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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended December 31, 2003

OR

For the transition period from              to             

Commission file number 1-13806

REWARDS NETWORK INC.

(Exact name of Registrant as specified in its charter)

Registrant’s telephone number, including area code (312) 521-6767

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

Title of each class

None

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2 of the Act).    Yes  x    No  ¨

Based on the closing sale price of the registrant’s common stock as of June 30, 2003, the aggregate market value of voting stock held by non-affiliates of the registrant was approximately $162,656,416

The number of shares of Registrant’s common stock outstanding as of February 29, 2004 was 24,200,241.

DOCUMENTS INCORPORATED BY REFERENCE: Filings made by companies with the Securities and Exchange Commission (SEC) sometimes “incorporate information by reference.” This means that the company is referring you to information that either was previously filed or will be filed with the SEC, and this information is considered to be part of the document you are reading. Information contained in our Proxy Statement to be filed for the Annual Meeting of Stockholders to be held on May 25, 2004 is incorporated herein by reference in response to Items 10, 11, 12, 13 and 14.

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FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended. The words “anticipates,” “intends,” “expects,” “could,” “should,” “plans,” “believes,” “estimates” or words or phrases of similar import generally identify forward-looking statements. You are cautioned that forward-looking statements are subject to risks, trends and uncertainties that could cause actual results, performance or achievements to differ materially from those expressed in any forward-looking statements. Important factors that could cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by those statements include, but are not limited to the following: (i) our dependence on our relationships with airlines and other reward program partners for a significant number of our members, (ii) the concentration of a significant amount of our rewards currency in one industry group, the airline industry, (iii) our inability to attract and retain merchants and members, (iv) our inability to maintain an appropriate balance between the number of members and the number of participating merchants in each market, (v) the failure of our program offering members rewards for patronizing select hotels, (vi) changes to card association rules and practices, (vii) our dependence upon our relationships with transaction processors, presenters and aggregators, (viii) network interruptions or processing errors, (ix) our susceptibility to a changing regulatory environment, (x) increased operating costs due to privacy concerns of our marketing partners, credit card processors and the public, (xi) the failure of our security measures, (xii) our susceptibility to restaurant credit risk, (xiii) economic changes, (xiv) the loss of key personnel, (xv) increasing competition, (xvi) our inability to obtain sufficient cash, (xvii) our control by Samstock, L.L.C. and its affiliates, (xviii) the ability of our board of directors to issue shares of our preferred stock without stockholder approval, (xix) possible future sales of restricted and other shares, (xx) the price of our common stock could be volatile and (xxi) anti-takeover provisions that could delay or prevent a change in our control even if the change in control would be beneficial to our stockholders . We undertake no obligation to update or revise any forward-looking statements to reflect changed assumptions, the occurrence of anticipated or unanticipated events or changes to future results over time. See the cautionary statements included as Exhibit 99.1 to this annual report on Form 10-K for a more detailed discussion of the foregoing and other factors that could cause actual results to differ materially from those included in the forward-looking statements and that, among others, should be considered in evaluating our outlook.

PART I

Item 1. Business

Overview

We market and administer loyalty rewards programs that bring our participating merchants and members together. We do this by offering rewards in the form of savings and benefits to our members who patronize our participating merchants, principally restaurants and hotels. We attract participating restaurants by purchasing credits for food and beverages in advance and by providing yield management tools such as variable promotions, dining incentives and off-peak pricing to fill empty tables and generate incremental business. We attract participating hotels by providing yield management tools to fill empty hotel rooms and generate incremental business. We offer rewards in the form of cash, airline frequent flyer miles and other currencies to our members who patronize our participating merchants and pay using a credit card they have registered with us. We partner with airlines and banks to obtain and service members.

Effective December 9, 2003, we changed our corporate name to Rewards Network Inc. from iDine Rewards Network Inc. Shares of our common stock are traded on the American Stock Exchange under the symbol IRN.

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Participating Merchants

Restaurants

As of December 31, 2003, we had approximately 10,830 participating restaurants in over 55 metropolitan markets in more than 40 states. We primarily offer two plans for our participating restaurants — the Dining Credits Purchase Plan and the Revenue Management Plan.

