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NFT restaurant membership ‘first use case of a utility-based project’: FlyFish Club CEO

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David Rodolitz, FlyFish Club & VCR Group CEO, joins Yahoo Finance Live to discuss how the company is creating a use case for NFTs by launching a members-only restaurant club in New York City.

Video transcript

BRAD SMITH: NFT sales totaled over $25 billion in 2021, according to DappRadar. And even the hospitality industry is shooting its shot. The FlyFish Club, founded-- co-founded by Gary V, is expected to open in early 2023. And it is set to become the world's first dining club where memberships are purchased through an NFT.

For more on this FlyFish Club, VCR Group founder and CEO David Rodolitz joins us, alongside Yahoo Finance's David Hollerith as part of our Crypto Corner segment presented by Tastyworks. Great to have you here with us today, David Rodolitz. We're going to get to David Hollerith in a moment.

DAVID RODOLITZ: What's up, Brad? What's up, David? How are you guys doing?

BRAD SMITH: But we got to start with-- good, good. So we got to start with the type of demand you're seeing right now and what really drove so much fanfare around this type of approach in the NFTs, but as part of the hospitality industry.

DAVID RODOLITZ: I think what we're seeing is that our project is based on utility, and most of the NFT projects to date have been based on digital art or a collectible and a lot of things that people aren't really understanding. Ours is a first use case of a utility-based project. And through NFTs and leveraging technology, we've converted a membership, which has been around forever, into an asset, into ownership.

So I think it's just a tremendous innovation. People have been really excited about it. People have been following NFTs. A lot of people have been following crypto. And I think you're just seeing a lot of things overlapping that has gotten people excited about this project. So yeah, we're really excited about it. We're happy where things are.

DAVID HOLLERITH: Yeah, David, I think Brad actually wanted to get more into the food. But I was sort of curious-- it sounds like there's food going on here, there's cocktails. What is the model here? What is the ultimate utility of the token?

DAVID RODOLITZ: Yeah, it's going to be a private dining club. So there'll be a robust bar. It'll be a seafood focused restaurant. And it'll be an outdoor space. And then there'll also be a private omakase room nestled in the back of the club. My partners, I have two chef partners, Josh Capon and Conor Hanlon. So these guys are very decorated chefs. We're going to be flying in some of the best seafood from around the world. We'll also be sourcing ingredients locally. And it'll be amazing food, high quality ingredients.

And then in the omakase room, we'll also be bringing in our partners from another restaurant that we own called Ito, which is by Masa Ito and Chef Kevin Kim. We're going to all collaborate on that one and do a really special omakase experience in the private omakase room. So, you know, approachable food, but very well done, very thoughtful with a lot of culinary superpowers.

AKIKO FUJITA: Yeah, I mean, at the end of the day, you've got to have the food, right, to get people in through the door. David, quick question. You mentioned how your use of NFTs are different than what we've seen largely so far, talking specifically about this being used as a utility. How much of the long-term case you think for this space is about that, that it's not necessarily about collectibles, but utility?

DAVID RODOLITZ: No. Listen, the collectibles and the speculative investments, I think a lot of projects will work. I think a lot of projects won't work. I think NFT's in the macro. NFTs are here to stay. I think you're going to see it disrupt all industries. I think you're going to have to see them more convert more into real life experiences and utility. That's why we were excited to be first in this case. I think there's a lot of projects right now that are just-- people are pumping them out, trying to make some quick money. And I think that's a lot of the reasons you're hearing people call this a fad or something else.

But I think the utility-based projects that are leveraging the technology-- I mean, NFTs, they authenticate ownership. I mean, that's tremendous. So to be able to seamlessly do that and then to also efficiently be able to transfer that ownership super quickly and to have an ability to document that without all these middlemen or months in between, how can that not disrupt all industries? So I think we're going to see more real life, in-person, utility-based things. I think you're definitely going to see it in the events business. I mean, it authenticates ownership. It could be a ticket. It could be anything.

BRAD SMITH: So let's talk a year, two years after launch. What performance indicators would you look back to, to say whether or not this is a success, and then perhaps overlay this same type of model and the NFT approach towards other parts of the experiential economy?

