage lenders often will look at multiple scores. Not surprisingly, each of these scores – since they are calculated using different formulas – will vary somewhat. Also not surprisingly, since lenders pay for the right to access these scores, none of the organizations that own these scores will give them away for free…even to you.

What about the Free Scores
The free scores you see advertised are simply estimates of your general credit worthiness and are different from the credit scores lenders actually use, although they may appear similar. Consumer reporting agencies and other companies sometimes use an estimated score to illustrate a consumer’s general level of credit risk. How can you tell whether a score is estimated? Ask the company if the score is used by most lenders. If it’s not, it’s likely to be an estimated score.

Why do Fair, Issacs and the 3 national credit reporting companies charge you for their credit scores while other companies give you theirs for free? Basically, 2 reasons.

First, Fair, Issacs and the other companies charge for their credit scores because they can. Lenders find those scores useful in making credit decisions, so they will pay for them. On the other hand, lenders do not find the other estimated scores valuable and will not pay for them.

The other reason, of course, is because most, if not all of these other companies are actually trying to sell you credit monitoring services for anywhere from $8.95 to $14.95 per month. The “free credit score” is their hook to get you on their site and get your credit card information.

Don’t be fooled. If you want to see the credit score that lenders use to make credit decisions about you, go to one of the 4 companies that provide those scores and pay the $14.95 or so it costs to get it. For example, at www.myfico.com, you can get your FICO score for $14.95.

The 5 Parts of your FICO Score
These are the 5 general categories that make up your FICO score.

1. Your payment history is about 35% of your FICO score – if you pay your bills on time, this improves your score and, if not, it hurts your score.

2. How much you owe is about 30% of your FICO score – FICO scores are calculated in part based on the amounts you owe on all your accounts, the number of accounts with balances, and how much of your available credit you are using. The more you owe compared to your credit limit, the lower your score will be.

3. Length of your credit history is about 15% of your score – generally a longer credit history increases your score, but a short history can get a high score if it shows good credit management.

4. New credit is about 10% of your score – If you have recently applied for or opened new credit accounts, your credit score will weigh this fact against the rest of your credit history. If you need a loan, do your rate shopping within a focused period of time, such as 30 days, to avoid lowering your FICO score.

5. Other factors are about 10% of your score – Several minor factors also can influence your score. For example, having a mix of credit types on your credit report is normal for people with longer credit histories and can add slightly to their scores.

Want a Free Copy of your Credit File?
Go to www.annualcreditreport.com. This site, set up by the government, allows you to request a free credit report, once every 12 months from each of the 3 national consumer credit reporting companies: Equifax, Experian and TransUnion. But remember, you can get your credit file for free, but not your credit “score.” That will still cost you.

If you are a restaurateur who wants to increase sales, enhance marketing, make capital expenditures, or otherwise invest in your business and are looking for a restaurant loan, try Advance Restaurant Finance, LLC (ARF). ARF has been making short term business loans to restaurants for almost a decade. Despite the economy, ARF never stopped making business loans to restaurants, and ARF makes restaurant loans up to $1,000,000 per location. If you are looking for a restaurant loan, ARF is one the first call you should make. ARF is a lender you can trust, and our team of experienced hospitality specialists provides straightforward funding solutions with a streamlined funding process, professionally and personally.