Dining Credits Purchase Plan. Under this plan, we purchase food and beverage credits (“Rights to Receive”) from participating restaurants for typically 50% of the retail price for which they sell the food and beverages. We make these purchases with cash or by providing advertising and media placement services. We then provide our members with rewards in the form of savings or benefits for dining in our participating restaurants (in some cases, on certain days of the week or times of day, set at the discretion of the restaurant). When a member dines at a restaurant that participates in the Dining Credits Purchase Plan, we typically are entitled to 80% of the total transaction amount, and we generally debit this amount from the participating restaurant’s bank account. The remaining amount (typically 20%) is left with the participating restaurant to provide for items such as sales tax and tips. We believe that the Dining Credits Purchase Plan is designed so that participating restaurants can make a wholesale profit in advance through the sale of food and beverage credits that are utilized through subsequent dining transactions at the restaurants by our members.

If we do not purchase additional Rights to Receive from participating restaurants after the initial Rights to Receive are used and the participating restaurants do not terminate their agreements with us, then they continue to be included on our website list of participating merchants, and our members continue to earn rewards and savings by dining in those restaurants. In these cases, we may receive between 15% and 35% of the total transaction amount from the merchant in an arrangement similar to the Revenue Management Plan.

Revenue Management Plan. Under this plan, our members earn rewards by dining at participating restaurants (in some cases, on certain days of the week or times of day, set at the discretion of the restaurant) for which we receive a marketing fee. Under the Revenue Management Plan, we receive between 15% and 35% of the total transaction amount from the merchant. Although our revenue from these transactions is less than under the Dining Credits Purchase Plan, revenue management transactions do not require us to purchase any Rights to Receive from merchants. Our Revenue Management Plan is designed for restaurants that choose to only take advantage of our marketing services.

Hotels

In the second quarter of 2003, we launched a hotel revenue management product that focused principally on independent hotels, which typically do not have their own loyalty or rewards programs. In October 2003, we announced that we had entered into a relationship with Travelweb LLC, a leading travel distribution company, to expand our hotel rewards offering by including additional independent hotels as well as certain major U.S. hotel chains. Although our hotel loyalty and rewards program remains in its early stages, as of December 31, 2003, the number of participating hotels had grown to approximately 6,940. This number represents both hotels sourced through the Travelweb network as well as hotels under direct contract with us. Typically, our members have access to reduced rates at participating hotels and also earn rewards by using the credit cards they register with us to pay for hotel stays after making reservations through our website or call center. Under our Revenue Management Plan for hotels, we receive between 10% and 32% of the hotel room rate.

Members

As of December 31, 2003, we had approximately 3.4 million active member accounts (i.e., members with at least one transaction with one of our participating merchants during the last 12 months). An active member account may

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consist of more than one credit card registered with us and may have more than one person associated with the account, although we consider each member account to be held by one “member.” Our members come from a variety of sources and marketing efforts, including through direct solicitation or through our affiliations with major airlines, large banks, credit card issuers and other affinity partners. In our affiliate programs, members may be solicited for enrollment or may be directly enrolled by our affiliate partner. Our members have a choice of member programs. Membership in our programs that provide for cash rewards requires an annual fee, and membership in our programs that provide rewards to members in other currencies, such as airline frequent flyer miles, does not require an annual fee. Our membership programs consist of the following:

Rewards Network No Fee Program. Our no-fee program offers alternative currency rewards, predominantly airline frequent flyer miles on charges for food, beverages, tax and tip at participating restaurants and on charges for room rates at participating hotels. Members of this program are members of various loyalty program providers.

Rewards Network Program. This is a fee-based program that typically offers up to 20% cash savings on charges for food, beverage, tax and tip at participating restaurants and up to 15% cash savings on charges for room rates at participating hotels. Members typically pay an upfront $49 annual fee. Alternatively, members may elect to “earn” their fee. In this case, benefits and rewards are retained by us until the member has reached the same $49 fee level, after which point the member receives a benefit and we (by not providing a benefit until $49 of benefits has accumulated) have effectively received a fee.

Registered Card Platform

A critical part of the administration of our loyalty and rewards programs is our registered card platform. Members who enroll in our programs simply register a major credit card with us and then present that registered credit card while transacting at a participating merchant. Based on our agreements with various processors and presenters throughout the country, we aggregate data for all the credit card transactions at our participating merchants. The transactions are then matched to a file containing the members’ registered card information. The matched transactions are qualified via business rules as to whether they are eligible for a reward. Qualified transactions are then used to provide member savings, airline frequent flyer miles or other currency benefits, as well as to invoice and collect from merchants, principally via an electronic debit to the merchant’s bank account.

