Co-op restaurants: pipe-dream or practical solution?
Courtesy of Phoenix Coffee Company
The pandemic has changed what we mean by “restaurant” to include market hybrids, more take-out, less brick-and-mortar—and more restaurants that want to upend the hierarchy that defines dining out.
“Should we lease out our kitchen?”
There was no easy answer—and for workers at Red Emma’s in Baltimore, no boss to make the decision. Since opening in 2004, the restaurant-slash-radical bookshop has been cooperatively owned by its workers, who vote on the issues, big and small, that shape the way their business operates. And, for an hour and a half on a June afternoon, each worker-owner got to speak up about the kitchen’s future—one tied up with their own.
For years, Red Emma’s has drawn crowds for its crispy falafel sandwiches and vegan mac and cheese as much as for its wide selection of literature, ranging from prison abolition to queer feminist theory. Yet, like so many small independent businesses, the store has limped along during the pandemic. A patchwork of sidewalk book sales and disaster loans, together with takeout, delivery, and grants, couldn’t stop the store from hemorrhaging cash. That could all change, though, if the cooperative voted to rent out its kitchen on weekdays to the Mera Kitchen Collective, helping both groups strengthen their bottom lines.
“What I say actually means something for the future of the business,” said Tre’ Ford, a worker-owner and newly-trained line cook at Red Emma’s. “That’s empowering.”
During the pandemic, the restaurant industry has engaged in great soul-searching as it struggles to keep afloat. Many businesses have adopted takeout and delivery models, while others have trimmed menus or added a market component. And a small but growing handful has decided to upend the business model and run a restaurant as a worker-owned cooperative, where profits go not to investors but to the employees, who have a voice in determining their companies’ future.
“What I say actually means something for the future of the business. That’s empowering.”
Interest in cooperative business models tends to swell in the wake of social revolutions and financial crises. The Great Depression and New Deal era gave rise to democratically run bartering systems like the Unemployed Cooperative Relief Organization. The countercultural attitudes of the mid-20th-century civil rights and antiwar movements birthed worker-run auto repair shops as well as natural and gourmet food stores like the Cheese Board Collective in San Francisco, whose two original owners, inspired by their time spent on an Israeli kibbutz, decided in 1971 to sell their business to their six employees to create a worker-owned cooperative. In the decade following the Great Recession, the number of verified worker-owned cooperatives in the United States swelled between 2013 and 2019, from around 350 to at least 465, according to the Democracy at Work Institute (DAWI) and the U.S. Federation of Worker Cooperatives (USFWC). Mo Manklang, policy director for USFWC, said that there are 39 verified cooperatives that are restaurants, breweries, cafes, bars, or bakeries.
There’s been a similar response to the pandemic, as it exacerbates income inequality and lays bare workplace disparities. Attendance at monthly webinars hosted by the USFWC has more than doubled to an average of 65 people per month, according to Manklang. And over the past 19 months, a handful of businesses in the foodservice sector alone have started up or transitioned to worker-owned cooperatives. Among them is the vegan Sri Lankan restaurant Mirisata in Portland, Ore., as well as Phoenix Coffee Company, a Cleveland-based regional chain with five locations and a roastery.
“I have experienced recessions, a pandemic, erosion of the social safety net, watching the boomers extract value left and right,” said Christopher Feran, a worker-owner and co-general manager of Phoenix Coffee, who was previously a minority partner at the company. “I do not subscribe to the way capitalism was practiced in the U.S. for the last 50, 60, 70 years. And I think that has a lot to do with it.”
The definition of worker-owner varies from one business to the next, but usually it
Other worker-owned cooperatives have a more traditional structure. At Democracy Brewing in Boston, Miguel Zambrano, the head chef and a worker-owner, is in charge of directing the menu and the kitchen staff, while Tom Edes, the general manager and a worker-owner, is responsible for overseeing daily operations of the restaurant and for hiring. Even so, worker-owners on the lower end of the hierarchy are assured their say through elected representatives who sit on the board of directors, which oversees management.
“If you have a manager who is abusive or you have a manager who is just not doing a good job, is not listening to the workers, the workers have the power to have that person recalled and take that person out of a position of power, and they can participate in choosing who is going to fill that role.”
“What a cooperative does is replicate that bottom at the top” through the board of directors, said Kate Khatib, a co-founder and worker-owner at Red Emma’s. “If you have a manager who is abusive or you have a manager who is just not doing a good job, is not listening to the workers, the workers have the power to have that person recalled and take that person out of a position of power, and they can participate in choosing who is going to fill that role.”
