Over the past year, the number of restaurants exploring digital engagement within the NFT space continued to grow as blockchain technology became more lucrative. But what goes up must come down, and now industry analysts are citing the 2022 “crypto crash” as a reason to sell rather than invest in this still-trending industry. But do operators that just started dabbling in blockchain-backed customer engagement have to worry? And exactly how will the crypto bubble burst affect regular entrepreneurs?
“It’s a natural cycle of the markets: bull runs follows bear, rinse and repeat,” Reggie Jarath, CEO of Gather Network and blockchain expert said. “It’s survival of the fittest.”
But whereas crypto investors in the finance world might need to pay close attention to the rise and fall of the markets, restaurant operators don’t need to follow quite as closely. Operators might want to know whether to take crypto as currency and if they should list their restaurant NFTs on Ethereum, or whether all of these investments are just one big fad.
The hospitality industry’s engagement with blockchain and Web3 has run the gamut from Wendy’s launching games in the metaverse to Chipotle taking crypto from customers and Wings and Rings allowing franchisees to pay for their franchise fee with Bitcoin. Many of the NFT-backed hospitality projects have targeted the 1%, offering NFT memberships being sold for thousands of dollars in cryptocurrency.
Recently, President Biden signed an executive order that would lead to federal regulation of cryptocurrency for the first time.
“In order for the NFT ecosystem to thrive, all transactions related to NFT should be made with the native tokens of the relevant blockchain by nature,” Jarath said. “Brands, on the other hand, are developing user interfaces that are making these cryptocurrencies more accessible to the less tech savvy users by pushing technicalities in the background.”
One of the biggest hurdles for restaurants interested in dabbling in crypto-based assets is the steep learning curve both for employees and customers. There were rumors that NFT-themed restaurant Bored & Hungry had stopped taking crypto and while the rumors were unfounded, (it turns out they were just updating their systems and accept Apecoin and Ethereum), founder Andy Nguyen said he does not just want to be the NFT restaurant:
“The crypto crash is amplifying us even more, because we are not just an NFT brand. We are bringing a lot of utility and experience to the community,” Nguyen told Nation’s Restaurant News. “The crash weeds out a lot of bad brands. I think it gave us a platform to have more attention on our brand.”
Josh Sigel, CEO of Shō hospitality Group and founder of NFT private club, Shō Club, recently started taking regular credit cards in addition to cryptocurrency in an effort to broaden his customer base. If crypto is down, customers can always use traditional currency.
“There isn't really necessarily a hard and fast rule that an NFT couldn't be purchased with currencies other than crypto,” Sigel said. “We holistically see tremendous value in the underlying technology of the Web 3.0 space.”
Sigel thinks that the crypto crash is more of a “correction of the market” than a sign to be alarmed, and shows that the “get-rich quick” schemes of people investing in crypto and NFTs just to jump on the trend won’t last, especially as the space becomes more regulated by the federal government.
But if the crypto crash is a sign of survival of the fittest for the budding industry, which Web 3.0 hospitality concepts will survive? It depends on who you ask.
“The crypto crash is the best time in crypto,” Peter Klamka, CEO of Cordia Corp. and creator of the Crypto Food Hall NFT collection said. “These periods allow for experimentation, cheaper labor costs, and faster times to market because more resources are available. What is very like gone for good are the $10,000 or more NFT ‘membership restaurant.’”
Klamka, who is selling 1,000 unique chef NFTs as entrance to the Cordia food hall for about $200 apiece, said that as we likely head into a recession, the number of people that can spend money on a very expensive NFT will shrink drastically.
“[People like us] are investing in NFTs and you even have national chains getting in on the action, but the successful ones are going to be the $25-$100 NFTs that give customers loyalty points, coupons, and a free appetizer,” Klamka said.
Even though he said Cordia will always take cryptocurrency, none of his customers use it as regular currency. People with a crypto wallet are much more likely to spend their blockchain-backed currency on larger transactions.
But not every NFT investor in the hospitality industry agrees. Stratis Morfogen, owner of Brooklyn Chop House and Brooklyn Dumpling Shop, strongly believes that crypto is the future of the hospitality industry and that interest in NFTs have not waned during the crypto crash. He is taking a long-term bet on crypto as he anticipates the opening of his NFT lounge in the fall, where memberships are sold for up to $100,000.
“You don't want to be the one to say, ‘of, if only I had bought Apple for $5 in 2008,’” he said. “There’s a lot of fear when it comes to this industry.”
Morfogen said it’s incredibly important for restaurant operators to see NFTs and crypto as a new way to engage with their guests. It’s the new must-have marketing feature for hospitality, much like websites and social media were when they were the “shiny, new object.”
“If you don’t take NFTs seriously, you’re going to miss the opportunity of a lifetime,” he said. “It’s not just about cryptocurrency, it’s about forming relationships. If you make a relationship with this [crypto enthusiast] community, you’ll be making dividends for generations.”
Contact Joanna Fantozzi at [email protected]
Follow her on Twitter: @JoannaFantozzi