S1E51 / Disrupting Restaurants / David Henkes, Kirk Vartan, Tunde Wey

Hey everyone, Dr. Celine Gounder here. Wow, what a week it's been. Joe Biden won the presidential election. He announced a COVID advisory board of physicians, public health experts, and scientists, including me, to help guide the Biden-Harris team's response to the pandemic. Ron Klain, my former co-host on this show, was named Biden's chief of staff. And the pharmaceutical company Pfizer announced the results of its phase Phase 3 COVID vaccine trial, which showed the vaccine to be 90% effective. All this news, especially about the vaccine, has a lot of people breathing a sigh of relief, but it's important to remember that the pandemic is not over. The United States is breaking records almost every day for new daily infections and hospitalizations. When we recorded this episode, the US averaged more than 100,000 new coronavirus cases every day. As the weather starts to get colder, it's going to be even more important than ever that everyone continue to wear masks and socially distance. And if you haven't already, please get a flu shot. Remember, just because the coronavirus is here doesn't mean seasonal flu goes away. There is still a long way to go before the pandemic is under control. Find encouragement in this good news, but please don't let your guard down. We can only get through this if we all work together. Thanks for listening. Here's this week's show.

Food isn't going to solve the world's problems. Food is itself a part of the problem, but food is an opportunity to begin thinking about it.

Welcome back to Epidemic, the podcast about the science, public health, and social impacts of the coronavirus pandemic. I'm your host, Dr. Celine Gounder. Tunde Wey is a cook, writer, and artist from Nigeria. Before the pandemic, he was making headlines with his traveling pop-up dinners. Politics were always on the menu.

I talk about food in my writing or in my other work in a way that makes it connected or that connects it to a larger system.

Often these events were designed to use food as a way to confront diners with difficult topics in American life, things like racism, gentrification, and reparations. One event Tunde did in Nashville centered on a restaurant called Prince's Hot Chicken and its infamous spicy fried chicken.

The story that I think I remember is the founder of Prince's was cheating on his wife, and to get him back, she prepared this really spicy chicken dish. He loved it, and so he turned it into a business.

Prince's Hot Chicken is really hot and has a loyal following.

I wake up sometime in the middle of the night, 12, 1 o'clock in the morning, because they stay open at 4 o'clock in the morning on the weekends. I'm gonna go down and get me some Prince's Hot Chicken. Just to taste. It's just that good. It started in Nashville, but it's now everywhere. And if you look at who has benefited from it financially, reputationally, it's white owners.

Regional chains like Hattie B's have popped up across the South selling this extra spicy chicken. Prince's does well, Tunde says, but it doesn't have the reach or economic clout of its corporate rivals.

But that's a consequence of like the continued appropriation of Black food culture, Black culture, Black labor.

So Tunde came up with a series of dinners he called Hot Chicken Shit.

Well, Hot Chicken Shit was about housing. The way I conceive it, restaurants have become a tool of gentrification. They anchor new developments, they drive visitors to communities, and they also drive up real estate prices.

If new hipster restaurants were going to be the tip of the spear of gentrification in Nashville, Tunde decided to use hot chicken as a shield.

So the plan was to sell hot chicken to white people for exorbitant sums and use that money to secure the long-term affordability of housing in this Black community.

Black guests from the neighborhood ate for free, but white guests were charged crazy high prices. $100 for one piece of chicken, $1,000 for 4 pieces. Diners had to hand over a property deed in Nashville to get a whole chicken with sides. Proceeds were donated to the community. But Tunday isn't just using food as a way to look at problems outside the restaurant. When the pandemic hit in March, while airlines and other big industries were getting federal aid as business dried up, Tunde argued that the restaurant industry, his own industry, wasn't worth saving. He published an essay with the title, "Don't Bail Out the Restaurant Industry." In this episode, we'll hear more from Tunde as we look at how the pandemic has impacted restaurants. We'll see what Tunde thinks is so wrong about how restaurants operate, what the pandemic has done to the industry, and the solution some restaurateurs are pursuing to reimagine a more equitable future. Today on Epidemic, disrupting the restaurant industry. There's a phrase that Tunde kept using in his essay, "Let it die." Let's imagine fine dining.

In the fine dining restaurants where there is, let's say you make, you have the potential to make the most money as an employee, that money is made in the front of the house.

Servers, bartenders, hosts, those kinds of jobs. Jobs where someone gets access to tips.

