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Socially Responsible Business

When Mission Doesn’t Matter (Enough)

A cofounder of Cause, a recently shuttered “philanthropub,” reflects on the challenges of mixing business with charity.

Cause was a bar and restaurant in Washington, D.C., that I started along with my partner, Raj Ratwani. The place became known as a “philanthropub” because it was designed as a vehicle to generate donations for charitable organizations. We had a for-profit model in which, once we had covered our costs, we would direct 100 percent of our profits to a rotating series of charities. After five years of brainstorming and hard work, we opened the bar to much fanfare in October 2012. (SSIR covered Cause in “Donations on Tap,” an article in the fall 2013 issue.) Unfortunately, just 14 months later, we had to close our doors. In that time, we were unable to achieve regular profitability—and thus unable to achieve our mission. Along the way, though, we learned some important lessons. And since we still believe in this type of business model, I want to share a few of those lessons.

Don’t oversell the mission. We knew from the start that we were entering a very competitive industry—most new bars and restaurants don’t succeed—and that we would have to stand out not because of our mission, but because of our food and service. Based on our Yelp reviews, we did quite a good job on that front. But I now see that there were a couple of ways that we let our mission interfere with our business. First, we relied on earned media to do too much of our marketing. While the publicity was great, we should have developed a strong marketing campaign of our own. For each great piece of coverage that we got, we would see a huge spike in Web traffic, but barely a blip in sales at the restaurant.

Second, we may have done ourselves a disservice by putting our mission front and center. While the mission generated an amazing amount of publicity for us, all of that publicity focused on our business model and not on Cause as a bar and restaurant. You know that it’s bad when even a Washington Post food writer spends half an article talking about the mission and the model. Because there was so much focus on that side of things, the fact that we had a great menu and top-rate service got lost, and we struggled to establish an identity as providers of a service that people would pay for. The question remains: How do you translate mission-related buzz into actual business?

Don’t rely on the mission. People loved the idea of Cause. The idea of combining good food, good drink, and good works really struck a chord with folks. To be successful, however, we needed to build a base of paying customers. I had countless conversations with folks who had heard of the bar, who loved the idea, who had all sorts of questions. But when I asked if they had been to our place, all too often they said, “Oh, I’ve been meaning to,” or “Yeah, I went once, when you first opened.” As it turned out, all of that interest didn’t lead to a behavior change. It didn’t change where people went out to dinner on the weekend.

The nonprofit market is not always profitable. As a lifelong NGO guy, I should have known better. While we often generated plenty of foot traffic, we were continuously surprised by our nightly sales totals. For all of the business that we were getting, the numbers weren’t adding up. We came to realize that members of the nonprofit community—the first people to fall in love with Cause—weren’t exactly what you’d call big spenders. And who can blame them? Making $35,000 a year and living in DC isn’t easy. So be warned if you’re planning to make the nonprofit community a target market for your enterprise.

The charitable world is not always charitable. While most people in the nonprofit community warmly embraced us, we also saw some disconcerting things in our interaction with parts of that community. It made me wonder if the cutthroat battle to raise funds was preventing people from seeing the forest for the trees. We got countless requests from nonprofit organizations to do stuff for free: Donate beer, donate the space, donate food. And, fair enough, lots of people just didn’t understand our business model. But then, when we had to turn down these requests, some people would get angry with our managers and refuse to have their events with us. In some instances, organizations would take their business to another bar—even though that bar wasn’t donating anything to them, either! To me, that kind of thing was really disappointing. All of us in the social sector need to realize that we’re working together as part of a greater whole.

Now it’s time for me to get off my soapbox, have a beer, and figure out what comes next.

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COMMENTS

  • BY Antony Bugg-Levine

    ON January 13, 2014 02:53 PM

    Nick,
    I really appreciate your honesty and the clarity of the lessons you share. Kudos to you and Raj for making a go of it, and for sharing the lessons so that others can learn.

