When sites such as Groupon and LivingSocial touted more than half-off deals on a variety of products, customers were thrilled and businesses were excited for the new way to get people in the door. But as the years ticked by, it became clear to business owners that they were not benefitting from these sites. They were actually losing money.

Tony Mandarano couldn’t help but think about this, as well. Shortly after graduating from the University of San Diego, the Mercer Island native saw a series of studies that detailed how one-off deals are turning into money pits for businesses and he wanted to help. While working for a company in Portland he began putting together ideas for PaidPunch, a mobile app that gives consumers multiple uses of a daily deal-like offer. Customers buy several “punches” for a discounted price that they can use each time. They simply have to show merchants the purchased punch on their mobile phones to get the discount.

“There is a unique win-win in which merchants receive profitable repeat business and consumers received discounts on every visit. It started out as the answer to the ‘Groupon Problem,’” Mandarano said.

Mandarano and his team, whose office is based in Redmond, targeted Bellevue businesses early on after making the decision to move back to Mercer Island after college. So far, the company has signed up Tuscan Stone Pizza, Pho All Day, Dream Espresso, Bellevue Way Dry Cleaners and Tony Maroni’s Pizza in Bellevue.

Elliott McNary, head of merchant relations for the company, said they are working to enlist a variety of businesses, all of which would benefit from regular patronage. The company has also added businesses in San Diego and New York.

Development on the app began last summer, and Mandarano partnered with college friend Neil Rajpal, who he met studying abroad, to fund the project.

The first version of the app, released earlier this year, still had a lot of bugs. It didn’t interact with other sites such as Facebook and Google Maps, but mostly it was slow. Businesses using the application experienced long lines due to the time it took to process transactions. This was not good enough for Mandarano and his team.

It took many long nights of development on the phone with Rajpal’s father in India, who works with Hewlett-Packard, to knock out the kinks, but in the last few months, the team has finished the third version of the app, one which runs faster and includes more options, they said.

“We need users to tell us how they feel about the product,” McNary said. “If it’s still too slow, we need to know that. If the discounts aren’t big enough we need to know that.”