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The Spoon

Daily news and analysis about the food tech revolution

friesDAO

Hack Drains FriesDAO Restaurant Project of $2.3M in What Looks Like Potentially Lethal Blow

Late last month, FriesDAO, the organization that made a splash when it raised over $5 million via a token offering earlier this year, saw its treasury raided and drained by a hacker.

According to a postmortem created by the DAO’s admins, hackers were able to access the DAO’s treasury and take all of the group’s USDC tokens:

On October 27th, 5:58PM UTC, friesDAO contracts were exploited by an attacker taking control of our own deployer address through a profanity attack vector. The hacker was able to drain the treasury of its USDC through the refund contract, drain the FRIES tokens in the staking contract, subsequently selling it all into the Uniswap pool.

The document goes pretty deep into crypto-speak to explain what happened, but the bottom line is a hacker was able to access the DAOs treasury via a crypto exploit called the Profanity flaw. There have been a number of Profanity-exploit related crypto hacks over the past couple of months and, unfortunately for FriesDAO, they are one of the latest.

The news looks like a potentially crippling blow to the DAO, which had been deep in negotiation to buy its first restaurant. Those within the DAO are continuing to try and figure out who stole the funds and figure out next steps, but things are not looking good. The overall tenor in the group’s Discord is one of resignation as they try to figure out if they can salvage the acquisition, start anew by raising new funds, or if they should just take their losses and move on.

It’s a huge bummer for an innovative organization that looked like it would be the first to create the world’s first DAO-owned restaurant. More broadly, this type of news will no doubt potentially plant seeds of doubt among decision makers at bigger brands who had been evaluating moves into the world of Web3.

Web3 & Bubble Tea: FriesDAO Closing In On First Restaurant Acquisition

FriesDAO is closing in on its first restaurant purchase.

The group, which managed to raise over $5 million via an initial token offering in the spring of 2022, has identified a boba tea/frozen yogurt store in New York City that it describes as an “absentee store (no daily owner operation needed).” The group says the location is currently profitable.

To make the deal even more interesting, the FriesDAO team says “a very popular NFT collection” has offered to give the group full support with possible partnership implications if the DAO chooses to brand a store with the NFT. In a post on Snapshot, FriesDAO explains that partnering up with the NFT collection (which they do not name) is attractive because, in part, any commercial revenue restrictions from the NFT license would be removed.

“This would potentially allow us to own the store directly, explore and set our own policies, increase community engagement through creative endeavors, and possibly start our own franchise.”

Over the past six months, the group has been sifting through various proposals with mixed success. In a previous announcement, FriesDAO disclosed they had been in discussions with an operator of a Jersey Mike’s franchise to buy its location, but the deal fell through once the operator backed out.

The DAO now looks like it’s found a purchase target. After getting nearly unanimous consent from backers via an online poll, the DAO is planning to send a Letter of Intent (LOI) today, FriesDAO advisor Bill Lee told The Spoon.

If the deal (which will cost about $165 thousand) goes through, I’ll be curious to learn which NFT collection the group has been in discussions with. The success of Bored & Hungry has shown that branding a restaurant with a popular NFT can add buzz and drive customer visits.

The group’s choice of a boba tea spot makes sense, since spin-up costs for new locations are likely to be much lower than that of a traditional fast food joint. Lower capex costs could help accelerate expansion should the DAO move forward with an NFT-branded franchise model.

The Effort to Onboard Restaurants to Web3 Continues, But It’s Going to Take Some Time

Over the past year, we’ve seen a rush of enthusiastic entrepreneurs and restaurant-adjacent operators announce initiatives to help onboard the world of dining into the world of web3.

How’s it going so far? Let’s just say it may take some time.

I decided to check in on some of the early efforts and see how things are going. Here’s what I found.

FriesDAO

FriesDAO flew out of the gate, pooling $5.4 million through an NFT sale that the DAO hoped to use to buy or invest in a fast food restaurant. How are they doing?

Things look to be slow-going. Reviewing some of the announcements made via the DAO’s Discord, the group began exploring potentially working with Bored & Hungry to open a second location in June. Those talks don’t seem to have progressed very far. The group also began exploring potential deals to acquire or start a new franchise with a few franchise operators, including a Jersey Mike’s owner. In early August, the FriesDAO admin team announced that the Jersey Mike’s owner they had been in conversation with is no longer looking to sell.

Bored & Hungry

And what about Bored & Hungry, the crypto-centric restaurant that launched in April of this year after restaurant operator Andy Nguyen decided to create a Bored Apes-themed restaurant using one of his Apes (Bored Ape #6184) as the central character?

After garnering lots of early buzz, the restaurant continues to plug along even after the late spring/early summer crypto crash. While there were some reports that the restaurant had stopped accepting crypto as payments, Nguyen called the reports ‘fake news’ and the restaurant continues to do brisk business (with even the occasional Snoop Dog sighting).

BurgerDAO

Late last year, BurgerDAO launched with the hopes of starting a completely Web3-centric burger franchise from scratch. The idea was to raise funds via an NFT drop and partner with a ghost kitchen operator to launch the BurgerDAO initially as a virtual restaurant, with long-term plans to create an IRL physical BurgerDAO location.

Big plans, but according to BurgerDAO founder Al Chen, real life has gotten in the way. On April 1st, Chen sent a message on Discord letting the community know the founders have run into more roadblocks than expected and are also pretty busy with their regular lives.

