Worker-owned Bay Area food businesses are on the rise. Is it a turning point for the industry?
After a decade of building Local Butcher Shop from the ground up, co-owners Aaron and Monica Rocchino started to hit a breaking point with the Berkeley business.
For years, the sustainable meat shop off Shattuck Avenue had been the couple’s entire life. If the security alarm went off in the middle of the night, they got out of bed in San Rafael and drove to Berkeley to turn it off. Work emergencies kept them from picking up their daughter from dance class. Any ambitious, creative business ideas they wanted to pursue mostly got swallowed up by the daily grind. It wore on them.
But in 2021, as the pandemic was devastating small businesses throughout the Bay Area, they stumbled on a way to step away from Local Butcher Shop while keeping it alive: worker ownership. They decided to sell it to their employees.
“Longer term, it’s a much more sustainable way to run a business,” Aaron Rocchino said. “The entire shop was on my and Monica’s shoulders. No matter what happened, when it happened, where it happened, it was us.”
Local Butcher Shop is part of a new wave of Bay Area food businesses converting to some form of worker ownership, including Reem’s in San Francisco and Oakland, San Francisco-based Ritual Coffee and Bette’s Oceanview Diner in Berkeley. It’s a major shift spurred in part by the pandemic and owners’ search for a more sustainable and equitable future in the restaurant industry.
The Bay Area has a long-standing culture of cooperatives and employee-owned food businesses, such as Berkeley’s Cheese Board Collective and San Francisco’s Rainbow Grocery. According to a 2016 study by Oakland nonprofit Project Equity, the Bay Area then had 56 worker cooperatives, the most in any metro region in the country. Some new businesses are starting life as cooperatives, such as Fluid Cooperative Cafe inside the La Cocina food hall in San Francisco.
But these moves by older businesses to worker ownership may signal a turning point for a model that is still misunderstood and dismissed in many industries. Advocates see worker ownership as an alternative to closing a longtime business, as was the case with Bette’s diner. Baby boomers nearing retirement age own half of private businesses in the Bay Area, according to Project Equity. It’s a statistic the nonprofit fears will lead to a wave of closures without concerted action, including converting to worker-owned businesses. The model is also a strategy to address wage gaps, employee satisfaction and other issues.
Project Equity, which is currently working with 10 food service companies including Ritual and Local Butcher Shop, has seen an increase in employee ownership inquiries.
“This is the future of business,” said Ritual founder Eileen Rinaldi. “I believe in this movement as something that is good for small businesses, individuals, communities, and ultimately the world.”
Of the four businesses changing their ownership models, Local Butcher Shop is the only one that’s officially transitioned. Five former employees who are now worker-owners spent most of 2021 learning about shared governance and deciding how they wanted to structure the business. They also shadowed the Rocchinos, who brought on Project Equity to guide the process.
The Rocchinos and Ritual’s Rinaldi at one point entertained the idea of selling their business, but they couldn’t stomach the thought of a new owner dismantling what they’d built. Selling a business can also concentrate wealth, while worker ownership further distributes it, often among racial and socioeconomic groups that normally wouldn’t have access to it, advocates say. At these Bay Area businesses, low-wage workers, employees of color, immigrants and staff whose first language isn’t English are getting a shot at ownership.
Rinaldi said her interest in transitioning Ritual pre-dated employee backlash over workplace culture and racism in recent years. But the controversy forced intense introspection and structural changes at the cafes that made moving toward employee ownership easier, she said.
“Especially companies like ours, where I’m a white owner and my staff is really racially diverse — this is an opportunity to do something concrete that impacts income inequality, but in particular the wealth gap due to race,” Rinaldi said.
Reem Assil had long believed in employee ownership as a response to deep-seated racism and wage inequality in the food industry. But during the pandemic, it also became appealing as a way to share the burden of running a small business in the Bay Area. Once Reem’s is sold, she’ll likely stay on as acting CEO or a non-voting board member, but will no longer be involved in day-to-day operations.
“There are definitely perks to small business ownership, but it’s very lonely,” Assil said. “But what if you get to be a business owner with a few other trusted people, so that if you are tired or want a vacation or want to start a family, your fellow business owners can step up?”
