I've mentioned this in passing a few times, but if you don't mind, I'd like to get up on this soapbox for a minute and preach some truth.

 

Here's what we all know is wrong with the independant specialty coffee industry:  mainly, for your shop to be what you want it to be, you need committed, highly trained workers, who care about the shop, and are dedicated to becoming better at what they do every day.  Normally for any business, the way to have an elite staff like this is to offer them a competitive wage, maybe with benefits.  Of course most shops only make enough to pay little more than minimum wage, so all they can do is hope that their shop is cool enough that it's worth it for the expert barista to take the small wage in exchange for "the lifestyle".  Or you scale down your shop enough that you and your partner or whatever run it yourselves.  You suffer from high worker turnover, lack of commitment, lack of new ideas, and you spread yourself thin trying to control every aspect of the shop and keep it up to a high standard.

 

There is only one solution to this, and the coffee community needs to be aware of it as a viable option: The worker-owned coffee house; the cooperative model.  No, I am not a communist or an overly idealistic hippy; this is a highly effective, tried and true form of micro-capitalism.  Why do you need heirarchy to run a business?  Why do you need a boss?  This country was founded on democracy, why don't we incorporate it into our businesses?

 

Advantages:

1. the big one:  With every worker sharing in the profits and decision making, you can have a commitment to quality that single shop owners can only dream of.  Many baristas do their best because it's in their nature, but imagine the energy and effort these baristas would put in if every drink sold meant money in their pocket.  If the cafe they were working at was literally THEIR cafe and treated it as such.

 

2. the many armed manager:  A single manager is limited and overworked.  By dividing managerial tasks among all the members, you can do everything you ever wanted to do with a cafe, and do it better.  For each task a single person is accountable, and more effective because it's the only task they need to focus on.

 

3. the startup: there are so many passionate baristas who have dreamed of owning their own shop, and almost none of them have access to the capital it takes to do it, or the ability to get bank loans.  F%#@ the banks, they got us into this mess in the first place, we don't need them.  If each member can scratch together a few thousand, you're probably almost halfway there.  There are many non-bank lenders out there, especially for coops, grants, crowdraising websites...  And if you have 8 or 9 workers, it's 8 or 9 times easier to fund your business than it would be on your own.

 

4. no decision gets made without you.  It can be hard to get everyone to agree on some things, but this also means that each major decision gets scrutinzed, discussed, and researched thouroughly.

 

5. financial advantages: you don't have to pay worker's comp tax because everyone's an owner.  Also, you pay very little tax on the business income because at any time you can divy up the business' earnings and give it to yourselves as tax deductable dividends.  So basically, you cut out employment costs and manager costs, raise your profit by out-competing everyone, have the man-power to do additional revenue raising things, and cut costs to outside contractors by having a large pool of skills and doing more things in-house.

 

My core members and I just got done interviewing nearly 30 highly qualified people with a variety of different skills and specialties.  All passionate about coffee, tired of having a boss, or tired of being a boss (this model also gives you the rare ability to own a business and actually live your life a bit), tired of their hard work being overshadowed by useless co-workers or ignorant owners, and tired of being paid almost nothing to do a job that if done right takes years of experience.  On the job listing I stated that it would take some financial contribution, and about six months until we open, yet people have been scrambling to be a part of it.  Once we have the group and pool our resources, we can work out the lease for the building we want, get the permits going.  If things are on schedule, we'll be open in 6 months.  Of course they probably won't be on schedule, but we're prepared for that.

 

How to start:

-research research research research.

-learn your state's coop laws, get in touch with cooperatives, ask them (somewhat informed) questions and they will help you, talk to cafe owners and small business owners.

-write your business plan.  If you need help, look for free business plan writing workshops, there are probably some in your area. 

-Assemble a core group.  Not just anyone but people you know you can trust and depend on, and who share your general vision of what you want the shop to be.  You only need 2 or 3 people to get the ball rolling.  When your core group is SURE they will see this through to the end, put up ads advertising for applicants.  I made the mistake of wasting a lot of time asking a lot of friends, acquantances, and random baristas if they were interested.  And of course everyone was "interested" but probably about 10 people have come and gone from our collective.  Instead let people who really want it come to you and compete for the position.  Pay the $75 for the craigslist job posting, it's the best money I've ever spent.  You have no idea how many people have just been waiting for an opportunity like this.  Before you advertise for the position, make sure your business plan is solid: 1. you'll get more serious applicants that way, and 2. it will ensure that the people coming to you already generally agree with your vision as a foundation. 

