Posted: Mar 03, 2018
How Rooster Soup Co., the Perennial, and others bake giving back into the business model
On a near-daily basis, any successful chef or restaurateur fields requests to contribute toward some cause or charity. One week it’s a gala, another week it’s the local sports team’s fundraiser. “When I got in the business in 2001, back then these walk-around tasting events were a novel thing,” recalls influential Philadelphia restaurateur Steve Cook. “Now we could do three of those a week if we wanted to. But it’s hard to see where your efforts are really going.”
Many restaurants donate their time and resources to cook at fundraisers, but the effort can divide their attention from their core business without, ultimately, making a meaningful impact. With the average restaurant profit margin hovering around 5 percent, many chefs just don’t have money or time to throw around.
“I got tired of the way that restaurants engage in charity work.”
However, some entrepreneurs, mostly the heads of midsize restaurant groups with the capital and confidence to experiment, have found a different way to support causes they believe in: by permanently transforming their kitchens into social enterprises able to meet altruistic goals with greater sustainability.
“I got tired of the way that restaurants engage in charity work,” says chef Daniel Patterson. “It didn’t seem efficient. It didn’t feel like we were connected to people.” Patterson, who co-owns multiple restaurants in the San Francisco area (Coi, Aster, Plum Bar), began changing his approach by working with Larkin Street Youth Services, empowering at-risk teens by teaching cooking skills. That turned into a nonprofit called the Cooking Project, which in turn inspired his work on Locol — a partnership with Los Angeles restaurateur Roy Choi, aimed at challenging fast-food dominance in food-desert neighborhoods, while offering healthier options and creating better employment with more opportunities for skill development and advancement.
Patterson has chosen to use his growing restaurant group, Alta, to zero in on the larger issue of systemic racial bias in employment. “People with money, people who control who gets hired, how they get trained and who gets promoted — it’s white people and mostly men in the most visible and highly paid positions,” he says.
Working with Restaurant Opportunities Centers United on the launch of a second location for Alta, Patterson initiated a pilot for a racial equity program aimed at dismantling bias in hiring, training, and professional advancement. Interviews are now conducted using only standardized questions that correlate to one of four skill areas — technical, personal, interpersonal, and leadership — rather than relying on the interviewee’s impression. Once hired, employees are routinely assessed on a 40-point system. They are graded on things like recipe knowledge, taste accuracy, correct plating, taking initiative, listening, resolving conflict, and involving others in decision making to determine their progress, again with a goal of minimizing manager bias. (ROC has since released a racial equity toolkit that other restaurants can use to implement similar processes.) “Restaurants sometimes can mirror the segregation that our country at large has,” says Patterson. “Breaking that down is really powerful.”
Moving beyond the pilot project, Patterson has been replicating the model, with an equal pay scale for front and back of house, for his expanding empire — including at the buzzy new restaurant Kaya as well as at his other restaurants, like Alfred’s. Most of the restaurateurs I spoke with operate midsize restaurant groups, and believe they are only able to engage in altruistic practices buoyed by the economic strength of their other restaurants; Patterson sees his changed way of doing business not as a one-off, progressive experiment, but something he plans to roll out to all of his restaurants.
Vancouver-based restaurateur Mark Brand is also trying to upend a familiar restaurant paradigm. A cliche of contemporary city dining is that a hip restaurant will move into a depressed neighborhood to take advantage of the affordable rent, but end up attracting more businesses and residents — and displacing locals in the bargain. As Brand sees it, another way to do good as a restaurateur is to not be a reckless gentrifier.
Brand’s Save on Meats, a diner, butcher shop, and incubator kitchen for start-ups, occupies a 127-year-old building on Hastings Street in Vancouver, in a stretch plagued by homelessness and addiction. While surrounded by some of the most expensive real estate in Canada, much of the nearby street-level commercial units sit empty. The butcher shop and its pink neon pig sign have been here since 1957. When Brand (who also runs Persephone Brewing, Diamond Cocktail Lounge, and the Portside) bought the business in 2013, he sought to integrate with the neighborhood and its residents, rather than create something they couldn’t afford.
In addition to low prices and preparing over 1,000 meals a day for a nearby women’s shelter, Save on Meats’s most notable initiative is its popular token program: For $3.50 Canadian dollars (roughly $2.85), diners can buy a token to hand out in the community (instead of cash, which will likely go to feed addiction in what managing director Ash MacLeod calls an “open-air drug market”), good for one of five sandwiches. The restaurant redeems dozens of tokens every day.
“With the token project, I try to explain to people, this is not a charity,” says Brand. “You’re paying $3.50. There’s a small amount of profit in that. If there was no profit, I wouldn’t be able to get other programs off the ground.”
To sustain that, the shop buys only whole animals and returns the prime cuts (ribeye, strip loin) to the farmer, allowing the business to pay the lower “rail” price (the whole cow, by the pound) for its burger and sausage meats. The farmer is able to then sell the costly prime cuts elsewhere.
Like Patterson, Brand has also been focusing on hiring practices, especially as a way to connect with the local community, setting a goal for 30 percent of staff to come through various agencies (Jobs West, Open Door Group, STEP to Work) aimed at job placement for people with barriers to employment, such as criminal records or physical or mental health impairments.