Khatib noted that traditionally marginalized workers are among those who benefit the most from the worker-owned model, both in terms of the redistribution of power as well as a path toward owning a business. According a recent report by DAWI and USFWC, nearly 60 percent of people employed at worker co-ops identify as people of color, and more than 64 percent as women or nonbinary. Co-ops often involve worker-owners in decisions about distributing profits or setting up health care benefits and sick leave, two issues that have proven vital to restaurant workers throughout the pandemic. And many provide opportunities for professional growth and development, like lessons on deciphering financial statements and cross-training on different stations in the front-of-house or back-of-house.
“What cooperatives do is provide an opportunity for people who don’t have access to all that financial, social, and political power because of their identity,” Khatib said. “It provides a way for those workers to actually move into a position of ownership, and that is really transformative.”
Ford, a worker-owner at Red Emma’s, came to the store in 2019, following years of working as a security guard. Although his hospitality experience was limited to a brief stint as a Starbucks barista in college, he quickly picked up how to prepare drink orders as a barista and bartender. Now, with the kitchen short-staffed due to the pandemic, Ford has been working the line, learning proper cooking techniques from more experienced colleagues.
He often begins his back-of-house shifts at the prep station, briefly chopping pounds of tomatoes, onions, and cucumbers for the cucumber and mint salad, before jumping on the grill and fryers to prepare Beyond Meat burger patties or crisp up slabs of bacon tempeh for a “TLT.” He already envisions the day when he makes his first contribution to the menu.
Most businesses across America are typically built around a single person, particularly restaurants, where the celebrity-chef model has defined the industry since the 1990s.
“There are certain specials that will come up in the meeting and then they’ll be implemented for brunch or throughout the week,” Ford said. “If I can come up with something cool that we could serve people for an extended period, that would be great. I’d love to have a sandwich named after me or something.”
Part of the motivation behind all this knowledge-sharing in cooperatives is to reduce dependency on any one individual. Most businesses across America are typically built around a single person, particularly restaurants, where the celebrity-chef model has defined the industry since the 1990s. But Feran, the co-general manager of Phoenix Coffee, explained that a successful cooperative will be one that puts out a consistent product, regardless of who’s at work on a given day.
“Looking at the inevitability or the eventuality that I won’t be at the company anymore at some point, I need to do everything I can to ensure that my other members, who are my equals and make a contribution, are set up to survive that incident,” Feran said. Although Phoenix Coffee is only in its first year as a worker-owned enterprise, he is already looking ahead at how he can best document and share his knowledge of coffee buying and roasting or retail store development. “Not everyone has equal skill or interest or capacity, but if you make the resources available to engage in those conversations, you can find out who does have acuity in those areas.”
If there’s a right time for a more democratic structure in foodservice, now might be it, as the cultural fixation with celebrity chefs declines, said Paul Freedman, author of Ten Restaurants That Changed America and a professor of medieval history at Yale. According to Freedman, the pandemic, along with movements like #MeToo and Black Lives Matter, has “undermined the post-Top Chef model” in restaurants. People’s demands for “democratic tendencies, inclusive tendencies and a dislike of the macho image,” he noted, “has reduced the importance of celebrity chefs.”
The pandemic has brought into sharp relief foodservice’s vast inequalities and grueling work conditions, driving more owners and workers to explore ways to make their industry more just and humane.
Still, Freedman doubts that a completely egalitarian approach is a workable alternative. “You can’t have a Quaker decision-making consensus and still have an army,” he said.
But the pandemic has brought into sharp relief foodservice’s vast inequalities and grueling work conditions, driving more owners and workers to explore ways to make their industry more just and humane. Clark Wolf, a veteran restaurant consultant, predicts the result of this reckoning will be a heightened focus on “cooperation and consideration” in restaurants, including collective ownership, in the near future.
“I think we’re going to see a lot more experimentation and examination of how best to craft a credible, viable, sustainable restaurant business,” Wolf said, adding that cooperatives, including those owned by their workers, will likely “break out and permutate in many different ways.” While cooperatives like Red Emma’s and the Cheese Board Collective have expanded the scale of their operations and number of worker-owners, the business model isn’t for everyone. At the now-shuttered New York City cooperative restaurant Colors, founded in 2006 by former employees of the World Trade Center restaurant Windows on the World, the decision-making process and perpetual meetings hampered business, and its workers pivoted from the cooperative structure within three years. And the idea of being your own boss can be a frightening—if not somewhat annoying—challenge for anyone who has spent decades executing the visions of a head chef or owner. All of a sudden, they are expected to share opinions about the restaurant with their colleagues, and make decisions that could, worst-case scenario, tank their business.
“If you’re just making pizzas, all you have to worry about is stretching out your dough. You’re not thinking about food costs. You’re not thinking about labor. You’re not thinking about the rent. But being an owner, you have to think about all that.”