 

I had to write this.  I've seen people post and post about the frustrations in this business, and experienced most of them myself.  I believe this is the only way the specialty coffee industry can improve, you've all experimented with every brew method imaginable, and micro roasters aren't going to get much better than what we've got now.  The only way to be better is by raising the consistancy of quality and dedication in our shops, and the only way to do that is by making being a barista a financially viable job.  There are just too many intelligent, passionate, creative coffee people out there not to tap into that potential; merely employing them is a waste of their potential.

 

Viva Barista

Views: 138

Reply to This

Replies to This Discussion

Interesting idea, I wish you the best of luck.

I think proof is better than a soapbox though: more people will listen to you when you have actually opened the shop and show what quality and service you can deliver to customers and what return on capital and wages you can deliver to the baristas/owners.
I like the enthusiasm, but I don't know if I agree.

- Every worker sharing in the profits and decision making. Commitment to quality, energy and effort - all very alluring aspects of this argument. However, if the workers want to share in the profits and decision making, are they too sharing in the cost of establishing the business? Are they sharing in it's losses?

All of these are laudable theories but nine times out of ten, people just won't agree. Your "commitment to quality" may be quite a bit different than mine. If we're on the same "decision making group" then who's vision of quality becomes the company's?

Every drink sold exactly means money in everyone's pocket. That's something every barista needs to understand. Regardless of your wage level, each item sold is going towards your pocket. A company, by nature, needs to generate profit to remain "sustainable" and pay you your wages so that you can buy whatever you want and live the life you desire. If the baristas don't "get" that concept, they need to get the hell out.

3 - Financing a business without going to the bank is a desirable position. However, you start offering investment opportunities to a hundred people with a thousand bucks each - does that mean each of those hundred people have a say or a hand in operations? If so, you're screwed.

Also, banks are a very necessarily entity in business. Not only do you need to have accounts to hold your money and have credit card transactions transferred into but banks offer lines of credit, loans and other services that can be very beneficial to a small business. Plus, it helps to get to know your banker.

Which leads us to:

4 - Hard to get everyone to agree? That means the decision doesn't get made, or takes so long to get made that it's irrelevant or catastrophe has resulted. In large groups, a molasses effect usually takes place. Analysis Paralysis. In business, decisions need to be made. Many times those decisions are made with poor or inadequate information, but they need to be made and made now. It can't wait until the committee weighs in.

Even in "employee owned" corporations, there is an administrative structure. Most of the corporate structure and titles remain because there needs to be a hierarchy. Chain of command, areas of responsibility and people to report to are essential to efficient operations.

5 - Ideal but workers comp insurance typically isn't that extreme for a coffee shop business. But are we talking about a partnership or an actual corporation? What happens if someone actually gets injured? That corporate officer, who is technically an employee (or now owner), no longer has workers comp insurance to cover the injury. Screwed.

Tax deductible dividends? Have you actually worked this out with your accountant? From what I know, money paid out to an owner as recompensation on equity is non-taxable. However, money paid out as a "dividend" is taxable as it is personal income.



Further, how many people are you talking about? And how much are each of these people thinking they're going to make?

Let's just use simple math here. Let's say you have a staff of ten people who are going to share the work and make this dream happen. How much do they want to make per year? $25,000?

At $25K per person, you're going to need to generate $250,000 in revenue - just to cover salaries. If you can manage your labor to 30%, you'll need to generate $750,000 per year in gross sales. Minimum.

Of course, if you're able to cut your percentages in other areas like cost of goods and rent, then you can get by with less revenue, but to give yourself the cushion, you'll need three quarters of a mil per year.



On top of that, how are you going to build this shop? Are these people going to invest? Are they in a position to invest? What will they do if the project goes under? Do you even know how much it's going to cost?

Don't get me wrong. I'm not telling you not to move forward. But do you really know what you're getting into? Starting and sustaining a business is difficult. As an owner, the greatest pressure is the need to keep the business sustainable, and not because of a passion for coffee, but because I know my great team of baristas depend on the company to earn a living. If the company dies, so does their job.

It is the greatest burden of owning/running a business. Are you ready for that? Or are you simply going to pass the buck to everyone in the chain?
Wow, that's a lot of questions. Good ones too.
Rather than answer each one, or post our whole business plan here, I would say first that there are many ways that you can structure the initial startup costs, and investments, and second I would advise consulting an attorney regarding your state's coop laws, as we've done. Mainly, though, I just wanted to bring to the attention of many of the posters here who sound serious about starting a cafe, that whether or not we end up succeeding, there are hundreds of highly successful coops in America, some of them cafes, and that it could be more than worth looking into as an option if what I wrote sounds appealing at all. I know that the profit margin for cafes isn't that much, but if you really want to make a living at being a barista, then being part owner seems clearly to be a better way of doing it than working for someone else.



