How Restaurants are using NFTs and getting into the metaverse
September 26, 2022
Podcast: Download (Duration: 18:04 — 24.8MB)
Welcome to Dana Delivers by Aprio podcasts, the podcast that helps restaurant owners and operators learn from industry experts about trends and opportunities. On every episode, Dana Zukofsky, the leader of Aprio’s restaurant advisory team, explores a topic impacting our industry in a candid conversation. And now, let’s hear what Dana is serving up on this episode.
Welcome, everyone, to today’s edition of Dana Delivers by Aprio. We’re here again today with Spike Mendelsohn, and I’m really excited about his new venture into the digital world to learn about NFTs, how Spike is using them, and what he thinks about it. Welcome back, Spike.
So, okay, when we saw each other recently, we started talking about this new project you’re working on, also, with these NFTs. And we might have to talk about this in a full length episode, but I don’t understand them. I think it’s fantastic that everyone’s doing it. Tell me a little bit about what you and Tom Colicchio have done together and what you’re doing in this NFT world. Give me a few minute rundown of it.
Yeah, and then maybe hopefully, I’ll be able to clear at least a couple of things for you.
I bet you, you understand them more than you actually think you do at the moment, because having a marketing or PR hat on when it comes to customer loyalty and your brand ambassadors like the people that really support the Bobby Flays, for instance, like his amazing fans, his true hardcore fans. I think you’ll find something really interesting and revealing about the technology of Web 3. So when we talk about NFTs, we’re actually talking about this new era of technology, which is Web 3. We live very much in a Web 2 world right now, the internet. And a lot of the things that go on the internet, you don’t really own the IP of too much yourself there. If you’re on Facebook, it’s Facebook’s platform, Facebook’s data. If you’re on Instagram, it’s Instagram’s data. You don’t really own any IP of anything.
Yeah, exactly, of anything. And there’s also a lot of middlemen in life that tax you, whether it’s credit card fees, or a title company, for instance, that just is holding this contract in between, two parties, for instance. There’s ways that Web 3 technology will introduce itself into everyday life, which we haven’t figured out now that will really revolutionize the way we went. So let’s just put that aside for a second. Now, Tom Colicchio and I, we saw an opportunity, we didn’t 100% know exactly what we were getting into at the beginning. But we were both news junkies, and we were hearing about NFTs and this and that. And when we started to hear headlines where artists are able to sell a piece of art that they’ve created on this platform for a ton of money, but not only sell it on its first time sale, that they’re able to get residual sales based on this contract that they call a smart contract that will last a lifetime, meaning that if this piece of art sells to somebody else, they always get another 10%. So if you look at artists back in the day, you’re usually dead when your art’s worth anything. And everybody else makes money off of what you created. So for artists, it was a very revolutionary way of kind of flipping the scales on that. And so those were the early adopters of NFTs. They’re always the artists. The hippie. So I’d say that’s kind of what attracted me first because I consider ourselves culinary artists.
Okay, so far I got you.
Yeah. And as chefs, we abuse our IP a lot or give it up for free a lot, meaning we will promote a food festival, like the Food and Wine Festival where we may get our hotel room and a ticket. But we don’t really have a revenue share. We don’t have any votes on where the money is going that is raised for charity. And we lose a lot of IP there. It’s not really putting seats in our restaurant really, to be honest with you. So there’s many different instances in life for chefs that we lose our IP. So when Web 3 came into play, I thought that was a really interesting proposition to beta test what a product like a food and beverage product would look like in the Web 3 world, right? And the reason I thought that was important was, I’ll give you an example, when a pandemic hit, restaurants were fighting tooth and nail to find the consumers at home, because they weren’t coming into the restaurants anymore. But Dana, who benefited the most from that?
The third party delivery services.
We didn’t even practice and I got the answer.
Yes, exactly. So a Web 2 world, a third party delivery that isn’t putting blood, sweat and tears or ordering your food, looking after inventory, cooking the food, packaging and delivering it, they were coming in and scooping up 30%, on average – maybe if you’re lucky, you negotiated it down – of our work. So that, to me, blew my mind. I was like, wow, we are so not prepared for what was to come. So what my business did, PLNT Burger, for instance, we developed an app, and we started trying to figure out how to pull people away from Uber Eats to our own app, to just directly use our app, so we can re-consume the 30%. But what if, in the next world of the internet, there’s an opportunity to get ahead of those things.
