Why Cooperative Food Businesses Are on the Rise

The COVID-19 pandemic has been devastating for the restaurant industry, permanently shuttering 17 percent of restaurants nationwide, and revealing inequities and vulnerabilities baked into the foundations of these businesses. But there is hope on the horizon, as vaccines roll out and more food professionals are immunized. At the James Beard Foundation, we’re looking forward with optimism, while also striving to provide resources and tools to help the industry recover and rebuild with equity and sustainability at its heart.

Below, Sophia F. Gottfried examines the growing trend of restaurants converting to worker-owned cooperatives, and why this business model has become increasingly appealing to the food and beverage industry in the wake of the pandemic.

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Joe Squared in Baltimore looks like your typical neighborhood restaurant: the staff wait tables, receive deliveries, and sling its signature coal-fired square pizzas. Behind the scenes, though, Joe Squared is in the final stages of a major transition—becoming a worker-owned cooperative.

Once the change becomes final this summer, 13 employees will own this long-standing eatery in the city’s Station North Arts and Entertainment District and will collectively decide how it should be run.

COVID-19 has forced restaurants to pivot in countless ways. It has also revealed the inequities of the industry for workers, from unlivable wages to customer abuse to the lack of a safety net. As restaurants reopen, some owners, employees, and activists think worker-owned cooperatives could be a more just way forward.

But what does a co-op, often associated with health food stores or progressive social movements of the past, look like for a restaurant today?

“Co-ops come in all shapes and sizes,” explains Kate Khatib, director of the Baltimore Roundtable for Economic Democracy (BRED), which helps worker co-ops in the greater Baltimore area access capital. In a worker-owned cooperative, however, the workers own the business, receive a share of the profits based on their labor, and have their views represented by electing a majority worker-owner board. Beyond the logistics, the Democracy at Work Institute defines a worker-owned co-op as a “values-driven business that puts worker and community benefit at the core of its purpose.”

Prioritizing workers and community was the goal of Cleveland’s Phoenix Coffee when it converted its shops and specialty roasting business to worker-owned in 2020. Though Phoenix already offered health insurance reimbursement and profit-sharing, a full shift meant defining success differently, says Christopher Feran, worker-owner and director of coffee. Making money is a goal, he says, but the point is to “flow as much of that back to our people and build a strong company.” This means paying employees a livable wage so they don’t have to work multiple jobs, can pay off student debt, and put down roots in the community. “There’s more to running a business than the bottom line.”

Still, Phoenix operates much as it always has, day-to-day. While some co-ops train all employees to work every position, Feran explains, “we have areas of roles and specialization and expertise, different levels of responsibility.” Thirteen of Phoenix’s 32 employees are members of the cooperative, with another seven eligible to be considered for membership by the end of the year. (Every co-op’s bylaws dictate what it takes to become a worker-owner, as well as how the business is run and what worker-owners would vote directly on—from approving the annual budget to opening a new location—versus leaving it to the board.)

At Joe Squared, general manager and worker-owner Okan Arabacıoğlu is seeing lines blur between previously disparate roles. He’s delegating more, with chefs learning about finances and servers filling out grant applications. “We are training people to be business owners and entrepreneurs,” he says. “You see a different fire in their eyes.”

Though the transition is not yet finalized, the group—including founder and former owner Joe Edwardsen—has decided to invest 33 percent of profits back into the business and distribute the rest evenly among the worker-owners. (There will be employees who are either not yet eligible or who don’t wish to become worker-owners.)

Operating as a co-op is not without challenges, of course. Alison Lingane, co-founder of Project Equity, a national nonprofit which advises businesses on going employee-owned, says full-service restaurants can be more difficult to run as worker co-ops. For starters, there’s the industry’s notoriously thin profit margins. Add the many specialized roles and a plethora of menu options, she says, and things get more complex.

When permits or licenses ask what type of corporation is applying, there’s not even a box to check for co-op, Arabacıoğlu points out. “People not knowing about what a co-op is and how we work is the toughest part," he says.

Financing, too, can be difficult without the help of organizations such as BRED or Evergreen Cooperatives, which worked with Phoenix Coffee. When approaching conventional investors with the idea, “no one would touch it,” says Feran. “We needed someone outside the traditional financial system.”

Still, “there’s something about food that lends itself to being employee-owned,” Lingane says; it’s an industry that thrives when employees are highly engaged. Even during the pandemic, research indicates that companies owned by their employees are outperforming other businesses in crucial ways, maintaining work hours, salary, and workplace health and safety. At both Joe Squared and Phoenix, staff agreed to wait until everyone was vaccinated before considering reopening fully; both plan to continue to require guests to wear masks.

At Mirisata in Portland, Oregon, customers’ understanding of what it means to be worker-owned—stickers on the to-go bags identify it as a cooperative—has helped keep the business afloat. The vegan Sri Lankan restaurant started as a pop-up right before the pandemic in March 2020, switched to takeout-only, then opened in a brick-and-mortar spot in October.

According to Alex, Mirisata’s founder and co-owner (who prefers members of the cooperative be referred to by first names only), the restaurant has avoided backing from investors in order to stay worker-owned. In addition to the staff working many unpaid hours to bridge the gap and the business being approved for a Restaurant Revitalization Fund grant, the co-op also launched a membership for diners, which offers discounts, deals, and specials. Mirisata even used a loan from a customer to build an outdoor patio.

Even with supportive customers, though, being worker-owned won’t fix an entire industry, Feran says. “There are a lot of things we can't directly address as operators,” from unsustainable rents to the unjust tipping culture. “Co-ops are one instrument in a symphony.”

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Sophia F. Gottfried is a writer based in New Jersey. You can find her work —covering food, travel, sustainability, health and more — in outlets such as Eater, The Kitchn, and CNN Travel, among others. Follow her on Instagram @sophiafgottfried.