One question I do want to respond to because it has to do with cooperatives in general, is the decision making aspect. If you have a business plan to follow, and the core members agree to the essential tenets of the original vision, and you bring on people with the precondition that they also agree with the philosophy, like, for instance "green business, micro-roasted coffee, music venue" or whatever else you want to outline in your business plan, then the rest is just operational and can and should be negotiated as a group. And no, you don't need a hierarchical structure. Bigger coops will have a board of directors making most of the decisions with "members" under them, and sometimes also regular employees, but we think with a coffee shop of only 10 or so, everyone can be a member/director. You elect someone to lead meetings, you follow the agenda, you vote, and that's that. For smaller decisions like "what color to paint the walls" you can appoint a subcommittee to make design decisions and report back to the group. It would be faster for an owner to simply make a decision and order everyone to follow it, but by presenting a viewpoint, opening it for discussion, voting, you have the potential to reach much more sound decisions that everyone can agree on, or if not totally agree, then at least have a clear understanding of why the group went that way. I think this is another reason that coops typically don't fail once they're open as often as other startups; because each decision is made so methodically.

And to answer your closing question, yes, I have a very good idea of what I'm getting into. As in every business, there is some risk, and there will be things that come up that we hadn't anticipated, but we've done the homework, and have every indication that this can work, and will work for us, and of course has worked for many others. There is no way to "pass the buck", as everyone will be invested in the business. Either we succeed past all expectations, or it goes down in flames and we all lose, which I think is precisely why it will work.

I know what I've said would have more weight if we were already up and running, but I wanted to at least throw out the idea for people who are searching for a solution, and may have the drive to run with it.

In cooperation :)
-Chris
Your first link has reader comments like:

"surrounded by for the most part highly attractive revolutionary thinkers and thousands upon thousands of revolutionary books"

and

"They're worker-owned, they support a wide range of left and anarchist politics"

So much for the ... not communist thought process...

My staff, get full medical and pension... dental, they keep all their tips... we don't nail them for the ones paid on credit card... and they make a decent wage... Nobody has ever left (except to go back to school) no other shop has ever been able to hire one of our people away from us...

Customers love the staff and likewise... the staff love the customers...

In five years, we've only fired one person and that was for yelling at another staffer... we don't have politics in the shops... we've had a few relationships which always makes things touchy... but we managed to get by...

I don't run my shops... my staff do and they know I know that... it's a mutual respect...

That seems to work... just fine...
So, this is a novel idea.

But, from my experience, every co-op type business I've been in (which is honestly only 3-4) has a non-directed feel to it. Almost too homogeneous. No character... No direction.

A business needs to reflect the vision of an owner (for better, or worse). And, for the most part, people need direction.

Like I stated, I'm far from a co-op expert. And, my experience as a co-op consumer is limited.

I do think that this model works in certain businesses... but, not here.
I should add that the only co-op I "belong" to and really like is: R.E.I.
Despite my enthusiasm, in the end, a coop or a regular business will depend on the people or person involved. I would say most of the cafes I've seen suffer from a lack of creative vision, staleness, uninspired-ness...and coops aren't immune from it either. If the model is used to its full potential though, then you've got a large pool of skills and knowledge, and a constant influx of new ideas and solutions to problems, plus a greater ability put things into effect. The challenge of course is to keep things organized to a point where instead of a jumble of conflicting visions, you democratically decide a course of action, and execute it as a unified force. I think that's one misconception of coops: though everyone is politically equal and has an equal share in profits (in our case dependant on hours worked), you can still have one person in charge of espresso operations, one for food, one for booking live music, setting up art shows, making schedules, purchasing, etc. Jay mentioned this before regarding accountability, and the way that you set it up or don't set it up, so that there is accountability for everything can make or break the business. There are pros and cons to this model, it isn't for everyone, and the people you work with have to be chosen very carefully, but all of this is true of any business.

Anyway, sorry if it seemed like I was attacking your ways of doing business. I'm sure you guys are great employers and your shops are tip top, I wish there were more like you, and I know that most baristas are perfectly happy not having the pressures of running a business and all that. And not everyone wants to work in a cooperative setting. For some people though, this could be the way to go.




David Lanning said:
So, this is a novel idea.

But, from my experience, every co-op type business I've been in (which is honestly only 3-4) has a non-directed feel to it. Almost too homogeneous. No character... No direction.

A business needs to reflect the vision of an owner (for better, or worse). And, for the most part, people need direction.

Like I stated, I'm far from a co-op expert. And, my experience as a co-op consumer is limited.