Yeah, so Web 3 is interesting, because it’s all based on a contract that’s peer-to-peer. And all the contracts are out there, it’s transparent. It’s on the web, you can see exactly what this sold for, what the contract was made up for. So it introduces a new way to do business.
So if I buy my NFT from CHFTY, right, which is your company, is that how I pronounce it?
Yeah, let’s give them the background right now.
So basically, Tom and I decided to launch 3000 NFTs, basically, and they were called CHFTY. And this NFT is called the PFP project, meaning there’s all sorts of different styles of NFTs. This one is based on a character that looks like a pizza, and there’s 3000 different iterations of that pizza, meaning there’s a number one, and there’s a number 3000. And every single one of those pictures is a pizza, but they all look different. And they all are ranked on a different rarity, meaning number one is the most rare, number 3000 is the least rare based on if it’s wearing sunglasses or it has pineapple on it, or different pieces of art.
Okay, this is just so fascinating. Okay.
So basically, you have 3000 NFTs. Let’s call them tickets.
Okay, I got it. Much easier for me to understand.
Let’s call them tickets. People buy these. And they’ll buy multiple, A, because all 3000 of these will unlock utility, meaning, if I own one of these, I’m able to have a cooking class with Tom Colicchio and Spike, once a month. If I buy one of these, I’m allowed to come to the six different events that they put on throughout the year in different parts of the country, and I get VIP access to it. If I own one of these, I’m part of a social platform that is closed doors, meaning only the people that own this NFT can talk about food and communicate together and send each other recipes, send each other pictures of food, we can chat about the best restaurants in New York City, we can actually talk to Tom every once in a while on these platforms.
So, Spike, let me ask you a question. So, I get this part of it. And so a lot of people, like you said, they’re using it to gain, whether a fan base or a group of people, who are interested in whatever this one universal topic is that this group wants. So it’s, kind of to your point earlier, it really is like marketing or it could be someone buying into a loyalty program in some cases, which is kind of cool, because right now we’re giving loyalty programs. And we’re usually, as restaurant operators, giving people stuff for the loyalty. This is having them buy into the program as well. My question, though, is, if you don’t know who’s buying them necessarily, because it’s happening in the metaverse universe, how do you contact these people so that they know when the cooking class is?
You absolutely know exactly who’s buying them because every NFT project has a Discord that’s part of it, meaning, do you know what Discord is?
It’s like Reddit.
Okay, yes, now.
It’s like Reddit and Twitter together.
When you buy this NFT, you’re a part of this Discord. And this Discord has all sorts of different channels, Dana, right?.
Yes, I got it. I feel the light bulbs going off a little bit.
It’s funny that you said loyalty because we’ll get back to that. But when we open up the channels, there’s a conversation and it’s called pizza chat. And that’s basically where everybody goes just to get all the updates that are happening every day, like what we’re doing, what’s the news. Then there’s a channel in the Discord that’s the pineapple debate, whether pineapple should belong on pizza or not. And there’s like thousands and thousands of text messages with pineapple memes or people weighing in if pineapple belongs on pizza or not. And it’s our community. So it goes viral, then there’s somebody who suggests in the group, out of the membership, ‘hey, can you open up a New York City channel because we want to be able to micro communicate this community that lives in New York and do meetups.’
So then you could open that because you’re the boss of this program?
Yeah, so we opened that channel. So we have from New York, to San Francisco, to Hong Kong, to London, to Amsterdam, to Texas, I mean, to Austin. We have all these different channels opened up. And there’s all these different sub chats happening in our channels about food. We have a channel that’s solely dedicated to post your food. And that’s one of my favorite ones, because everyone cooks their food at home and posts a picture of it. And now all of a sudden, everyone comments on it and says, ‘Oh, my God, that looks great. What’s the recipe?’ And then that person will send them a recipe. There’s the bar channel where people post the drinks they make or the drinks they’re drinking.
It’s very fun. So it’s like you’re buying into a club a little bit, but you can resell your membership.