Front of the house is usually whiter and the back of the house is browner, is darker. So you have folks who are in the dish pit working as Black and brown folks. Even folks who are on the line working as Black and brown folks. And then you have a head chef who is, you know, a white person, white man usually. That's the sort of like racial gender segregation. White in front, Black and brown in the back.

This breakdown is more extreme in fast food. The workforce is almost entirely made up of people of color and working class. And when the pandemic struck, the restaurants that could stay open were relying on this same workforce. And many workers could not afford to stay home if they were worried about COVID This is part of the reason why coronavirus has disproportionately impacted people of color in the United States.

Of course, the folks who are going to be most affected by COVID are Black and brown folks, working-class folks. But of course, you know, it couldn't have happened any other way.

While some workers were seen as essential at the start of the pandemic, many restaurants were not. Bars and sit-down restaurants across the nation were ordered to close for months this spring. And the impact has been devastating.

We're looking at a decline in consumer spending of anywhere from probably 19 to 23% or so.

This is David Henkes. He's a restaurant and food industry researcher and consultant. David says these numbers are really bad, but the damage isn't evenly distributed.

Really where the impact has been has been on the full-service sit-down restaurant side, right? I mean, those have been massively impacted. We're forecasting probably anywhere from a 35 to 40% decline in full-service sit-down restaurant sales.

An overwhelming amount, more than 90% of the sit-down restaurants that David said were going to be the hardest hit are mom-and-pop restaurants.

And, you know, not that any part of the industry has been spared, but that's really the one that's going to be impacted. Hardest.

David says they're forecasting that roughly 14% of all restaurants in the United States could close by the end of 2020. And these closures are going to fundamentally alter a lot of neighborhoods.

These are the heart and soul and the face of Main Street America, right? And so when you talk about the lasting impact that closing, you know, some of these boutique-style restaurants have, it is and will have a devastating impact on neighborhoods. On sort of the feel and the atmosphere for a lot of cities, a lot of parts of not only big cities, but suburbs and even small towns where these independent restaurants form the backbone of the community.

That's going to mean servers, cooks, bartenders, dishwashers, hosts, all out of work. And those job losses are going to trickle down through the suppliers, distributors, and other services those restaurants use. It's not a pretty picture. This hit to smaller independent restaurants is a big shift from just a few years ago.

Independents up until the pandemic have had been growing at a faster rate than chains. Part of that was, you know, consumers had really started to vote with their pocketbooks about, you know, we want to go to the independent, the smaller restaurants.

Takeout and delivery were options available to some restaurants. But David says it's harder than many think to pivot to delivery service all of a sudden.

You really have to strategically do it, right? You have to look at your menu and what travels well and what kind of packaging do I need and all of this. And so the ones that have survived have been those that have been more successfully able to pivot to that off-premise.

David says there are a lot of things restaurants are up against, one of which is low margins.

Right, I mean, most restaurants in the best of times are living on, you know, maybe 5%, 5 or 6% margins, right, that they're taking home after all the costs are paid. And so, you know, you start to reduce your revenue by 20, 30, 40, 50%, right? And, you know, the costs are not going down by the same amount. It ultimately becomes kind of a cash flow situation where you're forced to close up and take your losses.

David says this is going to shift the restaurant landscape toward national and regional chains. They're the only ones with the resources and capital to weather the pandemic.

You know, in essence, we're going to be losing a lot of that creativity and soul that comes from those chefs and entrepreneurs and those that are very creative with the restaurants that they're trying to create.

This is where people start talking about the need for bailout funds. The House passed a $120 billion restaurant aid bill in August, but the Senate has not taken it up. At the start of the pandemic, there were options like the Paycheck Protection Program to help businesses make payroll, but access to those funds was complicated. The aid was administered through banks, not the government. This meant certain banks and certain clients were able to access these funds faster and in bigger quantities than small, locally owned businesses.

Where a lot of people got left out were, you know, those people that are most struggling, right? The 91% of full-service restaurants that I talked about earlier that are struggling day to day.

This is what Tunde has called an ordinary response to an extraordinary situation.

I think the bailout shouldn't happen, period. I think what should happen is instead a focus on a universal welfare system that allows more choice both for the employees and the employers too.

Things like a wage floor so workers know they can make enough money to meet their needs and more. And access to things like high-quality healthcare, education, childcare, and housing.

This is what the focus should be. This is how I think we should galvanize all the current organizing potential that is happening in the restaurant industry, and in fact, in all the industries.

