Why a fast-casual chicken chain is selling NFTs for $14,500 apiece
Image courtesy of Chick’nCone
A fledgling chain known for fried chicken served in ice cream cones is selling non-fungible tokens for $14,500 a pop to help it open more restaurants.
No, it’s not a Mad Lib industry. This is the business plan for Chick’nCone of 24 units. The fast casual hopes to sell hundreds of NFTs by offering people the chance to make money owning one.
This is yet another example of how restaurants wade into the world of NFTs, or unique digital images that can be bought and sold online. But so far, most experiments have focused on customer engagement rather than revenue generation.
Chick’nCone, on the other hand, hopes to sell over 900″Chick’nCoinsfor 5.5 Ethereum each, or around $14,500. Ethereum is a cryptocurrency.
It may seem like a lot to pay for what amounts to a simple black and white image of the word “Chick’nCoin”. But coins could pay off big for owners willing to take risks.
Here’s how it would work. Each of the 933 coins represents a particular region in the United States. If a person buys a piece and Chick’nCone later sells or opens a restaurant in the area, that person receives $22,500, which is half of the restaurant’s $45,000 franchise fee.
They are also entitled to 2% of the restaurant’s sales for six years. And if they get an area that already has Chick’nCone restaurants, they can start collecting their share right away.
Coins are distributed randomly, and there is a chance that Chick’nCone will never sell or open a restaurant in the area covered by a coin. In this case, Chick’nCone gets $14,500 and you get nothing. (Not even a chicken-filled waffle cone.)
On the other hand, “If we sell one in your area, you’ve almost doubled your money,” said Chick’nCone co-founder and CEO Jonathan Alamanzar.
Buyers can also resell their NFT on the secondary market, although Chick’nCone gets 10% of the sale.
Founded in 2014, the Florida-based chain currently has 24 restaurants in 12 states, with 58 more in development. He plans to have a total of 50 open by the end of 2022. And he sees NFT revenue as a smart way to fuel his growth.
“What we’re trying to do is raise capital, basically,” Alamanzar said. “That’s the whole goal behind it all: to raise capital without giving capital into the business.
“If we sell 300, that will accelerate our growth tremendously.”
Alamanzar has been into NFTs and cryptocurrency for quite some time. He was among the first to buy collectible NBA highlights known as Top Shots. As he saw their value skyrocket over time, he started thinking about how NFTs could be applied to the restaurant industry, but in a way, “it’s actually valuable to the instead of being like, ‘Own this NFT and get 10% off a chicken sandwich,’ he said.
That’s how he came up with the idea for Chick’nCoin, which could help the chain grow without making it beholden to traditional investors or banks.
“I want to do everything we can to get as far as possible before taking on institutional capital, and maybe never have to,” he said.
He expects the buyers to be investor types rather than people involved in NFTs and crypto. An initial launch of 10 Chick’nCoins sold out within a week, and all 10 buyers had little to no experience with NFTs.
“They just saw it as a good deal,” Alamanzar said.
An added benefit of selling the coins is that it would create hundreds of Chick’nCone superfans who would help promote the chain, not just because they might like the food, but because it might make them money.
When it came to pricing parts, the process was not scientific enough.
“$14,500 seems like an amount people would be willing to spend,” Alamanzar said.
As for the $22,500 payout, he wanted coin holders to be able to get a good return while leaving the company with enough money to open the restaurant it was selling.
There are costs associated with selling coins. Chick’nCone has to spend money to create the NFTs through a process called minting, as well as generating what are called smart contracts for each. If he’s not selling parts, he might be in the hole.
But the biggest risk, Alamanzar said, is that Chick’nCoin could harm the company’s short-term valuation, as it will essentially give income to coin holders.
On the other hand, it will help the channel grow faster, ultimately giving it a higher valuation in the long run.
“If I was planning to sell next week, then yes, I would be very worried about losing money doing this,” Alamanzar said.
Members help make our journalism possible. Become a Restaurant Business member today and unlock exclusive benefits, including unlimited access to all our content. Register here.