  • Fascinating and valuable lessons. I’m starting a line of business in a startup (two risks embedded within each other!) which I intend to donate all the profit from to specific charities, and I suspect reading this will probably have saved me much sweat and tears. Thank you, and good luck with whatever the next endeavour is.

  • I’m starting a nonprofit brewery in 2014 in Portland (exnovobrew.com), I’m sorry to hear Cause did not pan out! Good points all around, all things we’ve discussed at length and need to be intentional about looking out for, especially the part about making the mission the whole thing… in a town with 50+ breweries, that just isn’t going to cut it. Good luck elsewhere!

  • BY Patrick Duggan

    ON January 14, 2014 11:36 AM

    Open another bar/restaurant, have fantastic food, and market THAT, but still use the same business model (with perhaps 50% of the profits going to charity).

  • Theresa Fay-Bustillos's avatar

    BY Theresa Fay-Bustillos

    ON January 14, 2014 01:54 PM

    Love the honesty—bottom line to all of the lessons—both sides of the equation—business and charitable—need to work well for them to work together.  In my experience most social purpose businesses fail because one side or the other is under-developed.

  • BY Salah Boukadoum

    ON January 14, 2014 02:24 PM

    Nick, thanks for honestly sharing your experience. I’m the founder of Soap Hope, which like Cause is a for-purpose business. (Our model is slightly different; we invest 100% of profits each year to scale sustainable social enterprises, and the profits come back after a year - that twist makes it possible to raise capital.)

    I feel your pain about folks who proclaim to be supporters but don’t actually support by purchasing, and nonprofits that don’t understand that giving them free products takes money directly from the groups you are already working with. But I’ve come to accept those behaviors as part of the landscape that we as social entrepreneurs have to work with or work around.

    There’s great business value in an authentic and well-conceived mission: it does drive employee satisfaction, word of mouth, customer loyalty and earned media. But none of that substitutes for top-notch execution in every area of the business. The market is ruthless, and the mission only adds advantage if you get it right in everything else first.

    I hope you’ll dust yourself and get right back in. Best of luck in your next venture!

  • BY Eric J Henderson

    ON January 15, 2014 12:40 PM

    Nick: Thank you for this insightful lesson. Indeed, I think it is increasingly less profitable (in all senses) to not account for the larger context of a market that values the mission/profit interplay in very specific ways.  Whether to ride with it or disrupt it, the business model must fit the space in the market where we want to play. Funny… just read in the FT wknd that Man U is having the exact same mission/profit problem.  All best to you on the next venture.

  • Charisma's avatar

    BY Charisma

    ON January 16, 2014 04:45 AM

    Hi Nick,
    This was an interesting read. And it rings true what you say about not over-selling the mission. Are you familiar with Annalakshmi? A pay-as-you-like restaurant in Singapore that runs as a non-profit. All the revenues they generate go towards a charity.

    http://www.tripadvisor.in/Restaurant_Review-g294265-d1100181-Reviews-Annalakshmi-Singapore.html

  • Susan Sweetman's avatar

    BY Susan Sweetman

    ON January 16, 2014 08:13 AM

    Nick,
    Thanks for sharing lessons learned.  As funding for thriving non-profit organizations are cut, we continue to look to the profit world to expand our funding base.  Minimizing the risk of our investment has been our main concern.  Your example is very real and is to be taken very seriously before venturing into the different business model.

  • BY David Brookes

    ON January 16, 2014 01:43 PM

    Nick,
    Some really valuable lessons here for start-up social enterprises.  And good on you for being open about your experience.  We can learn as much if not more from these cases as we can from the success stories.

  • Nick Vilelle's avatar

    BY Nick Vilelle

    ON January 16, 2014 03:22 PM

    Thanks to everyone for the encouraging messages. This piece was hard to write, but I’m happy to see that it appears to be reaching the right audience and might help someone avoid some of our mistakes. I’m happy to offer any advice for those of you starting multiple bottom line businesses. The brainstorming is always fun! .(JavaScript must be enabled to view this email address)

  • Leslie Johnston's avatar

    BY Leslie Johnston

    ON January 16, 2014 11:31 PM

    Congrats, Nick and Raj, for sharing, so honestly, your learnings.  Hope that beer is a good one!  And best of luck in your next venture(s)...