Tunde's not alone in seeing opportunities to rethink the restaurant industry in the middle of a pandemic.

Right now, we have the ability to take 10 to 15 years' worth of movement and advocacy and compress that into a matter of months just by informing people about what this model looks like. Everybody gets paid. The owner gets paid. The employees get to participate if they want to. And the community wins because they keep their asset in their community.

After the break, we'll hear how a pizza shop is rethinking what ownership and equity looks like in the restaurant industry. Kirk Farten was working for Cisco in Silicon Valley when he decided to quit his job and open a pizza parlor. His wife wasn't wild about the idea.

Leaving high tech to open up a pizza shop was really not something that she was 100% supportive of, and neither was my mom, neither were a number of folks.

Kirk grew up in New York City eating a lot of pizza. His neighborhood pizza spot was called Ultimate Pizza.

Pizza's always there. You'll get a slice before dinner, you get it after dinner, you get it on the way home from school. It's just, it's something that's always available to you. My personal preference is just a plain slice, just plain cheese.

Over the years, he became friends with the owner, a guy named Benny. When Kirk moved to Silicon Valley, he was disappointed in the pizza out there. He tried to convince Benny he should come to the Bay Area.

I said, why don't you come out here? He goes, no, no, you find a place. I'll help you start it. And 9 years later, 8 and a half years later, I'm like, Benny, I think I found a spot.

Benny took Kirk under his wing and taught him the business. And Kirk needed a lot of teaching at the beginning.

All I wanted to do was have a New York pizza shop in my neighborhood. I've never worked in the restaurant industry. I don't know how to cook. I didn't grow up in a cooking family.

Kirk called his pizza shop A Slice of New York. When the business opened in 2006, he wasn't thinking about social justice or alternative ownership models. He was just trying to make pizza.

But the pizza shop became so much more. Like one of our original employees, we were able to put him through college. He's the first person in his family to ever go to college. And our business actually put him through and paid for it. You know, when we started this process again, it was, how do I create a pizza shop? But it turned into, we have what we call our chosen family. This is— these are the people that we choose to be with.

Getting a leg up like that is a big deal in a place as expensive as the Bay Area, especially when you're working in the service industry.

I'm part of the problem out here. You come from another area and you frankly displace people. And so the issue is around your housing stock, your cost of living. And when the median average income is $130,000, you've pretty much priced out the entire service sector and retail sector in the county.

Kirk says they've always paid their workers more than minimum wage, but he was looking for other perks he could offer his employees. He brought in a lot of elements from his time in corporate America. Things like performance reviews and annual bonuses. Another thing was stock. When he worked for companies like Cisco or GE, Kirk said stock options made him feel like he was invested in the success of the company. He wanted that same motivation for his employees. But stock didn't make sense for his pizza shop. So he asked team members who were interested to volunteer their time to figure out an alternative.

So we actually created a business development team internally and had about 13 people meet on Sunday mornings when we normally don't open up until 12:30. They come in at 9:00, and for like 5 to 6 months straight, every, every Sunday or every other Sunday, we would come in and meet as a group.

After looking at several different models, they settled on a workers cooperative. In 2017, A Slice of New York transitioned into a co-op.

To me, a worker cooperative is a mini government. It has its own constitution. It's got its own elected members. Its members are basically its citizens. The citizens elect the board, which is like its local government. And then the board, which is made up of the people that work there, the members, make decisions on behalf of its fellow members, which are the workers in the business. It's based on a one-person, one-vote, which means there's no one person that has a dominant voice in any of the conversations. It's a pure form of democracy. It's quite awesome.

Today, Kirk says around half of the employees of A Slice of New York participate in the co-op. They practice open-book accounting, so everyone who's a co-op member can see how the money gets spent. Co-op members get training in legal, human resources, and other aspects of the business so they can fully participate. When the pandemic hit, Kirk says they had to make a lot of changes to their business.

And, you know, for social distancing, we usually have 2, 3 people on the table making pies, but we had to bring in other tables and we have now 1 person per table and separated. The reality is kitchens, you're in close quarters no matter what you do.

But what's unique is that employees weren't told they had to show up to work or lose their job. After all, it's their business too.

So we wanted to create a work environment that people were comfortable with. And so the decisions we made, we actually talked to people and asked, What can we do? How do we do this? What's gonna make you comfortable here?

They moved to takeout only almost immediately. They mandated masks for customers and started doing temperature checks for staff. Kirk says their decision to become a co-op has made their business more resilient during the pandemic.