“…life just got in the way. We both have full-time jobs, families, and all the same shit you all deal with on a day-to-day basis. Long story short, we haven’t had as much time as earlier in the year to devote to pushing things forward on the project.”

Chen made it clear that they haven’t given up on the idea and are optimistic about BurgerDAO, but at this point, hasn’t made any additional announcements.

Devour

Devour isn’t a restaurant concept itself but instead a collection of different platforms that aim to help bring the world of restaurants into Web3. The group is creating its own blockchain token called DevourPAY, which it hopes will become the preferred token of the restaurant industry, and has launched a series of membership NFTs called the Industry Collection. They’ve launched their initial token offering through an ILO (initial liquidity offering) this week and are planning to launch a web3 food marketplace called DevourGO in September.

At this point, it’s too soon to tell how things are going with Devour, but they certainly look busy as they ramp up a bunch of different interlocking components of what they call an ecosystem. The group has something like 5 or 6 different websites, and for a restaurant operator not really accustomed to the world of web3, I have to wonder if the sheer amount of various offerings Devour is throwing out there is a bit overwhelming and confusing.

Brightloom’s Web3 Services

Adam Brotman, CEO of Brightloom, brings some digital payment street cred to the table as the guy who’s credited as the driving force behind Starbucks’ digital ordering initiative. So it wasn’t all that surprising when the company announced they were creating a web3 consulting business to help restaurant operators ease into the world of web3, especially after Brotman started making the rounds early this year talking about the potential of web3 for restaurants.

The announcement came after The Spoon had uncovered that Starbucks had brought Brotman in to advise on their move into NFTs (Brightloom has been careful not to make any announcements about being involved with Starbucks’ effort). At this point, it isn’t clear how much of the web3 push from Brightloom is simply Brotman pushing his own consulting services (he has a separate consulting group called Forum3 on his Linkedin) vs Brightloom trying to become a key player for restaurant web3.

So what do I think after checking in on some web3 restaurant initiatives? Mainly that things are going kinda slow. The crypto crash no doubt took some steam out of web3’s food service sails, but I also think that the world of dining just isn’t quite ready for this transition.

Everyday diners just want to eat and probably are confused by any mention of NFTs or a DAO. The same can probably be said for the vast majority of restaurant operators. And while platform-builders like Devour and Brightloom (and others who have made noise like Lunchbox and Nextbite) are building tools to make things easier for everyone, the reality is infrastructure building is arduous and time-consuming.

Bottom line: The world of web3 may eventually merge with restaurant dining, but don’t expect it to happen quickly.

It Started as a Meme. Now friesDAO Is On Track to Buy a Restaurant After Raising Over $4M Selling NFTs

When Bill Lee and Brett Beller started talking about the idea of using a DAO and NFTs to buy a McDonald’s, they were mostly joking around.

“There was always this joke since the beginning of crypto where if you just traded very poorly, or if you lost a lot of money, you could always work at McDonald’s,” said Lee, an advisor to friesDAO, in a recent interview with The Spoon. “And we just thought it would be hilarious if we got together and said let’s try and buy McDonald’s as a DAO so we can guarantee ourselves a future job.”

The two continued talking and became intrigued enough by the idea to start a Discord server, tell a few folks, and see what happens. Within a few days, a couple thousand had joined the Discord, and it became clear that what started as a meme was now something many were taking very seriously.

“As people started joining, we realized that the pressure is on now,” said Lee. “People are actually wanting to do this for real.”

Different members of the server offered to pitch in, and before long, they had assembled a crew to make it happen. One person started a website. Another registered a domain. Someone put together the documentation. And just like that, a Discord server that had launched after Christmas was a DAO with momentum and real money: As of this week, friesDAO has over $4 million in a treasury.

In the short time the project has been together, Lee and the rest of the team have given lots of thought to how it might work. For token holders, Lee said that while they will have a say in the oversight and direction of the restaurant and get access to real-world benefits like free food, what they won’t get is any ownership equity in the restaurant. That would essentially categorize the effort as equity-based crowdfunding and subject it to much stricter regulatory oversight.

As for the purchase structure and ongoing oversight of the business, the group’s considered a number of ways to do this. While one idea is an outright purchase of an existing restaurant through a contracted third party, another possibility they’re exploring is structuring the deal as a loan to an existing franchise operator to buy another restaurant. This would allow the DAO to rely on the operator’s expertise in running a restaurant, preserve capital, and scale to more cities, all while negotiating real-world benefits for token holders into the terms of the deal like coupons for free food.

With (as of today) over $4.3 million in the treasury, the DAO already has enough to buy a restaurant, but the question is what kind? Lee said the group has priced out everything from a Subway to different nationally recognized burger franchises, but they will likely go after a smaller franchise first, essentially giving them a “practice run” before scooping up a bigger franchise like a McDonald’s.

According to the group’s roadmap, that first purchase should take place around June of this year.

You can listen to my full conversation with Bill Lee of friesDAO below, on Apple Podcasts, or wherever you get your podcasts.

If you missed SimulATE, The Spoon’s food Web3 summit last week where we talked with others working on restaurant NFTs (including BurgerDAO and Flyfish Group), you can watch all the sessions here with a subscription to Spoon Plus. (Also, make sure to not miss SimulATE II, coming in May).