  • Great business insights and really a great effort.  If at first you don’t succeed…  smile

  • First, be careful not to separate social sector from the world, especially the people who closely associated with you, no matter what their mindset is. If you create an identity for NGO people, social sectors people…. you are actually dividing so as to harm the world.

    Second, for those who believe what you do, did you reveal your social contribution, what charities you donate and your social plan? did you treat social effect as part of your scorecard and as seriously as you treat your $? Only when you do so, your deeds are in line with your words. And that’s called integrity.

    Third, there are many ways to realize your business model. Why drinking? Why not a cooking class for example?

  • BY Nancy Brimhall

    ON January 17, 2014 09:58 AM

    We all applaud your candor here in our office.  And, am not surprised at all given how hard it has been over 30 years in the business of running small and then large fundraising organizations to see how difficult it is to get 100% employee giving…even a buck.  Fascinating. What happened to charity begins at home concept.  Somehow I think our organizations have developed staff morale problems in great numbers and married it to the inbred belief that somehow the bucks are supposed to come from “them.”  Typically the “them” are thought of as “rich” people and no one that anyone on staff would ever know or want to know. Doubly bizarre.  This, btw, has included CEO’s of non profits I have worked for and with as a senior staff leader or consultant. 

    I suspect like all good business brains you will learn from this, apply the knowledge, and come back onto your next venture strong and wise.  A great combination for your next success.  I still remain committed to non-profits but always looking to apply good business models.  Still hold out hope that we can solve the divide between how to work within an organization and not feel barriers to how it is kept healthy and financially sound—e.g getting those charitable dollars from an equally committed group of donors who are not only a “them” but an “us.”  All the best to you.

  • BY Susan Aktemel

    ON January 21, 2014 11:04 AM

    Hi Nick. Could not agree more! All of your story resonates exactly with what is happening in social enterprise in Scotland.  I’ve just set up my 4th business, and 2nd social enterprise @HomesforGood band you are right - the key to a successful social business is to competent the mainstream first and foremost, and know that you are creating the social impact you want to as a result . Good luck with your next venture x

  • Susan D.'s avatar

    BY Susan D.

    ON January 21, 2014 01:46 PM

    Nick, I visited Cause several times, often with events organized through DC Net Impact.  I drank the beer but because I had been there for a crowded event… I did not have the chance to sit down and try the food.  The business model was indeed fantastic to me as an individual consumer.  I was able to choose the organization that the profit was donated to and I thought that was really cool and worth my repeat business.  But I think there’s another lesson learned in the endeavor.  And it is that MOST bars and restaurants, instead of donating profits to charity, they donate space, food, and beer to the professional fundraiser for that charity so that the fundraiser can raise greater sums during a benefit dinner / lecture / social event.  The business model of putting the customer in charge of allocating the profits deleted the need for a professional fundraiser… thus they did not bring events or business in.  If this is a passion for you, I hope you try this model again!  Being in DC you have access to stellar professional fundraisers, maybe bring one in as a strategic advisor so that the consumer AND the fundraising pros benefit from your next operation?

  • This is one of the best, most useful blog posts I’ve ever read on the SSIR. Thank you for sharing your lessons learned after a worthy endeavor.

  • Avila Kilmurray's avatar

    BY Avila Kilmurray

    ON February 8, 2014 04:07 AM

    Hi - Very interesting and honest article.  There is a good example in Belfast (Northern Ireland) of a very successful pub - the John Hewitt - that was opened as part of a sustainability strategy for the Belfast Unemployed Resource Centre.  Perhaps if successful because we all drink a lot!
    Avila

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