Is restaurant crowdfunding immune to the COVID-19 pandemic?

Abstract

Purpose

In 2020, the COVID-19 pandemic had a devastating impact on global health care and the economy. The restaurant industry has been especially hit hard by the statewide “stay-at-home” orders. To get back on track, many of these businesses need capital. A new and effective form of fundraising for business startups is crowdfunding (CF). However, there has been little research on the pandemic impact on CF. This study aims to fill this gap by investigating the pandemic-related impact on restaurant CF.

Design/methodology/approach

This study extracted all 2,686 restaurant CF projects in the USA from the Kickstarter platform from April 2010 to January 2021. By conducting descriptive analyses and multiple logistic regression models, this study examined the pandemic impact on CF success.

Findings

This study finds that, while controlling the effects of other determinants, businesses in the midst of the pandemic are more likely to be successfully funded than businesses unaffected by the pandemic. Findings also reveal that restaurant startups lowered their funding goals and posted more updates/comments/pledge levels during the pandemic, which made projects more likely to be selected as a “Project We Love” and increased the odds of funding success. However, mentioning COVID-19-related information or locating projects in “red zones” are not found to have any significant direct or moderating impact on the funding success.

Research limitations/implications

This study pioneers the research topic restaurant CF and attempts to raise the research attention of small- and medium-sized enterprises and entrepreneurial financing. Using quantitative methods, it provides a new perspective on pandemic-impact research. Social exchange theory is extended to the context of reward-based CF under crisis. Finally, to the best of the authors’ knowledge, this is the first investigation of the possible moderating effect of project location on the relationship between restaurant CF characteristics and success.

Practical implications

The findings of this study suggest restaurateurs to be confident about the fundraising of their startup business through reward-based CF, even when located within so-called pandemic red zones, and perform appropriate communication strategies while using the reward-based CF.

Originality/value

This study is one of the earliest to examine the main and moderating effects of the pandemic-related factors on business CF in the hospitality realm. The findings are reference for researchers and restaurateurs on fundraising in a crisis context.

Citation

Yang, Y.(Y). and Koh, Y. (2022), "Is restaurant crowdfunding immune to the COVID-19 pandemic?", International Journal of Contemporary Hospitality Management, Vol. 34 No. 4, pp. 1353-1373. https://doi.org/10.1108/IJCHM-06-2021-0817