Is Kickstarter the Future of Restaurant Financing?

A Kickstarter campaign from the crew behind the upcoming Minnesota restaurant Travail Kitchen has, as of posting, raised a whopping $183,022 since the drive went live on Tuesday. Travail met its $75,000 goal in less than six hours, and they still have 27 more days of fundraising to go. And Bizarre Foods host Andrew Zimmern says the use of Kickstarter by Travail and other restaurants like them might well be a "a sea change in terms of how local restaurants get funded."

$75,000 Raised in Six Hours

Right now, Travail has some 29 backers at the $1,000+ level and one backer who donated a staggering $10,000. And what do these donors get? For $1,000, they get four chances to cut the line for dinner (the restaurant will not take reservations), a dinner for six at the Kitchen Table (alcohol not included, apparently because of a Kickstarter rule), spots at the opening party, and other swag. The $10,000 donor will get a private party for 40 on a Sunday or Monday (again, no alcohol included). Other incentives for donors include spots at a cooking class, their names on the "Family Wall," and the 2014 Travail Sexy Chef Calendar.

[Screengrab: Kickstarter]

Brown calls the donations a "sweat equity loan."

Eater spoke with Travail chef and Eater Young Gun Mike Brown about the campaign's success. Brown says he thinks the success of the campaign is due in part to the community's understanding that "it's the one time we've ever asked the public for anything like this ... They know nobody handed us anything." He calls the donations a "sweat equity loan" the team will work off when the restaurant opens and when rewards are redeemed. He says the outpouring of support has been "humbling" and "tear-jerking." Although the goal has been met, Brown explains that Kickstarter advised him that he wouldn't be able to shut down the campaign. He's not sure the public would want him too: "At this point, people want to do this ... The number keeps going up, and we're going to figure out how to accommodate the rewards."

So what exactly will the restaurant do with the $100,000+ Kickstarter surplus? Brown tells Eater that first they will finish building the restaurant, "and then see what kind of surplus we have." If there's money left over from the build-out, Brown is hoping to invest in specialty equipment like rotovaps and blast chillers. He also says the team is discussing ways to provide better health benefits to employees. There's a non-profit cooking school Travail would like to create for disadvantaged teens. He'd also like to build a test kitchen. "That $100,000 for us is huge," Brown says.

Thirty Acres, Jersey City, New Jersey. [Photo: Krieger]

The Future of Financing?

Over at Mpls.St.Paul Magazine, Zimmern points out that in the days before Kickstarter, private funders would give money in exchange for partial ownership and the possibility of earning cash back. With Kickstarter, a more diffuse group of donors receives prizes and, as Zimmern puts it, a chance to be "'in' on the inside" of a hip restaurant.

While the amount of money raised seems to put them in a category of their own, the Travail team certainly isn't the first restaurant to use Kickstarter to fund an opening. Another Minneapolis restaurant called the Rabbit Hole met its funding goal of $10,000 this week, with 16 days left to fundraise (they are currently up to $12,483). In Cambridge, MA, the upcoming restaurant Commonwealth has met its $50K goal, having raised $53,418 with another 11 days of fundraising to go. Kickstarter seems to be particularly popular in and around New York City, where The Musket Room raised over $25,000, Thirty Acres banked a respectable $18,000, and Littleneck took in $13,000. It seems that today, a restaurant must consider Kickstarter as a legitimate option in fundraising.

Kickstarter isn't a guaranteed win for restaurateurs.

Of course, Kickstarter isn't a guaranteed win for restaurateurs. In New York City, Sarah Simmons launched a Kickstarter campaign this Summer to move City Grit. Although she received donation pledges of roughly $33,000, her goal was $100,000. Because she didn't receive the pledges, her project was left unfunded.

Littleneck, Brooklyn. [Photo: Littleneck / Facebook]

The Rewards-Based Donation

With customers donating a tremendous amount of money, it's reasonable for them to expect a lot in return. Yesterday Travail wrote an update on their Kickstarter page expressing their thanks and acknowledging this very issue: "We know that all of this support means we've got some big expectations to fulfill." Today Brown tells Eater: "It's going to really put it on our shoulders how much people expect from us. To give money like that to us, they have really high expectations. We have those expectations too...but damn the gravity has gotten stronger."

Restaurant reward incentives on Kickstarter are hardly consistent.

Beyond raised customer expectations, with Kickstarter campaigns there's a question as to whether the prizes match the scale of the donation. Brown credits the rewards for part of the campaign's success. He explains his rewards are basically "pretty comparable to an at-cost scenario" for the restaurant. But restaurant reward incentives on Kickstarter are hardly consistent. Whereas a $5,000 donation to Travail brings a year of unlimited reservations (along with other perks), the same amount at Thirty Acres would have been rewarded with a complimentary dinner with drinks four times a year forever.

There's also a concern about whether customers will tire of giving money to for-profit businesses. Zimmern writes that donating to restaurants and donating to non-profits need not be an "either/or proposition," and points out that restaurants themselves play a vital role in non-profit activity: "The hospitality community is the single greatest resource for non-profit that I can think of." Notably, Brown tells Eater that he would not turn to Kickstarter to fund another restaurant again. He says: "If we were to do it again, it would be for a non-profit."

Zimmern suggests that a restaurateur might turn to Kickstarter because it offers the cash infusion of private investment without the strings. Private investors — who want things like a say in the direction of a restaurant they gave money to — can be "bad for making art." For now, it appears that restaurants like Travail have solved the problem with Kickstarter. It just remains to be seen whether customers will keep on giving, even if they are excited about having a new restaurant in their neighborhood and their name on the wall.

· And the Travail Kickstarter Has Met Its $75,000 Goal [Eater Minneapolis]
· The Travail Boom [Mpls.St.Paul Magazine]
· All Kickstarter Coverage on Eater [-E-]