About that NFT restaurant...
Manufactured scarcity, access, and why this feels kind of icky right now
Last week, much of New York food media reported on Flyfish, the “first NFT restaurant” allegedly coming to the city sometime next year. As I can tell, the interest was spurred by Rachel Sugar’s Grubstreet mock Q&A about the concept, but the restaurant concept has been out there for a while. (Hngry’s Matt Newberg wrote a good (paywalled) explainer in September; entrepreneur and NFT proponent Gary Vee, also a partner in the concept, announced it on CNBC over the summer.)
Regardless of who announced what, when, and when the thing actually caught on, Flyfish the restaurant doesn’t actually exist. Not in physical form, anyway. But it has raised millions from backers, called token holders, that have purchased membership to the as-yet-to-be-built club and restaurant using cryptocurrency. At the outset, a regular membership cost about $8,000 in actual US dollars (2,650 available); a membership that includes access to an exclusive omakase room cost over $13,000 USD (385 available.)
Tokens are currently sold out, per the website, but they’re available on the secondary market. (1,501 were released this month.) Each token — the actual NFT — is an illustration. General memberships are illustrated by a yellowfin tuna; omakase members choose from illustrations of seven different designs — uni, otoro, hamachi, you get it.
As I write this, omakase membership #182 was resold for the equivalent of $46,000. Regular memberships are going for a cool $18,000. That’s a significant return on investment for the original token holder who flipped it after just a few months. But it’s also a significant return for the VCR Group, the company behind Flyfish Club. When a token (aka a NFT / aka a digital picture of a fish / aka a ticket to a hypothetical restaurant) is sold, 10 percent of the cash goes to its creators. This is a de-facto standard and one reason artists are embracing NFTs and the blockchain: they continue to collect on the increasing value of their work as it trades hands.
Flyfish token holders can also lease their memberships to people on a monthly basis for access. But, and this is a big but, membership gets you only access. Members and their guests will be required to pay for the food in actual US dollars. The people behind the restaurant concept have yet to announce any sort of annual food and beverage minimum, though they seem committed to not charging an annual membership fee a la traditional country club dues. But will limiting access to the restaurant to token holders and their guests only — even if they are able to lease this access to other people — actually create enough revenue to sustain what looks to be a very high-end restaurant experience? TBD if those numbers actually work out, but I suppose it depends how frequently the tokens change hands.
Last Tuesday during a Twitter Spaces conversation about NFTs and restaurants,
a couple partners behind Flyfish chimed in. They were in the car and on their way to look at a space for the restaurant concept, they said, which will (hopefully) open in 2023. As they explained, Flyfish members don’t have a stake in the restaurant group; they are not investors in the traditional expect-returns sense. They are backers, sort of like those who contribute to a Kickstarter campaign. Though, as they point out, the token, which represents money invested into the project, becomes an asset to its holder since it can be resold or leased. And, of course, it’s an asset to the project’s creators, who get a portion of every token resale in perpetuity.
By manufacturing scarcity, project creators are able to continually drum up cash to run this business — a business that, I will reiterate, doesn’t exist in physical form and won’t for a while. During the same Twitter Spaces, celebrity chef Tom Colicchio agreed “this is a great way to fund a restaurant.” He’s not wrong.
A headline in the Washington Post described the project as “status with a side of seafood.” That’s also not wrong, and the product’s founders agree.
“Social currency is a big part of this. People are communicating digitally about what they like and who they are,” VCR founder and CEO David Rodolitz told the Post. (If a member needs a plus-one to opening night 2023, I am available! Proof of concept.)
So… what’s wrong with it?
To hear the concept explained this way makes a decent amount of sense: it’s a luxury product marketed toward people who can afford the luxury experience, or should I say the idea of the luxury experience. Given the volume of tokens listed on OpenSea, a secondary market (like eBay for NFTs), plenty of people bought into the project hoping for appreciation. So far, they’re getting it.
In an effort to strike the right balance between eye-rolling and utility, here’s why this feels kind of icky, especially now. Bullet points because this is getting long.
