Crowdfunding is quickly becoming a popular funding method for new restaurants and cafes. Crowdfunding is the process where businesses or individuals pitch business ideas online and ask for funding to help take the business off the ground.
A website is created to provide information to potential investors to help raise money through donations. Investors don’t just invest out of the goodness of their hearts.
Usually, they ask for a share in the business, or for crowdfunding a restaurant, they ask for rewards like free dinners or booking the restaurants for events.
Crowdfunding is a brilliant way to generate capital to start your restaurant.
Pros of crowdfunding restaurants
- One huge advantage of this sort of funding is that you don’t need to pay back or repay your investors.
- Crowdfunding a restaurant means your investors know that there will be no interest-related payments. As long as the funds are used according to what you promised, there are no hidden fees for crowdfunding apart from a payment processing fee.
- Crowdfunding provides grassroots marketing by building brand awareness through word of mouth. Crowdfunding your restaurant helps to draw attention from local customers. It’s a great way to interact with potential customers.
- Crowdfunding can help you achieve your dreams, even if big-time investors don’t invest in your ideas. Local investors and your already existing customers can end up investing in your thoughts, no matter how crazy they are.
Cons of crowdfunding restaurants
- Crowdfunding restaurant projects means there is a payment processing fee that your restaurant will have to pay, and it is up to 3-5% of the amount raised.
- This sort of funding also means the funding process can take its sweet time to get to the amount you need, which means you are wasting precious time that could have been saved with one big investment.
- There are some restaurant crowdfunding platforms that have the all-or-nothing rule. It means your restaurants only get funding if you achieve your funding goal.
- Crowdfunding has a way of making each and every investor feel involved.
- This could end up backfiring, that is, if you don’t achieve the results you were aiming for or if your launch gets delayed, your investors could become disgruntled, which could lead to unhappy shareholders or having to suffer their wrath.