I do think that this model works in certain businesses... but, not here.
Promoting themselves as anarchists works for them and their demographic, and I guess is unifying factor for their team (sort of ironically). It isn't a necessary condition for working cooperatively with other people toward a common goal. You were probably just joking though.




Marek said:
Your first link has reader comments like:

"surrounded by for the most part highly attractive revolutionary thinkers and thousands upon thousands of revolutionary books"

and

"They're worker-owned, they support a wide range of left and anarchist politics"

So much for the ... not communist thought process...

My staff, get full medical and pension... dental, they keep all their tips... we don't nail them for the ones paid on credit card... and they make a decent wage... Nobody has ever left (except to go back to school) no other shop has ever been able to hire one of our people away from us...

Customers love the staff and likewise... the staff love the customers...

In five years, we've only fired one person and that was for yelling at another staffer... we don't have politics in the shops... we've had a few relationships which always makes things touchy... but we managed to get by...

I don't run my shops... my staff do and they know I know that... it's a mutual respect...

That seems to work... just fine...
I don't see any upside to this business model. It's like a group project for school - No matter how competent the members of the group are, there's always a minority carrying the weight of everyone else, yet everyone expects the same grade. There needs to be a "the buck stops here!" person. Otherwise you are creating a system that promotes groupthink rather than innovation. A company that chooses to not have a definitive leader, is a company that doesn't have a definitive leader to choose.
One of my mentors for this project is Tim Huet, who is on the board of directors for the cooperative Arizmendi Bakery, who is also a lawyer specializing in coop law and runs a non profit that helps coops get started. He can do all these things by not being a sole owner (one advantage). Arizmendi is now opening it's 5th location. Though expanding doesn't really raise profits for worker owned business other than raising popularity, the model has been so successful that they've opened other locations because of the number of people who want to be part of this kind of business.
a few more examples just in the bay area, and there are lots more, again 4 stars and above.

http://www.yelp.com/biz/missing-link-bicycle-cooperative-annex-berk...
http://www.yelp.com/biz/the-cooperative-grocery-emeryville
http://www.yelp.com/biz/berkeley-moving-cooperative-berkeley-2
http://www.yelp.com/biz/inkworks-press-berkeley#query:cooperative
http://www.yelp.com/biz/rainbow-grocery-san-francisco
http://www.yelp.com/biz/nabolom-bakery-berkeley
http://www.yelp.com/biz/techcollective-san-francisco#query:worker%2...
http://www.yelp.com/biz/box-dog-bikes-san-francisco#query:worker%20...


There are no cafe coops in the state-we will be the first, though there are some in other states; like Firestorm in Asheville NC, and the Red and Black in Portland. I'm not sure if they focus on "3rd wave" coffee, but that's exactly why I posted this. Almost all the arguments I've heard have been against coops in general, when clearly the model can and has worked. I can't think of any reason it can't work for specialty coffee. Maybe especially so, since cafes require less members and less overhead than most of the examples I posted.




John P said:
I don't see any upside to this business model. It's like a group project for school - No matter how competent the members of the group are, there's always a minority carrying the weight of everyone else, yet everyone expects the same grade. There needs to be a "the buck stops here!" person. Otherwise you are creating a system that promotes groupthink rather than innovation. A company that chooses to not have a definitive leader, is a company that doesn't have a definitive leader to choose.
It's not that it CAN'T work, but the solution doesn't provide the right answers. The idea that this alternative will provide a better standard of pay for the workers really isn't so. In the end you have a group of workers, being paid like workers, not a group of owners being paid like owners.

Partnerships are tricky enough, but having 3 or 4 or 10 owners will bring more headaches and confusion and less reward. I have a few friends that I have known for twenty plus years, and I wouldn't go into business with any of them -- and they're all experts in their own fields. Not everyone is cut out to have a business, to be an owner. And the likelihood that a group of X people who want to have a business actually have the tenacity and skill and business smarts to do it is unlikely.

The reason there are so many hoops to jump through, such difficulty getting funding and creating a business, is to weed out those who are likely to fail. You sound like more of a leader than a follower, and if that's the case, step up and do what YOU need to do to have YOUR business. Maybe offer a buy in or a percentage of profits when management and staff have proven results. We can love what we do, but in the end, results matter. Reward results.

Reply to Discussion

RSS

Barista Exchange Partners

Barista Exchange Friends

Keep Barista Exchange Free

Are you enjoying Barista Exchange? Is it helping you promote your business and helping you network in this great industry? Donate today to keep it free to all members. Supporters can join the "Supporters Group" with a donation. Thanks!

Clicky Web Analytics

© 2020   Created by Matt Milletto.   Powered by

Badges  |  Report an Issue  |  Terms of Service