Photo by Travis Anderson
David Kristal took his foodservice business in a creative new direction.
Food for Change
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David Kristal built St. Paul–based Augeo Affinity Marketing on the flickering embers of the restaurant business his family founded in 1956. That business had been built around the Embers brand. But eight years ago, while trying to turn that business around by co-branding (sharing the restaurant’s name) with franchisees, Kristal realized that independent family-style restaurant operators needed to have cost-saving opportunities to compete against larger chains.
So Kristal founded FoodStreet Plus, a bulk-purchasing organization for small and midsize restaurant operations. He approached Maryland-based U.S. Foodservice, one of the largest food service distributors in the nation, with a set of services and resources designed to help its independent restaurant customers compete more effectively. U.S. Foodservice piloted the program and ultimately decided to roll it out across the country.
Simultaneously, Kristal formed partnerships with a handful of investors, including Lyle Berman, cofounder of Grand Casinos (now Minnetonka-based Lakes Entertainment). As Kristal’s new business started taking off, Embers Restaurants’ focus changed. “Today, Embers is a licensing organization,” he says. Embers now provides business resources to Embers licensees, which are under less strict guidelines than franchisees were. (Embers, which is a separate business from Augeo Affinity Marketing, is owned primarily by the Kristal family and an outside investor.)
Kristal gradually shifted his business’s focus to helping large companies like U. S. Foodservice provide discount programs to their customers and employees. “We saw a need among small businesses to find more effective ways to compete,” he says. “These small businesses happened to be customers of our clients.” The demand for these programs quickly outstripped that for food-buying services, so Kristal renamed the company Augeo Affinity Marketing in 2003 and positioned it as a provider of programs for building customer and employee loyalty.
Augeo has 110 employees and close to $20 million in revenues. It has additional offices in Phoenix, New York City, and Long Island as well as a satellite office in Boston. The company’s board of directors is anchored by Juan Sabater, a former managing director in Goldman Sachs’s Investment Banking division. “Juan has been instrumental in the recent growth of the business,” Kristal says.
Augeo offers three customizable groups of programs:
• Reward programs. One example of these programs is Nascar RacePoints, a licensing agreement between Augeo and Nascar. For instance, there’s the Nascar RacePoints Visa credit card for Bank of America. As customers use the card, they earn points that can be redeemed for Nascar merchandise and other rewards, such as meeting Nascar drivers or having special access to tracks on race days.
• Coalition partner networks, such as the programs that Augeo manages for Home Depot. For example, Home Depot Business Toolbox is a set of resources that support the everyday needs of contractors, from dumpster rental to health and business insurance. Augeo also offers the Home Depot Insurance Center, which helps retail customers purchase or upgrade their homeowner’s insurance.
• Employee benefits solutions. Augeo Benefits helps employees who can’t obtain health coverage through their employer to find other means of insurance.
Augeo has doubled its revenues every year since 2005. “We want to acquire companies that are complementary to our existing core platforms, both on the coalition side and on the points and rewards side,” Kristal says. The word “augeo,” he explains, is Latin for augment. “That’s what we do,” Kristal adds. “We augment relationships between distinctive companies and their constituents.”