For over a year, about a dozen of 30 Reem’s employees and Assil herself have been attending an in-depth apprenticeship program with Oakland’s Sustainable Economies Law Center to prepare for the turnover of the business. The program was funded with $100,000 from the Emerson Collective, Laurene Powell Jobs’ philanthropic organization. That enabled Reem’s to pay the staff for their time and hire consultants and interpreters for Spanish-speaking employees.
Workers said they’ve already felt a culture shift at Reem’s, particularly among staff who may not have previously felt comfortable speaking up or taking on leadership roles.
Dee Aguirre, a lead line cook, used to be terrified of sharing her opinion in staff meetings. She didn’t want to say the wrong thing, so she stayed silent. But through the apprenticeship program’s focus on communication, she’s started speaking up more.
“To me it creates a lot of leadership in people who never thought that they would be a leader,” she said of worker ownership.
Employee ownership saved Bette’s, a beloved Berkeley institution, from permanent closure. After the original owner announced the longtime diner would close for good in January, veteran staffers approached the building’s landlord, Denny Abrams, about helping them take over the business. He and his partner invested about $275,000 to finance the transition. Bette’s is scheduled to reopen as Oceanview Diner this month, with the same chefs and menu as before. Seven employees came back to Bette’s, general manager William Bishop said, for the chance to become owners themselves.
“There are restaurants failing right and left and it’s not because the business isn’t there,” Abrams said. “It deserves attention as one of the solutions.”
One of the biggest challenges to the worker ownership model remains raising awareness about it; many still find it a hazy, unfamiliar concept. Years ago, the Bette’s team discussed converting the business but it fell through as concerns about management and finances mounted, Bishop said. Common questions quickly bubbled up at Ritual Coffee, too, Rinaldi said: What’s the difference between a cooperative and a collective? (In a collective, all the worker-owners also serve on a board of directors.) Does running a business in this way mean decisions as small as buying new toilet paper take forever to make? (No, but every group can structure their bylaws differently.)
“The biggest barrier to there being more employee ownership is people just don’t know about it,” said Project Equity co-founder Alison Lingane.
Converting is an involved process that can take over a year to complete and typically requires the help of consultants. Project Equity, which focuses specifically on converting existing businesses, spends three months making sure a business is the right fit for employee ownership before even beginning the transition process.
There are multiple ways to structure worker ownership, and each model comes with legal and financial complexities. An employee stock ownership plan (ESOP), for example, means that workers get shares in the company, while a worker-owned cooperative means staff must pay an initial buy-in fee to become owners. Securing bank loans to finance transitions can also be tricky; Project Equity recently launched a new capital equity fund for businesses to borrow from instead. At Reem’s, Assil is documenting the restaurant’s efforts to create a toolkit to share with other businesses.
“If we’re going to really build a co-op movement that’s thinking about longevity, we need to get more community partnerships and funding to help subsidize that work,” Assil said.
The idealistic promise of employee ownership, however, doesn’t always pan out. San Francisco’s Four Barrel Coffee didn’t end up passing the business to employees as promised after a sexual harassment scandal in 2018. Plans to turn Starline Social Club in Oakland into a cooperative was met with pushback from workers who said they weren’t consulted beforehand. Starline general manager Marcus Osborne said the popular club, which reopened this month, is still “working toward that model” but declined to elaborate further.
Still, advocates for the model have hope that it will soon become more mainstream. Kirk Vartan transitioned his A Slice of New York pizza shops in Sunnyvale and San Jose into worker cooperatives in 2017, and he’s been working since to boost the concept. He lobbies local and state officials and helped the City of Santa Clara establish a worker-ownership program that provides resources to business owners. The City of Berkeley has a similar program, which is how the Rocchinos found out about employee ownership.
Vartan envisions a mass public awareness effort, just like anti-smoking or drunk driving campaigns: “If you care about small businesses, there’s another option for you. Have you heard of worker ownership?”
He worries about the alternative, closure, which was almost Bette’s fate. He sees the diner’s revival as a success story, albeit an unplanned one.
“That’s a great example of why it’s such a shame to not raise awareness of this,” he said.
Elena Kadvany is a San Francisco Chronicle staff writer. Email: [email protected] Twitter: @ekadvany