Until recently, much of the big development in restaurant tech helped make restaurants and restaurant meals more accessible. Reservations went online; delivery services made it fast, easy, and affordable for diners to get restaurant meals at home. Restaurants can currently sign on with a company that will help them literally ship their dishes across the country; ghost kitchen companies help restaurants expand geographically with lower operating costs. The NFT restaurant is the opposite of that: it’s exclusive, it’s gated, it’s guarded. Theoretically anyone who holds a fair amount of crypto can access it, but that’s assuming you’re in New York, book a reservation (14 days out, no sooner!), and continue to find enough value in the experience to return.
NFT proponents claim that these projects build community — chefs who are vocally active in the space (think: Spike Mendelsohn, Rocco DiSpirito, Colicchio) parrot this line. But the restaurant is financially rewarded every time a token changes hands — that is, every time someone drops out of the community to sell their access to someone else. Realistically, how many times will an omakase token holder pony up for an expensive meal? Does Masa have many regulars? Or, are you a part of the community simply for having dined there once and passed your access along?
Tom Colicchio described a hypothetical future: a chance for diners to enjoy his New York restaurant in the metaverse — as in, a diner in Nebraska (his example!) could receive actual food from the restaurant in the mail, allowing them to cook a dish with minimal work and, bam! they’re at Metaverse Craft from thousands of miles away. (This is, of course, years in the future, he said.) But a kitchen table in Nebraska isn’t Craft in New York City, it’s not even close. Transporting a diner thousands of virtual miles seems a tall order, even for an ambitious future metaverse. But I guess it could happen.
This all feels so inaccessible, even as proponents preach just how accessible it is. There’s a steep learning curve with NFTs, and if the conversations I see flying around the internet and in the media are any indication, plenty of people are already turned off by their reputation alone. (If you’re looking for a no-judgement primer, try NFTnow.com.)
It also feels a little strange to be talking about the promise of an extremely well-funded restaurant that might arrive in 2023 when the reality for plenty of other restaurants right now is super bleak. Colicchio is a founder and active spokesperson for the Independent Restaurant Coalition, which recently released some troubling new data about the industry during the omicron surge. Per their data, 46 percent of businesses reported that their operating hours were impacted for more than 10 days in December. And 58 percent of businesses reported that their sales decreased by more than half that month.
More chatter this week on Twitter Spaces (which seems to have usurped Clubhouse as the audio platform of choice to describe these things) focused on creating actual value around NFTs and restaurants. Things like priority access to reservations, or a special kitchen tour for token holders of certain businesses. But just like private clubs, these things already exist, and you can probably get access to them through whatever status credit card you’re holding.
One commenter during the Space suggested NFTs of restaurant menus given to diners at so-called status restaurants like Noma so they could share them widely online. This one hangs in my kitchen. Am I doing it right?
If you’re still skeptical, I understand.
These ideas are easy to mock because most of these conversations revolve around what could be, not what actually is. I’m getting a real you-gotta-trust-us tone when listening to early adopters speak about the promise of NFTs and restaurants, and it’s not unlike the early-ish days of restaurant technology nearly a decade ago when I dropped my first restaurant tech newsletter. At the time, restaurants were pitched several times a day on the latest tech that could maybe help them reach more diners, boost sales, create a robust delivery program, enhance loyalty, build community, streamline payments, fix the back office, reorganize the kitchen, revolutionize inventory, and plenty of other promises. Some came to fruition. Others — looking at you, third-party delivery — turned into join-us-or-die businesses that extracted money from restaurants while promising growth.
This time, maybe we should think more critically about what NFTs and cryptocurrency and the blockchain are offering real restaurants, including how much time and effort it’ll require to engage a limited audience. Yes, there’s real promise in taking control away from some third party gatekeepers, and it could be a great way to build restaurant loyalty and engage with diners outside of meal hours. I get it.
Unfortunately, just like the world’s first NFT restaurant, we can all get a clear look at what might be there, but we can’t yet go inside.