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The Role of Crowdfunding in Modern Restaurants

When you think of crowdfunding, you may think of tech startups, charitable causes or various small companies trying to get to the next level. What you may not think of is the restaurant industry. It makes sense, however as bank loans can be hard to acquire and through equity, debt and reward crowdfunding, restaurants can earn the money they need to get off the ground.  

 

Not only can restaurants rely on crowdfunding and investors when starting up, many including Mexican restaurant chain Chilango have found success in raising funding for expansions. Chilango has raised a total of £5.41 million via Crowdcube. The chain planned to use the funds to add five new locations to their already ten existing sites. According to City A.M. “big spenders wanting to invest £10,000 will get a free burrito every week for the duration of the four-year bond.”

 

Similarly, many restaurants have found crowdfunding efforts successful because investors are interested in experiencing the restaurant, not just making money from it. “The average target [for the food and beverage sector] is £86,688. But the average total raised is far greater, coming in at £129,838. This is broken down as: 248 investors, £523 average investment and £22,281 the largest investment,” reported Nisbets

 

Vietnamese street food chain Hop found success in crowdfunding, raising over £1.4 million using Crowdcube. Far surpassing their original target of £750,000, the campaign was aimed at “expanding their brand across London”. Hop’s website stated they had a fiscal year 18/19 revenue of £3.8 million with stable sales year-round.  

 

The number one selling craft beer of Scotland, Innis & Gunn offered different tiers of investments starting at just £20 and going above £50,000. Their crowdfunding campaign was aimed at raising money to build ‘Edinburgh’s biggest brewery’. All of the investment tiers provided unique and amusing benefits including the investors name inscribed in the new brewery. The campaign raised over £3.32 million and finished at the end of January 2020.  

 

Even outside the UK, crowdfunding restaurants have become more popular as sites such as Kickstarter, Crowdcube, Indiegogo and Seedrs. Quick campaigns which open and close within a month find success because investors feel a sense of urgency, rather than pushing it off. By adding a group of investors to the company, crowdfunding can be a powerful, successful and quick tool to raise money for restaurant businesses.  

 

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