Miguel Rubio, one of 14 worker-owners among 28 staffers overall at the Bay Area pizzeria A Slice of New York (ASONY), was one those terrified by the responsibility that accompanied his new ownership role. For years, before the two-unit pizzeria went co-op in 2017, Rubio spent his days largely shaping the dough, baking the pizzas and calzones and handling the register. But when he returned to the company to become a worker-owner earlier this past June, he faced decisions well beyond whether his pizzas were done cooking. “I’m expected to have an opinion, have a say, in everything,” Rubio said. “In our food ordering, in our recipes, in the food quality, in everything.”
For the store’s 15th anniversary event this past September, Rubio brainstormed with colleagues not only on how much pizza slices should cost and how many people they’d need for the event but also on marketing ideas for driving future revenue—including a dough-cutting ceremony with local elected officials, and whether handing out free cannoli would draw new customers. He regularly texts fellow worker-owners at all hours, and has been conducting recipe research for biweekly meetings that go well beyond determining the proper way to cut peppers, or the right amount of sauce for a stromboli. “If you’re just making pizzas, all you have to worry about is stretching out your dough,” Rubio said. “You’re not thinking about food costs. You’re not thinking about labor. You’re not thinking about the rent. You’re not thinking about advertising or marketing or stuff like that. But being an owner, you have to think about all that.”
The worker-owners at ASONY have plenty more to learn—and in some cases, unlearn—as the leaders of their pizzeria. They need to become comfortable doling out constructive criticism, and stepping up in situations their former employers would have handled in the past, like when an employee recently needed help as they lost their cool with a difficult customer. Still, Rubio recognized that owning and running a business was the next step in his career, which made joining a worker cooperative, particularly one whose logo he already had inked on his arm, all too perfect.
“You’re essentially jumping on a moving train. Like the business is established, the recipes have been established, you’re not buying thousands of dollars worth of equipment to start your own company,” Rubio said. “Believing in A Slice of New York and everything that it means and wanting to be an owner of that, I think that’s exactly what I wanted.”
Courtesy of A Slice of New York
External issues can be even more daunting: One of the greatest challenges cooperatives face is access to capital. Equity financing presents a fundamental conflict, because cooperatives are geared toward workers’ profit and ownership, not investors’. And traditional banking and lending systems aren’t used to dealing with a group of 20 owners applying for a loan. “What they will do is suggest that you choose the 3 people who have the best credit or the most assets, and apply for the loan in their name,” Khatib said, recalling a problem that Red Emma’s faced when it sought a $150,000 expansion loan in 2013. “That introduces a really nasty disparity into your cooperative, because suddenly some people have more on the line than others.”
Dozens of new loan sources have cropped up to fill the void. Red Emma’s eventually secured capital from lenders and foundations, including The Working World and Research Associates Foundation, which allowed the co-op to circumvent having to ask just a handful of worker-owners to risk their credit. The experience was so difficult, though, that it motivated Khatib to co-found SEED Commons, a national network of local loan funds geared toward investing in co-ops. Since its inception in 2015, the organization has provided more than $15 million “non-extractive loans,” where the “returns to the lender…can never be greater to the borrower than the benefits of the loan to the borrower.”
This past September, Project Equity, which consults with companies on converting to employee ownership, also started its own loan fund, with a partial aim of inviting more traditional lenders into the process to familiarize them with the cooperative landscape. And over the past decade, cities like New York and Boston have launched their own initiatives to ensure co-ops in their communities have access to resources and support.
By giving cooperatives the support they need to thrive, these groups and initiatives hope to convince other lenders to take a chance. “We need enough deal flow in our space to make it worth it for a small business lender to stop and learn and think about rejiggering their systems and processes to enable this,” said Alison Lingane, co-founder of Project Equity, referring to cooperative conversions of existing businesses.
After exhausting back and forth discussions, Red Emma’s worker-owners decided not to rent out their kitchen, even if that meant working harder to reduce their financial losses. That day’s conversation—and decision—in June resulted in dozens more: on revamping the menu, which had become limited during the pandemic’s delivery and takeout phase; on adjusting hours to plan events that would bring in more traffic and sales, and on what those events might look like; on staffing the restaurant and bar for the new schedules.
By early September, their collective decision-making resulted in a boom in sales. An open mic night drew a crowd of 40 that lingered over drinks late into the night, and that same week, groups of people packed the bar and patio area for a happy hour event, ordering rounds of fries, cocktails, and tequila shots. The store had been losing money, typically bringing in around $8,000 in weekly sales, but that week, Red Emma’s cleared $14,000, turning a profit for the first time since the start of the pandemic.
“Being able to hash it out with a lot of people, you think of things that you wouldn’t think of if you were just doing it by yourself,” Ino Aksentiev, a worker-owner, bartender and bookseller at Red Emma’s. “Also, it means that you make a decision together, and you’re all invested in going forth with that decision.”