Rewards

The vast majority of rewards are delivered to members in the form of a direct credit on their credit card statement, a cash-denominated reward to a loyalty or rewards program account or a mileage credit to their frequent flyer account. Only members of our Rewards Network Program are eligible to receive cash credit on their registered credit card accounts. Cash rewards typically represent up to 20% of the member’s total transaction amount with participating restaurants and typically up to 15% of the member’s room rate with participating hotels. Alternatively, Rewards Networks Program members may elect to receive rewards in the form of airline frequent flyer miles. Members receiving airline frequent flyer miles generally earn up to ten miles for each dollar spent at participating restaurants and up to five miles for each room rate dollar spent at participating hotels, provided that they make the hotel reservation through us. Loyalty partner program members may receive rewards either in cash or in alternative currencies such as airline frequent flyer miles. We communicate rewards to our members via a variety of communication tools: email, our website, newsletters, directories, toll-free numbers, fax back services and wireless devices such as personal digital assistants.

Canada

We plan to expand our rewards programs to Canada in 2004. Initially, we plan to offer our Dining Credit Purchase Plan and our Revenue Management Plan to restaurant merchants in the Ontario market.

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Marketing

Member Acquisition

As of December 31, 2003, we acquired members through the following four channels: third-party partner programs, our direct marketing programs, our Corporate Travel and Expense Reduction Program and our credit card issuer program. The table below sets forth for each channel the number of enrolled member accounts and active member accounts as of, and sales for the years ended, December 31, 2003 and 2002. Enrolled member accounts represent members that are eligible to transact with us and earn rewards or savings while active member accounts represent accounts with at least one qualified transaction with one of our participating merchants within the last 12 months. An enrolled member account may consist of more than one credit card registered with us and may have more than one person associated with the account, although we consider each account to be held by one “member.”

Airline frequent flyer programs represent the largest number of our member accounts obtained through this channel. As of December 31, 2003, we provided dining benefits to nine major airlines, which we believe makes us the largest provider of dining programs for the airline industry. We are actively working to expand our loyalty partnerships beyond airlines. Six Continents Hotels, Inc, Upromise, Inc., eBay Inc., and Electronic Script Incorporated (eScrip) are notable instances of non-airline partner program providers for which we provide dining benefits.

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Our business development group manages all Loyalty Partner Programs, the Corporate Travel and Expense Reduction Program and all Credit Card Issuer Programs. Focusing on member acquisition, this group consists of nine full-time client and partner management professionals.

Member Communications, Activation and Sustained Utilization

In 2003, we expanded and improved our data collection infrastructure to target our members for marketing communications, gather and analyze member account data and manage direct marketing campaigns. We also hired additional employees to focus on improving the utilization of our member database for marketing purposes.

In the latter part of 2003, we began testing direct marketing programs designed to increase the frequency with which members dine at participating restaurants and to shift behavior to off-peak dining periods (e.g., Sundays through Thursdays). We expect to refine these direct marketing programs as we build on the learning derived from our testing.

In 2003, we also completed the development of a pilot “Preferred Member Program” that we expect to launch in the first quarter of 2004. The objective of this program is to reward our most active members by providing them with an enhanced set of member benefits and targeted communications. We plan to evaluate the success of this program based on its effect on member retention, transaction frequency and average transaction amount.

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Toward the end of 2003, we expanded our hotel rewards product with a launch of member announcements that we expect to supplement with an array of communications in the first quarter of 2004 to coincide with the peak hotel booking season. This campaign will focus on convincing our active dining members with a demonstrated propensity to travel to make their hotel reservations with us.

Finally, in 2003 we completed the initial phase of the re-branding of iDine to the new Rewards Network identity. This included the re-branding of internal business materials, signage and announcements to press and key corporate constituencies (e.g. merchants, partners, etc.).

Website Marketing and Operations

Website(s) remain the center of our business. In addition to our own website, as of December 31, 2003, we hosted and managed more than 163 different websites on behalf of our partners and corporate clients. These websites typically have a search engine leading to information relating to participating restaurants and hotels, including restaurant and hotel descriptions, third-party reviews, menus, maps, photos and featured membership rewards offered by participating merchants. We strive to improve the content of the websites we host and manage with the goal of further influencing measurable dining and hotel decisions.

