Restaurants’ appetite for cryptocurrency is growing

Restaurants’ appetite for cryptocurrency is growing

On May 22, 2010, a programmer named Laszlo Hanyecz made cryptocurrency—and restaurant—history when he traded 10,000 bitcoin for two pizzas from Papa John’s.

It was the first commercial transaction using digital currency, and is celebrated in crypto lore as “Bitcoin Pizza Day.”

However, that landmark pizza purchase turned out to be more of a novelty than a sign of a new era of payment for the industry. While restaurants have dabbled in cryptocurrency payment over the past decade, it never truly caught on. Bitcoin, the most popular digital currency, has been extremely volatile, and consumer adoption relatively low. Notable skeptics included former Starbucks CEO Howard Schultz, who said on a 2018 earnings call that “I don’t believe that bitcoin is going to be a currency today or in the future.”

But crypto has accumulated some serious cachet recently. The value of bitcoin has skyrocketed, and other digital currencies are becoming mainstream. What’s more, institutional investors are paying attention. So it’s no surprise that some restaurants are again trying to get ahead of the curve.

Last week, Tilman Fertitta, CEO of the Landry’s hospitality group, said most of the company’s restaurants would begin accepting bitcoin and other crypto payments within the next three months. It is perhaps the most high-profile foray into cryptocurrency by a restaurant to date.

“It’s amazing how simple the transaction is, and it is here to stay,” Fertitta told CNBC. “This is where it is, and it’s inevitable that this was going to happen.”

Despite its former CEO’s misgivings, Starbucks sees a use case for cryptocurrency as well. Shortly after Schultz stepped down in 2018, the coffee chain announced a partnership with Bakkt, a digital asset marketplace, that today allows customers to reload their Starbucks Cards by converting bitcoin into U.S. dollars.

“By accepting a variety of payment methods, Starbucks allows customers to select the option most convenient and relevant to them,” a Starbucks spokesperson said. The company would not reveal how many of its customers have used Bakkt to convert bitcoin. 

Offering customers more flexibility in how they pay is one reason restaurants might consider accepting cryptocurrency, said Peter Jensen, CEO of RocketFuel Blockchain, a crypto payment processor.

“From a restaurant’s perspective, you just want to accept whatever payment the customer wants to pay with,” he said. 

And there are other potential benefits, too. Most cryptocurrency payments are stored in an immutable, time-stamped database called the blockchain. That system makes payments more secure, Jensen said, and results in fewer declined or disputed transactions, all of which amounts to lower processing fees.

Leading crypto payment processor BitPay, for instance, takes a 1% cut of each transaction. That is lower than the major payment networks, which charge an average of 1.3% to 3.5% per swipe, according to The Motley Fool.

“This is something that is very much in the infancy stages, but it is something that people are going to be requesting and wanting.” —Cindy Ferreiro, Thesis Hotel and Mamey restaurant

Even though it has made headlines recently, cryptocurrency usage is not yet widespread in the U.S. As of last year, only about 6% of Americans used or owned cryptocurrency, according to a survey by researcher Statista. But that has not deterred some restaurants that believe mainstream adoption is coming.

“This is something that is very much in the infancy stages, but it is something that people are going to be requesting and wanting,” said Cindy Ferreiro, senior marketing manager at Thesis Hotel in Miami. The hotel and its restaurant, Mamey, started accepting cryptocurrency payments with BitPay about two weeks ago. 

Only two guests have used it so far, Ferreiro said. But she has high hopes for more activity during a bitcoin conference scheduled for June.

“It’s still new,” she said. “I don’t think the general population is comfortable with using it yet.”

Prior to launch, hotel and restaurant staff participated in a training with a BitPay representative and did some research on their own so they could educate customers. Operationally, “it was pretty seamless,” Ferreiro said—if a guest wants to pay with bitcoin, the waiter will bring out a BitPay tablet, and the person can enter their payment information. 

RocketFuel, which currently only processes online payments, is working on streamlining the in-store payment experience even further, Jensen said. Right now, it can be clunky, requiring a QR code or additional device.

“We want to make it as easy as buying from Amazon in the stores,” he said. “It needs to be super, super easy.”

“I think it’s gonna have a lot of volatility … but at the end of the day, I don’t think it’s going to disappear.” —Derek Gonzalez, Pilo’s Tequila Garden

As of Friday, a single bitcoin was worth nearly $58,000—making that initial pizza purchase back in 2010 a nine-digit transaction. Despite those eye-popping numbers, most restaurants aren’t going to be interested in keeping their crypto, Jensen said. Companies like RocketFuel and BitPay will convert the digital coins into fiat, so merchants don’t have to worry about the impact of fluctuations.

There are thousands of different cryptocurrencies, and not all are as volatile as bitcoin, he added. Some, known as stablecoin, are pegged to fiat or other commodities. “Then it could make sense for the merchant to just keep those,” Jensen said. 

Still, the astronomical growth of bitcoin and other digital currencies can be tantalizing. Pilo’s Tequila Garden, a taco concept in Miami, recently began accepting another fast-growing cryptocurrency called dogecoin—and plans to hang onto it.

Dogecoin, created on a lark by software engineers in 2013, was trading at about 61 cents on Friday afternoon. But it has surged by more than 21,000% over the past year, thanks to Reddit users and encouragement from Tesla CEO Elon Musk. Pilo’s owner Derek Gonzalez sees it as a long-term investment and even hired an independent contractor to manage the currency for him.

“It’s crazy to think that people are buying tacos for doge, and what if doge in five, 1o years is worth $100, or $10,000?” he said.

Doge is the only crypto Pilo’s accepts, in part because of how it aligns with the restaurant’s tech-forward but accessible brand. Gonzalez called it “the people’s coin.”

“You don’t have to be completely loaded [to buy it], and you can come various times a week and it’s not going to break the bank,” he said. 

And what if the doge bubble pops?

“It’s a risk I’m willing to take,” Gonzalez said. “Obviously, if it disappears, I can’t accept something that no longer has value.

“The idea is that I think this coin is here to stay. I think it’s gonna have a lot of volatility … but at the end of the day, I don’t think it’s going to disappear.”

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