Will Weed Smoke Out Restaurants?
New investment trends are creating challenges for local restaurateurs — for now
Every week, I speak with restaurateurs about the issues facing the industry. The price of cauliflower is going up thanks to the vegetarian/vegan trend of cauliflower rice. Avocados are also spiking because avocado toast is the new fidget spinner for mouths. And many are questioning the sustainability of the new poke restaurant trend (when we’re serving huge chunks of tuna in a bowl, it begs to ask how much tuna is left in the sea).
But one of the more interesting things I came across this week was a conversation with a local food operator who was trying to raise money for a new project. He’d been pitching numerous investors and time and time again he ran up against the same obstacle: weed.
Weed is the next Silicon Valley. A big leaf of it was recently on the cover of Forbes magazine. Investor money across America is being diverted from every industry into cannabis. There are currently seven states (California being one) where both recreational and medicinal marijuana has been legalized. And that number will tumble into the dozens very soon. Moral struggles being what they are, states need the gigantic money recreational cannabis has brought to places like Colorado. Weed will one day fix the potholes on your street.
For an example of how mainstream it’s become, PayPal founder Peter Thiel is investing tons of money into Privateer Holdings, which paid bunches of millions for the rights to Marley Natural weed.
Anyway, how does this affect San Diego restaurants? Because traditional funding streams (i.e. banks) aren’t usually available to restaurants. The industry has notoriously small profit margins, and banks only hand money to those with hugely proven track records. The best way to make a banker to laugh is to ask him or her to fund your gastropub.
So restaurateurs have long depended on private investors. “And now those investors are putting everything into weed,” said my source. “We talked with dozens of investors who used to put money into the restaurant industry, and almost every one of them mentioned cannabis as a reason they either wouldn’t invest, or why they were hesitant. It’ll be interesting to see how that affects funding for new restaurants in the near future in San Diego.”
The silver lining is: Once weed is fully funded and immersed in California’s culture, one of the primary recreational activities for its supporters is eating. So maybe it’s a short-term fallout for restaurants. An investment in weed just may be an investment in increased hunger and restaurant sales.