2010 was an interesting and momentous year. On March 23, the then US President Barack Obama signed the Affordable Care Act (ACA) into law. (This act would colloquially be known as Obamacare.) Across Europe, a huge cloud of volcanic ash spewed by a volcano in Iceland heavily disrupted air traffic for six days in April. The event cost the airline industry an estimated US$1.7 billion. Meanwhile, Starbuck’s and McDonald’s began offering free WiFi to its customers across the world this year. And on May 22, something very peculiar happened. On that date, a Florida man by the name of Laszlo Hanyecz made history when he paid 10,000 bitcoins for two tasty Papa John’s pizzas. (Had Laszlo kept the 10,000 bitcoins, he would have been $630m richer in 2021.) The episode is now little more than a footnote on the colourful history of Bitcoin, but it has sparked a long-lasting legacy. May 22 will forever be known as Bitcoin Pizza Day.
We recently embarked on a series of articles about non-fungible tokens (NFTs), and how these crypto assets are slowly making their way into a diversity of industries and sectors of society. We recently published a piece about NFTs for real estate, for example, and followed it with an interesting tale about NFTs for the hospitality industry, focusing on hotels. Today, we’re going down the culinary crypto road, focusing on NFTs for the restaurant world.
A collector’s passion
People just love collecting stuff. The desire to add a new, unique item to one’s collection is a powerful psychological driver. This passion stems from the fundamental human trait to obtain and own things that other people also want. Stamps, dolls, miniature vehicles, art pieces, sports memorabilia, militaria, autographs, trading cards, Beanie Babies, etc., people the world over spend a significant amount of their spare time (and often, money) gathering and trading items to expand their personal collections. Over time, some of these collections become so large and unique that they acquire a high value, both in cultural and monetary terms.
Building collections was once a labor-intensive task. Old timers would have been forced to trawl through antique shops -home and abroad-, walk through Sunday car boot sales, attend auctions, spend a whole bunch of time dialing numbers on their fixed-line phones, and make extensive use of their local postal service to find, purchase, and trade collectibles. Today, building collections is a far more convenient affair. In the digital era, collectors can use the internet, email, instant messaging apps, and many other digital tools and aids to communicate with buyers and sellers the world over and obtain and trade items, all from the comfort of their own homes.
Computer and internet technology also created a new tradable range of items: Digital collectibles.
NFTs: Coming soon to a restaurant near you
The first quarter of 2021 saw NFT sales of around $2bn. This spending bonanza was fueled in no small part by the now infamous sale of the Beeple NFT in March, which fetched the very tidy sum of over $60m. Not long after, Twitter’s CEO Jack Dorsey sold his very first tweet in NFT form for almost $3m.
But once the initial hype passed and the NFT dust settled, NFT sales took a nosedive. By June, sales amounted to just under $9m. Still a respectable amount, for sure, but a far cry from the Beeple heyday.
It is easy to dismiss NFTs as a ‘fad’ or ‘craze’, a fleeting mania to feed people’s desire to get rich quick. Some -very few- have become so. Many others have made some money. And even many more have sold their NFTs for insignificant amounts of money. NFTs are highly speculative assets, you see, and, much like cryptos, they’re highly volatile. If you sell at the right time, you might make a killing, but more often than not, you will not.
But despite all that, NFTs do have long-term value, as these assets have breathed new life into the digital collectible world, for example, and, as we learned in our last post, hoteliers can digitize the hotel’s assets through blockchain technology and sell these tokens to individual, relatively small-time investors.
Restaurateurs are now also turning their heads towards NFTs, for similar reasons as hoteliers do. The COVID-19 pandemic has kept people home, and restaurants closed. But many restaurants are now beginning to reopen, thanks to the mass vaccination rollout. It is time to deploy the new weapon in the restaurant business arsenal: NFTs
How can NFTs support the restaurant business?
Innovation is part of any business. There’s an old adage that says that if you don’t innovate, you stagnate. Restaurants are no exception. They might change their menus every now and again, for example, to ensure that customers, both returning and new, always have a reason to eat there.
Part of this innovation is the swing to NFTs as part of restaurant’s promotional campaigns. Pizza Hut Canada, for example, recently introduced its ‘1-Byte Favourites’ NFT collection, which is linked to the chain’s $10 Favourites pizza promotion range. The NFTs represent digitized images of pizza slices, valued at $0.0001 ETH (about 16c of a US Dollar.) Pizza Hut referred to the initiative as ‘the world’s first non-fungible pizza (NFP).’
Another popular fast-food chain, Taco Bell, launched a similar NFT campaign earlier this year. The ‘NFTacoBells’ were five pieces of five different digital taco art designs. The 25 tokens sold out in less than 30 minutes.
One could argue that Pizza Hut and Taco Bell’s actions were promotional stunts, plain and simple. And one could further argue that the companies were jumping onto the NFT bandwagon, hoping to cash in. Both are valid arguments, but one cannot lose sight of the business angle here, and the psychological aspect of offering limited collections. People love collecting stuff, as we discussed earlier, and something limited might accrue a high value. This plays into the old marketing ploy of Fear of Missing Out (FOMO). The Beeple NFT plays heavily in the psyche of many. Could any of these limited items become the next Beeple?
There’s yet another potential use case for NFTs in the restaurant industry. Often, people make dinner reservations but fail to show up, either on purpose or because of unforeseen circumstances. Either way, the restaurant loses potential revenue, as there might not be time to give the table to somebody else.
It might be possible to address this problem through NFTs, by tokenizing tables. Each tokenized booking would be unique in terms of date, time, number of people, etc., and some tokens might be more valuable than others, depending on the location, establishment, and other factors. The tokens would serve as a deposit, guaranteeing revenue, even if the party does not actually show up.
Tokenizing restaurant tables could have a secondary benefit, as people could trade the tokens in a peer-to-peer fashion. For example, if you make a reservation but can’t make it for whatever reason, you could sell the token to the highest bidder online. In this case, too, the restaurant maintains a revenue stream.
Tokenization is a versatile tool for the hospitality industry. Prominent chains like Taco Bell and Pizza Hut have already taken some tentative steps to see how their businesses can benefit from tokenization, and NFTs in particular.
The world already celebrates Bitcoin Pizza Day, to honor that quirky moment in history when someone paid for his food with a then almost unheard-of asset. The Beeple NFT event was another milestone in the history of crypto, and though NFTs remain somewhat of a novelty within the restaurant industry, the use case is real. And tasty.