Can crowdfunding work for restaurants?
Crowd-funding is, in the simplest terms, the act of raising money via small sums from a large group of people in exchange for rewards of varying values. It’s considered a form of alternative financing instead of the traditional methods such as bank loans. Most of the successful crowd-funding campaigns are product-based – where people support a campaign and receive an item such as a t-shirt or watch, or get a credit on a film. Even then, Kickstarter says only 37 per cent get fully funded, while those that don’t meet their goal don’t receive any funds.
Restaurants face an obvious uphill battle when it comes to crowd-sourcing: there’s no cool product to ship, and the pool of supporters are limited to the local city. (Toronto eating spots The Real Jerk and Glory Hole Doughnuts both campaigned for funds and fell short.) It’s also difficult because equity crowd-funding – money given in return for a share of the business – isn’t allowed in Canada unless the investor is accredited.
Two restaurants, one in Toronto and one in Edmonton successfully raised $40,000 and $107,000 respectively. The money raised wasn’t equity crowd-funding, it was raised by the local communities, people invested in the success of the restaurants and targeted rewards.
Now, thanks to Kickstarter, Loka Snacks owners Dave Mottershall (known on Instagram as Chef Rouge) and Ayngelina Brogan are looking forward to finalizing the transition of their pop-up into a restaurant. Mottershall has worked on the east and west coasts of Canada.
He came back to Toronto a year ago to open a restaurant in the competitive city. Brogan said it’s difficult to get a small business loan when you’re self-employed so the pair looked to crowd-funding. Brogan, who has a marketing background, said they spent a “good couple months” investigating how Kickstarter worked. This included talking to people who ran their own Kickstarter campaigns.
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