Merchant Marketing – Program Awareness and Establishing Brand Recognition

As part of our marketing efforts to merchants, we focus on developing sales support materials that include brochures and inserts. Additionally, our marketing efforts include a national, regional and local print media campaign, trade-show participation, industry lectures and speaking engagements. We also plan to create tools to measure the “cause and effect” influence we have in directing our members to participating merchants.

In the interest of improving the retention and recruitment of participating restaurants, we plan to provide a suite of marketing propositions that meet the needs of growing and expanding restaurants as well as mature, successful restaurants. This includes developing alternative offers to meet off-peak or real-time needs of the restaurant operators and developing alternative value propositions that are intended to appeal to the multi-unit restaurant sector.

Similarly, as we expand our hotel program marketing, we plan to increase our focus and relevancy to the different hotel merchant types.

Dependence on Rewards Program Partners

We depend on our relationships with reward program partners for a significant number of our members and a significant portion of our revenue. We are particularly dependent on our relationships with the airline frequent flyer program. For the year ended December 31, 2003, approximately 57% of our sales were derived from members enrolled through an airline frequent flyer program. As of December 31, 2003, we had contracts or relationships with nine major airlines and approximately 2.1 million of our 3.4 million active member accounts were enrolled through frequent flyer programs. In addition, as of December 31, 2003, member accounts enrolled through two of our reward program partners jointly accounted for approximately 40% of our active member accounts and approximately 33% of our sales for the year ended December 31, 2003. Members enrolled through the reward programs of each of United Airlines and Upromise, Inc. separately accounted for more than 10% of our revenue for that same period. We have a written agreement with United Airlines that continues until June 30, 2004 and a written agreement with Upromise, Inc. that continues until June 30, 2006.

Competition

We compete for both members and participating merchants, although we believe that we are the largest multi- credit card type rewards platform in the dining sector. Our competitors include discount programs offered by major credit card companies, other companies that offer different kinds of travel service or discount marketing programs and

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numerous small companies that offer services that may compete with the services offered or to be offered by us. We also compete with various finance companies to address the liquidity needs of restaurant merchants. We anticipate continued growing competition from various e-commerce ventures. Certain of our competitors or potential competitors have substantially greater financial resources and expend considerably larger sums than we do for new product development and marketing. Further, we must compete with many larger and better-established companies for the hiring and retention of qualified sales and marketing personnel. We believe that our programs contribute to our competitiveness and allow us to offer better value and service to our members and participating merchants due to the fact that our programs: (1) are usable by members at participating merchants with very few restrictions; (2) provide substantial savings without the need for a member to present discount coupons or a separate card when paying for a meal or hotel stay; (3) direct significant numbers of customers to participating merchants; and (4) provide participating restaurants with either cash in advance of customer transactions or customized revenue management plans.

Employees

As of December 31, 2003, we had 399 full-time employees. We believe that our relationships with our employees are good. None of our employees are represented by a labor union.

Executive Officers of the Registrant

The following table sets forth certain information concerning our executive officers as of March 1, 2004:

George S. Wiedemann has been a director since 1998 and became President and Chief Executive Officer in September 2002. From October 2000 to September 2002, Mr. Wiedemann was the Chairman of the Board and Chief Executive Officer of Responsys Inc., a provider of online direct marketing technology. Prior to that, Mr. Wiedemann was Chairman of the Board and Chief Executive Officer of GreyDirect Marketing Group, Inc., a direct marketing agency he founded in 1979 that specializes in multimedia direct response advertising. Mr. Wiedemann served as Chairman of the Board of the Direct Marketing Association in 1999.

Bryan R. Adel became Vice President, General Counsel, Secretary and Chief Privacy Officer in April 2003. For the previous ten years, Mr. Adel held various positions at McDonald’s Corporation, the world’s leading food service retailer, most recently Managing Counsel, International Legal. From January 2001 to February 2003, Mr. Adel served on the board of directors of Chipotle Mexican Grill, Inc., a company that operates quick-service eateries that is majority owned by McDonald’s Corporation.

