How Crypto Ecosystems Are Solving the Financial Constraints in the Restaurant Business
The restaurant business is one of the most coveted niches, given the opportunity to become one’s boss and create employment for others. This booming industry is the bread and butter of most families in the U.S., with over 9.9 million people employed in various restaurants, according to the U.S. Bureau of Labor Statistics, National Restaurant Association. The figure was above 12.3 million before February 2020 but took a major hit at the onset of the Covid-19 pandemic.
As much as the food business has significant potential, statistics show that players in this sector struggle to make razor margins to keep afloat. This is because of several shortcomings, which range from financial factors to the legal landscape. With the number of employees in U.S. restaurants projected to hit 17.2 million by 2030, it is inevitable to address these challenges.
So, what is being done by stakeholders to build a more lucrative industry? First, let’s delve deeper into some of the existing challenges and later introduce the potential solutions, including accepting cryptocurrencies as a form of payment. A trend that is significantly changing the game for restaurant owners and their clients.
Financial Constraints in the Restaurant Business
Though lucrative, the restaurant business faces a myriad of financial and legal challenges. The following section highlights some of these challenges in detail to paint a grim picture of its dark side.
1. High Transaction Costs
In most cases, restaurants rely on U.S. banks to maintain their going concern status by accessing capital and enabling payments to merchants or by customers. While banks have traditionally been the go-to financial institutions, they significantly increase the cost of doing business, given the high transaction fees associated with bank payments.
Restaurants that leverage banks for transactions incur processing fees between 1.3% to 3.5%. In addition, they have to pay interchange fees and assessment fees to accept credit card payments. These fees eat up most of the revenue generated by restaurants, leaving them at the mercy of meagre returns.
2. Online Third-Party Review Platforms
With the world moving to digital ecosystems, company-sponsored reviews have become a popular way to advertise businesses. However, this model has its fair share of challenges when it comes to the restaurant business. For starters, third-party customer review platforms charge high commission fees for listing services within their platforms.
These review platforms also operate based on centralized architectures, which means that restaurants lose control autonomy. Food businesses that list their services on third party sponsored platforms have little to no access to their clients’ data, making it hard to build direct relationships or leverage the data to increase sales. This is a challenge to the merchants and clients, given they are merely incentivized or compensated for their valuable data.
3. Access to Financing
For any business to grow, it needs capital and human resources to scale up efficiently. Restaurants are no different; unfortunately, stakeholders in this industry often face a significant challenge in accessing capital to scale up or keep their businesses operational.
As we emerge from the pandemic, the situation is even worse, given that stakeholders, including the government and financial institutions, are cash strapped. Meanwhile, gatekeepers in the financial ecosystem are sidelining restaurant businesses or small entities, allowing them to sink into financial ruin in favour of other sectors.
Can Crypto Ecosystems offer a Solution?
The emergence of Bitcoin opened up many opportunities, the most notable being the introduction of decentralized ecosystems. Unlike traditional industries, cryptocurrencies are decentralized, which allows anyone to use them. This fundamental concept is now being adopted in the hospitality industry, with some restaurants already accepting Bitcoin as a form of payment.
Even better, there are upcoming decentralized direct-to-consumer food and beverage marketplaces such as Bistroo, a community-powered platform that links restaurants directly with consumers. The Bistroo business model allows restaurants to onboard their services within 24 hours while charging a significantly lower commission fee (5%) than traditional review platforms. The fees can go as high as 13% in the latter.
In addition, Bistroo returns the autonomy of data control to the restaurant and prospective clients. This community-powered food marketplace allows restaurants to customize their listings and access clients data at a fee. On the other hand, clients can share their data with restaurants in return for network incentives in the form of BIST tokens.
Ideally, BIST tokens operate as the fuel of the Bistroo platform by facilitating payments to merchants amongst other operations. Clients who leverage this native token to make payments are incentivized with a 2% cashback in BIST tokens. It is also noteworthy that Bistroo features decentralized merchant financing to assist restaurants to access capital from the community. This platform has grown exponentially, recording over $1 million in orders as of Q4, 2020.
Going by the developments, crypto ecosystems such as Bistroo offer solutions to most of the existing challenges in the restaurant business. However, this can only be actualized on an industry level if more restaurants are willing to become part of the decentralized economy or Web 3.0.
As mentioned in the introduction, the food industry is one of the most lucrative business sectors in the global economy. Nonetheless, it continues to face significant challenges that push restaurants out of business daily. With more people increasingly depending on this sector, it is only prudent for stakeholders to integrate modern-day technologies such as blockchain and crypto to improve their efficiency.
Decentralized ecosystems offer more autonomy to restaurants and could go a long way in building confidence between the merchants and consumers. Statistics show that 79% of American customers trust online reviews on a similar level to personal recommendations. That being the case, decentralized crypto ecosystems are a good starting point to build direct communication channels and eventually improve industry confidence.