Crowd-funding for restaurants is a fickle beast. Sure, Zack Danger Brown infamously raised $50,000 to make potato salad on Kickstarter last year (it started as a joke; he ended up giving the money to charity) but the story typically has a less happy ending.
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.
But the costs of opening a restaurant are prohibitive. Andrew Richmond of La Carnita estimates that it can cost up to $500,000 depending on the size and custom design work of the restaurant. Derek Valleau, a partner in Toronto's Pukka restaurant says, "Attracting investors or going to the bank is very painstaking, difficult and complicated. The biggest challenge with restaurants is the risk of failure which is very high and hence the reason why banks hesitate to provide money for upstarts." So, no matter the challenges, restaurants keep turning to crowd-funding. It turns out, there's a bit of a science to it, but it can be done.
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.
"There are lots of nuances in terms of language and rewards to make a campaign successful," she says. "You want to provide rewards that are of value. When you have a product, that's very easy to do because you can have a really cool [product] and someone wants to buy it. But when you have something less tangible, you have to really think about what are the rewards that I can provide so that people don't feel like they're donating. We're not a charity, it's an exchange." They met their goal in less than a month.
Brogan said that a lot of the money came from friends, family, people in the industry and former work colleagues from across Canada (Chef Michael Smith appears in the fundraising video). They also tapped into Mottershall's community of 34,000 Instagram followers from as far as Spain.
"We started with 20 rewards, narrowed them down to seven and added a few more during the campaign," she said. Apart from the expected rewards of a sit-down meal or an invite to opening night, some of the rewards were created for people who may not be able to come to Toronto. They include t-shirts and a cookbook with all of Loka Snacks' recipes.
Brogan credits Sylvia and Darren Cheverie for having a successful campaign. They found the Cheveries during their research and reached out to them for advice. The Cheveries are planning on opening Charterie, a French-Canadian restaurant in Beaumont, Alta., 25 kilometres south of Edmonton. Their Kickstarter raised $107,000 from 600 people, the most-funded restaurant Kickstarter campaign in Canada ever, and all of it came from their community.
"We were selling people an idea and a vision. It was an interesting marketing challenge and we knew that marketing had to be spot on," Sylvia Cheverie says. Part of that marketing was to get the community to buy into the idea of a restaurant. "We didn't have this international audience and we knew that the people who would invest in us would be within 30 to 50 kilometres."
The Cheveries started volunteering with the Beaumont Agricultural Society and went to every business in the area and put up posters. "We were on the ground, in the community, talking to our potential investors," she says.
"It's very similar to running a political campaign," said Darren Cheverie. This included answering questions on Beaumont's Facebook pages and offering rewards for both local and long-distance supporters. They also offered recipe books and a personalized thank you as well as meal packages. The Cheveries launched their Kickstarter on March 5 of this year and reached their goal two months later, on May 4.
Both restaurants are in the middle of renovations. Loka Snacks is hoping for an October opening while Chartier's opening is planned for January, 2016.
Recently, the Cheveries turned to crowdsourcing again, this time going to Twitter to ask for help finding talent. "We are on the hunt for the perfect Head Chef of @dinechartier," they tweeted. "Plz share and help us find our partner."