Gerald J. Hughes became Chief Operating Officer, Dining in January 2004. From July 2003 to January 2004, he was Executive Vice President, Business Development, and from November 2000 to July 2003, Mr. Hughes was Senior Vice President, Business Development. Prior to that, he served as Vice President of Business Development for our subsidiary iDine.com, Inc. From 1996 through 1999, Mr. Hughes was a management consultant with Deloitte Consulting, a management consulting firm.

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Kenneth R. Posner became Senior Vice President, Finance and Administration, in August 2003 and Chief Financial Officer in October 2003. Since August 2002, Mr. Posner has served as President and Chief Executive Officer of Angelo and Maxie’s, Inc., a company that operates steakhouses. From April 2001 to July 2003, Mr. Posner served as President and Chief Financial Officer of Angelo and Maxie’s, Inc., and from April 1999 to July 2000, he was Executive Vice President and Chief Financial Officer of Lodgian, Inc., an owner and operator of full-service hotels. For 18 years prior to that, he was Senior Vice President of Finance and Treasurer of H Group Holdings, Inc., a diversified company with interests in the hotel, gaming and real estate industries. He has also served on the boards of directors for most business units of H Group Holdings, Inc. and as a trustee of all of its employee benefit programs.

Anthony Priore became Chief Marketing Officer in July 2003. From March 2003 until he joined us, Mr. Priore was Senior Vice President of Electronic Marketing Services at Experion, Inc., a strategic consulting firm, and from January 2001 to November 2002, he was President and Chief Operating Officer of MarketsOnDemand, a database firm. Beginning in March 1999, Mr. Priore served as Senior Vice President of Marketing at YesMail.com, a provider of web-based relationship marketing solutions, and for the four years prior to that, he was Vice President of Marketing at Peapod, Inc., an Internet grocer.

Domenic A. Rinaldi became Executive Vice President, Sales in May 2003. From 2001 to 2003, Mr. Rinaldi was President and Chief Executive Officer of Timeless Hospitality Inc., which provided an Internet booking engine to the hotel industry. From 1997 through 2001, Mr. Rinaldi was Chief Operating Officer of WorldRes.com., an online hotel reservation network.

Gregory J. Robitaille became Executive Vice President of Corporate Development in February 2001. From April 2000 to January 2001, Mr. Robitaille managed our revenue management and web site projects, and from September 1995 to March 2000, he was a managing director for Equity Group Investments, L.L.C., a private investment firm affiliated with Samstock, L.L.C., our largest stockholder.

Available Information

Our principal executive offices are located at 2 North Riverside Plaza, Suite 950, Chicago, Illinois 60606, and our telephone number is (312)521-6767. Our website is www.rewardsnetwork.com. We make available free of charge on or through our Internet website our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after we electronically file such material with or furnish such material to the SEC. You may read and copy any material we file with the SEC at the SEC’s Public Reference Room at 450 Fifth Street, N.W., Washington, DC 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site at www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.

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Item 2. Properties

The following table sets forth certain information regarding our principal facilities as of December 31, 2003:

In addition to the properties listed above, we have eight sales offices throughout the United States. We believe our properties are generally in good condition and adequate for our needs. Furthermore, we believe that suitable additional or replacement space will be available when and if needed.

Item 3. Legal Proceedings

We are a party to various lawsuits arising out of the conduct of our business, none of which is expected to have a material adverse effect on our financial condition or results of operations.

Item 4. Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of stockholders during the three-month period ended December 31, 2003.

PART II

Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters

Our common stock is listed on the American Stock Exchange. The following table sets forth, for the periods presented, the high and low sales prices per share of our common stock, as reported on the American Stock Exchange.

We have not paid cash dividends on our common stock in our two most recent fiscal years. We do not expect to pay any cash dividends on our common stock in the foreseeable future. The number of holders of record of our common stock as of March 4, 2004 was approximately 290.

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The following table presents information as of December 31, 2003 regarding our equity compensation plans:

Equity Compensation Plan Information

Item 6. Selected Financial Data (Dollars in thousands except for per share data)

We changed our fiscal year end to December 31 from September 30, effective the three-month period ended December 31, 2001. The financial information for the three-months ended December 31, 2001 and 2000 (unaudited) is provided for comparative purposes.

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The selected financial data set forth below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” our consolidated financial statements and the notes to those financial statements, which are included in this annual report on Form 10-K.