It's a different focus. Our decision isn't based on profit. It's based on employees' health and employee safety.

Kirk and other members of worker cooperatives have been working with the California state legislature to put money behind efforts to encourage more worker-owned businesses as part of recovery efforts there.

To convert, you know, 10 restaurants or 10 businesses here and there a year is nice, and that's good, and we should always do that, but that doesn't actually move the needle. Saying the worker cooperative movement takes time, it's going to take years for this. It's like, I just don't accept that. It can happen immediately. It can happen now if it has a platform and a voice. And right now it just doesn't have that.

Kirk says cooperatives and other employee-owned business models can be good options for any business in transition, whether or not there's a pandemic.

We had a problem before this crisis. We had the silver tsunami, meaning the baby boomers trying to retire or sell their business, their kids don't want it, and they just close their business, do an asset set sail and the business is gone. The community loses that resource. I strongly believe that employee ownership, worker-owned businesses, and co-ops specifically, worker-owned co-ops, give an option, a financially valid option, and a model that allows current business owners to transition to employee-owned businesses that will allow us to be more stable, more scalable, and start having that wealth disparity come back in check a little bit more.

The pandemic has wrought a lot of destruction on the restaurant industry, but it's also going to create a lot of opportunities. It could be a chance to rethink the ownership structure of a business like Kirk's Pizza Co-op, but it's also going to shake up real estate. The pandemic forced a lot of businesses to close. Rents for commercial real estate have fallen since the start of the pandemic. Tunde says he benefited from a similar situation when he opened his first restaurant in Detroit. After the 2008 recession, cheap rents in the city made it possible for newcomers like him to open a restaurant. But Tunde sees a cautionary tale when it comes to who benefits in the long run from the disruption caused by shocks like the Great Recession, the pandemic, or a storm. Hurricane Katrina devastated New Orleans in 2005, The storm displaced tens of thousands of residents. Besides the flooding and loss of homes, clean water and electricity were in short supply for weeks.

The restaurant industry was particularly affected because New Orleans is a tourist city and restaurants and hotels anchor the tourism spending here. But what came after that, I don't think many people would have thought possible is that the city rebounded spectacularly.

10 years after the hurricane, the city was booming and the food scene was a big part of that. But Tunde says these numbers were deceiving.

And it looks amazing that the city has come back, but then you drill down and you realize that it has come back just as unequally as it was before, even more than before. White folks still make twice as much as Black folks. Black businesses make up about 36% of businesses in New Orleans, but they only collect 2% of the receipts.

The pandemic has devastated restaurants across the country. Many have closed while others struggle to keep enough customers because of capacity restrictions and health concerns. New Orleans and its restaurant scene bounced back from Katrina, but it did so in a very uneven way.

In my mind, that is the moral of Katrina, and that is the moral of COVID is that for white folks, these disasters are an opportunity to come back stronger. For Black folks, this is another blow. This is just another one, and it doesn't necessarily get better. It just looks different.

For Tunde, if the restaurant industry doesn't take these lessons to heart and work for a more equitable future, then maybe it should die. Epidemic is brought to you by Just Human Productions. We're funded in part by listeners like you. We're powered and distributed by Simplecast. Today's episode was produced by Zack Dyer and me. Our music is by The Blue Dot Sessions. Our interns are Tabitha Gordillo Annabelle Chen, and Brian Chen. If you enjoy the show, please tell a friend about it today. And if you haven't already done so, leave us a review on Apple Podcasts. It helps more people find out about the show. And Just Human Productions is now on Instagram. Check us out at Just Human Productions to learn more about the characters and big ideas we cover on Epidemic and our sister podcast, American Diagnosis. You can learn more about this podcast, how to engage with us on social media, and how to support the podcast at epidemic.fm. That's epidemic.fm. Just Human Productions is a 501(c)(3) nonprofit organization, so your donations to support our podcasts are tax deductible. Go to epidemic.fm to make a donation. We release Epidemic every Friday, but producing a podcast costs money. We've got to pay our staff, staff, so please make a donation to help us keep this going. And check out our sister podcast, American Diagnosis. You can find it wherever you listen to podcasts or at americandiagnosis.fm. On American Diagnosis, we cover some of the biggest public health challenges affecting the nation today. In season 1, we covered youth and mental health. In season 2, the opioid overdose crisis. And in season 3, gun violence in America. I'm Dr. Celine Gounder. Thanks for listening to Epidemic.