DAVID RODOLITZ: Yeah, I think the obvious. We need to have a fun, enjoyable restaurant that people are at. It's been remarkable that we sold this project out in less than a minute. Obviously, all the financial numbers that are transparent on the blockchain, we're very happy about that. It gives us an ability to be really financially stable, which is difficult for the hospitality and restaurant industry.

So we're not patting ourselves on the back. We have to deliver an exceptional restaurant. We have to deliver a hospitable experience. We need people to be there. We need people that bought this token to want to use the token, not just buy an NFT like a lot of other projects have done. So to hedge against that, we've held back about 1,500 tokens that are sitting in the FlyFish wallet that can be used down the road once we see consumer behavior.

So if people are enjoying it and frequenting the restaurant, then great, we don't have to release a lot of those or do anything with it. But if a lot of these people bought it for different intents than what we created this project around, then we will sell more of these tokens that we've held back. We could gift these tokens to the right people around the New York marketplace.

My partners and I have been doing this for a long time. We know how to curate the right experience. So like anything, you need to see your four-wall EBITDA, you know, and your restaurant sales exceeding your restaurant expenses. I would argue-- a lot of people have brought up to us that this is crazy. How are you doing this? This is so-- you're already in a difficult industry, and you're just adding more complexity to it.

And I'd argue the exact opposite. I think it's very difficult to just rely on restaurant EBITDA these days, you know, to build a restaurant, to raise money, millions of dollars, and then to hope to squeeze out 10% or 15%. I think that's very challenging. So through NFTs, we've created a new modern financial model. We've got upfront sales. We've got ongoing royalties through the smart contract. And then we have restaurant sales hopefully exceeding restaurant expenses.

But all of those three give us an advantage. And I believe that that will allow us to create more value for our customers. We could be more hospitable. We could be less transactional. We don't have to forward all the supply chain issues onto the consumer like every other restaurant does because they need to--

AKIKO FUJITA: Yeah, so--

DAVID RODOLITZ: --because it's very challenging.

AKIKO FUJITA: David, it sounds you've got-- it sounds like you've got kind of a sliding scale in terms of how many tokens that are going to be released, the different tiers. Can you walk me through the kind of price tag we're talking about?

DAVID RODOLITZ: Yeah.

AKIKO FUJITA: And what do you think the resale value would be?

DAVID RODOLITZ: Well, the beauty-- I mean, we know the resale value right now. It's all on the blockchain on the secondary market called OpenSea, which is basically like the buying and selling. It's eBay of NFTs. When we minted the tokens-- minting essentially just means you're taking a digital file or digital collectible and you're converting it into a digital asset in ownership.

So during the minting process when we sold our tokens, there were two types of tokens. There was a FlyFish token, which gives the purchaser or the member access to the restaurant, the dining club, the bar, and the outdoor space. That's a FlyFish token, which we sold for 2.5 Ethereum. And Ethereum at the time was hovering around 3,200. And then we have the FlyFish omakase token, which at the time was selling for 4.25 Ethereum. So those were about 8,000 and 15,000 respectively when we sold them to the first buyer. We sold those out and generated a little bit north of $14 million.

And then on the secondary market, the activity started immediately. And again, this wasn't our intent, but it's the truest form that this is an asset. People could do what they want with it. They could keep it. They could sell it. We're creating a leasing mechanism that they could lease it if they're not able to enjoy it for an amount of time. So we started seeing people flip it for 2x, 3x, 5x. I mean, there was some really great acknowledgment about our project and a lot of press. And we started to see tokens, the base token, sell for $25,000. And we saw the omakase token sell for 55,000 to 60,000 tokens.

AKIKO FUJITA: Well--

DAVID RODOLITZ: It's come down a little bit since then.

AKIKO FUJITA: --David, it's going to be interesting to see if other restaurants follow as well. We'll be watching the progress very closely. David Rodolitz, FlyFish Club and VCR Group founder and CEO, and our very own David Hollerith joining in on the conversation.

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