You can resell your membership, which is the genius part about what an NFT brings to the table. Not only are you part of a community, but it’s an asset. So when you are partaking in the community, you’re growing your asset because that’s the two-prong approach. If no one in the community is talking about their assets and the opportunities and partaking, then the asset isn’t driving the price up high, the resale value of it. And by the way, that doesn’t really play too much, because what we found out is a lot of NFTs people buy up to resell to make a transaction. The people that have bought our NFTs, out of the 3000, there’s maybe been less than 100 that ever went up for sale. And it says so much about the product that we’re giving, because, for instance, we had real life events. And we had two or three of them. We had one here in DC at the Food Fight. We had one in New York at Vallata, Tom’s restaurant. And we were able to meet our community and actually interface with him for a couple hours over drinks. So it’s like, we’ll just use Bobby Flay for a second, say, Dana, Bobby Flay has a million followers on Instagram, he’s so famous. But out of that, out of all those people, who are the 10,000 most loyal Bobby Flay members? What can we give them? The ones that buy his cookbook, go to his restaurant, show up for his food shows?
Give them a little bit extra.
Yeah, so let’s put out 10 NFTs that are Bobby Flay driven, and the most loyal Bobby Flay fans will buy this, and they will have special access and certain things that are awesome and also be driving this asset, this membership of super fans of Bobby Flay. To make a long story short, well, to sum this up, we launched 3000 NFTs, we sold out, we generated $600,000, we have $300,000 so far in secondary sales. So this thing’s basically at a million. You can do all sorts of goods. So one of the things that we did as part of our NFT is we gave a certain percentage to the Big Green Dao, which was Kimbal Musk’s NFT. And his project is about inspiring home gardens and really democratizing the way fundraising goes. So immediately when we sold our NFT, because it’s written in the contract, that money gets distributed right away to his foundation. While someone’s clicking and approving the transaction, that crypto is getting dispersed to all these different accounts right away. NFTs introduce a very amazing opportunity to do fundraising differently and to distribute the funds to where they need to go very quickly. So it’s a very interesting technology, but again, we did a beta test, and what I loved the most about the beta test is that we really saw something that was amazing that was happening in our Discord, meaning the communication of people just sharing food recipes and pictures. So I can’t really announce it next, Dana, but I will send you the deck so you can just personally see it.
I can’t wait.
But when you talk about loyalty, because you said it, there is a massive opportunity in Web 3 and food and beverage to reinvent the way people earn loyalty in restaurants.
And again, that’s where we’re seeing it with a lot of our clients the most, is trying to figure out how to use the NFT to create loyalty and brand involvement similar to the stuff you’re saying.
Yeah. And we have that answer. For restaurants and chefs and brands, we have that answer for them, actually. And we’ll be announcing it soon, very soon. And like I said, it really opens up the door to rethink the restaurant industry, because the facts are here, right, Dana? We lost an enormous amount of customers due to the pandemic. And based on my percentages, personally on my restaurants, they’re not all coming back, and they’re never all going to come back. And as the world is shifting, and it’s becoming more technology and more delivery and metaverse all of a sudden. You can order McDonald’s in the metaverse one day and get it at your doorstep. As the world is moving fast in this direction, we as restaurateurs and chefs need to adapt and look at different verticals of our businesses. We can’t just look at a restaurant as a restaurant, we have to look at it as a restaurant and a source of income, and how can we drive different income into that place? And how many different ways can we do it?
Right. How many revenue channels can there be?
How many revenue channels can you do? That’s where the business is going. So Web 3 really allows you to really personalize it, hopefully, and capture it before it’s too late.
Well, I love it. I love my education. I love that you did donations to the Big Green Dao because I am one of the original people who invested with Square Roots, so I love what Kimbal is doing.
And I think just that whole brand is fantastic. So, Spike, I loved speaking to you. I loved learning more about NFTs. I can’t wait to hear what’s next. This isn’t gonna go out for another few weeks, so if you’re launching a new product, and you need us to redo, put this out there when you launch it, you’ll let us know.
And that’s it. And I can’t wait to see you next time you’re in New York.
All right. Awesome, Dana. Love it.
Thank you so much and we’ll speak soon.
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About Spike Mendelsohn:
Evangelos Spiros “Spike” Mendelsohn is a food policy advocate, chef, and restaurateur best known for his time as a contestant on Top Chef season four. He is the chef and owner of multiple restaurants such as Good Stuff Eatery, Santa Rosa Taqueria, and We, The Pizza in Washington, D.C. He is also the co-founder of Eat The Change, an environment-friendly snack company. He has worked with many highly acclaimed chefs during his time in the United States and France, such as three Michelin Star chef Gerard Boyer. Spike graduated from The Culinary Institute of America in 2005.
About the Author
Dana Zukofsky is the Restaurant, Franchise & Hospitality Practice Leader at Aprio, providing advisory, accounting and consulting services to help foster profitability and growth.