He’d like to see local government build incentives for other businesses to make similar efforts: “It would be great if a social enterprise business didn’t have to pay property tax, things along those lines that further incentivize developers, people of wealth, people who own chain restaurants, to do more impact.”
San Francisco restaurateur Karen Leibowitz sees the intersection of mission-oriented businesses and government incentives a bit differently. “The hope is that building consumer demand will lead to political demand,” she says.
“Restaurants have a big responsibility toward shaping cultural expectations around food.”
When Leibowitz and and her husband chef Anthony Myint launched Mission Street Food as a snack cart in 2008, then as a pop-up, it was a hobby. They both had day jobs and only took a modest salary ($300 a week), with any profit going to San Francisco food banks. By 2009, the restaurant had become Myint’s full time job, and they started donating 75 cents from each meal. So for Leibowitz and Myint, who now co-own the Perennial, Commonwealth, and Mission Chinese Food in San Francisco (and are silent partners in Danny Bowien’s embattled Mission Chinese Food in New York), social engagement was baked in from the beginning.
“Restaurants have a big responsibility toward shaping cultural expectations around food,” says Leibowitz.
As she and her partners learned more about climate change, they made that the focus of their activism. Initially, Leibowitz and Myint sought to form a coalition of restaurateurs to collect funds for lobbying. But their peers saw this as a tax on consumers, or a punishment for investors. Instead, the couple began looking at how they could create change within their own operation.
“We did a life cycle assessment at Mission Chinese Food [in San Francisco],” Leibowitz says. “And the majority of our carbon footprint was coming from ingredients, and the majority of that from beef and lamb.” The restaurant added a carbon ranching surcharge of 25 cents to those dishes, which they use to purchase carbon offsets. The practice (which they do at the Perennial too) provokes questions from diners every day.
“Part of the point of the restaurant is to spark questions and conversations,” says Leibowitz. “We are sending the signal that beef and lamb are not as cheap as the market would make you believe.”
At Commonwealth, 15 percent of profits goes to support a dozen nonprofits. The Perennial is focused on sustainability. The team source grass-fed beef from Stemple Creek Ranch, which raises cattle using a farming method that sequesters carbon and promotes perennial plant growth. They bake bread with kernza, a regenerative grain that prevents soil erosion and improves nutrient retention. Herbs and lettuces come from an aquaponic farm, where fish poop helps grow produce using less water.
“The United States has a pretty conflicted feeling about government intervention in markets,” says Leibowitz. “I’m just trying to use the restaurant as a platform for talking about something that we need government help with.”
Steve Cook isn’t holding his breath for a tax break or any other help from the government.
In January 2017, the co-owner of multiple Philadelphia restaurants with award-winning chef Michael Solomonov (Federal Donuts, Zahav, Abe Fisher, Dizengoff, Goldie) opened a new business, Rooster Soup Co., dedicating 100 percent of profits to the Broad Street Ministry Hospitality Collaborative, a charity that feeds some of Philadelphia’s most vulnerable, eschewing the soup kitchen queue model for an emphasis on service and hospitality.
“We would have preferred to have been a nonprofit,” says Cook. “But that’s the way the lawyers advised us — to be a for-profit company and donate all the profits. It’s a bit inefficient for us as a business, because we get taxed on profits, then hand them over. But it turns out that merely raising money to support a nonprofit entity does not qualify with the IRS as a charitable endeavor.”
Photo by Michael Persico, courtesy of Rooster Soup Co.
The genesis of the project goes back to 2013, when Cook’s fried chicken and doughnut business, Federal Donuts, switched from buying breasts and thighs to whole chickens. The whole-animal price is more economical, but only if you use the entire bird. With six locations in Philadelphia, Cook and his partner Michael Solomonov needed to find a regular use for thousands of chicken carcasses.
So they opened a soup restaurant.
“Philadelphia is a great, big city. But it’s one of the poorest big cities in America,” he says. A quarter of Philadelphians live below the poverty line, according to the United States Census Bureau.
A Kickstarter campaign generated $175,000 to help build the Rooster Soup Co. But in the first year, the profits sent to Broad Street have averaged $500 a week. That’s $26,000 a year. At that pace, it’ll take almost seven years just to send $175K, which turned out to be only a fraction of the restaurant’s cost, to Broad Street. Though it’s not fair to limit the impact of the restaurant, which also employs people and contributes to the local economy, to the amount of their charitable donation.
“For any restaurant to be profitable and cash flow positive in the first year is not typical. We’re fortunate to be able to contribute anything in the first year,” says Cook, who admits it may have been an error to include soup in the name. (“In the deep summer, people didn’t want to come in for soup.”) The luncheonette sells mostly sandwiches.
But it’s not just byproducts (like the chicken carcasses) from Cook and Solomonov’s other restaurants that enable Rooster to continue. And that’s common to all of these entrepreneurs. They are not currently getting funding from the government. They’re not doing it at a loss to write off as a tax deduction on their other businesses. These projects are all done with their own money on the line.
“One of the benefits of a being medium-sized restaurant group,” says Cook, “is that we’re not going to let this thing go under for lack of capital. At least not anytime soon. And if that means in leaner times we need to fund some losses, we’re willing to do that.”
By Corey Mintz
March 2, 2018
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