The pizza restaurant (gourmet pizza, not crap) around the corner where I live is workers owned. The previous owner went bankrupt and left his employees hanging out to dry, so they took ownership of the place. Not sure about the legal situation (e.g. whether they bought the restaurant from the owner or what) but it's been workers owned for the past few years and doing well, judging by how full it always is. I eat and take out from there and it's pretty good quality.
This is not the first decent workers owned restaurant I've known, so I'm going to answer: yes, it can work.
The idea is that cooperatives don't have to treat everyone exactly the same. You can have different "classes" of members. You can have ordinary worker members, but also "founder" members. For example, for an agreed number of years "founder" members can get to elect a certain amount of board seats and get a higher share of profits.
Sure, it moves away from "one-person one-vote" democracy and full equality, but only for a temporary period, and it still gives ordinary workers a much greater say in their workplace than they get in standard companies.
Possibly. My impression, purely from popular media, is that only partners have any say in the running of a law firm, and becoming a partner involves cash buy-in of some sort, which might be a little different from co-operatives, where usually all permanent non-probationary workers have some sort of vote. But as I say, my knowledge of law firms is mostly from watching The Good Wife, so....
You can become partner if you bring good clients with no cash buy in required. I think there are also different levels of partnership(i.e not all of them get their name in the office name).
implying what? that "workers" can't start something? Even if we imagine there's a category of people that are suited to be "starters" or "entrepreneurs" that category is still plenty numerous, easily 10-35% of the population, if not more.
Yes that is the implication. Starting something requires raising money and organizing things. Generally, at the start, only a small number of people care to do this work. And once they do it, why would they give their ownership stake away to their employees when they could just keep it for themselves?
IMO, the reason you don't see more is that us financing is quite conservative and unwilling to risk "unusual" business models.
(Similarly, finding a mortgage for shared housing requires a lot of extra work, because the mortgage brokers only like nuclear families... Even when you show up with four incomes and no kids, it's still considered risky because unusual.)
Which is to say... The smallish number of worker coops in the US has nothing to do with the rarity of magical founder people... I'll say that the folks I've known in housing and worker coops have a much higher rates creativity, grit, and organizational chops than anyone I've met from a business school. And, indeed, many of them are now run their own businesses in a wide range of endeavours.
Practically anyone already wanting to work at such a place would care to do it with the proper resources. Imagine if you could easily get a government grant to start such a co-op...
Even if we're imaging a scenario with free government money, I'm not sure a co-op makes sense because of the financial incentives at the heart of capitalism. Imagine you could get government money to start a co-op or take private investment and maintain a large ownership stake in the business? Isn't the upside way higher for you if you go the private investment route?
Of course, the government could subsidize co-ops to the degree that financial incentives of starting a co-op outweigh the financial incentives from starting a traditional business, and maybe they should do that, but it's not how our curent market is structured.
This assumes all founders act as rational economic actors. Yes, it's hard to pivot from a traditional corporation to a co-op because of capitalism, but there are plenty of people who love the idea of a co-op but either don't have the capital or where the available capital is not evenly distributed among those interested to found the co-op with them. Amazingly, most humans do not do primarily what has the biggest economic advantages for them but what they think aligns best with who they think they are or want to be.
Speaking from personal experience, as a founder who does not come from wealth the biggest reasons not to pivot to a co-op are that you're giving up control over something you created, you have a lot of money caught up in it that could have instead gone towards your personal life and that someone you hired as an employee is not necessarily interested in becoming a co-owner (e.g. if your country has workers rights they might be losing access to certain guarantees and benefits by doing so).
Your wording is also needlessly abrasive. The government subsidies a large part of the economy like agriculture and fossil fuels (this is true in Germany and also seems to be the case in the US). Calling subsidies "free government money" suggests this is unheard of and unrealistic. If we want to go full utopia, the government could not simply subsidize co-ops, it could mandate them, e.g. by enacting a law that requires non-publicly traded businesses above a certain size to be worker-owned (with all liabilities to the founders being converted to standard loans) and prohibiting natural persons from holding more than a given percentage of any publicly traded company to shut down the potential loophole of just going public. It's the government. It's what allows corporations to exist so it could also restrict them.
I don’t think my words were abrasive. I was just pointing out that there exists financial incentives that disfavor co-op formation. If my argument, which is opposed to your argument, assumes “founders act as rational market participants” doesn’t that imply your argument assumes market participants act irrationally? Of course people act irrationally all the time, but what seems more likely on the whole, especially in regard to money?
Friend, I have worked in advertising. The entire industry hinges on humans acting irrationally in regard to money. Humans are irrational actors. The rational homo economicus is an abstraction to give economists something to work with.
Corporations act somewhat rationally in aggregate only because the people in charge of them are bound to do so by law. And even this breaks down when the corporation is directly run by one person who also owns it.
"Market participants" is not what we're talking about. "Market participants" includes corporations and other forms of organizations that impose strict controls on their own behavior. We're talking about humans. And humans are very irrational. They're just also very good at rationalizing their irrational behavior and prefer doing things they can rationalize.
If that's true (I doubt it) the reverse has to be true too: that those great at starting (a restaurant) are bad at sustaining it.
If there are distinct phases, and certain people or topologies are good at just one of those phases, then it follows that people starting restaurants must be bad at running them once they've established.
No it’s not. You haven’t refuted the claim that starting a restaurant requires momey. You just said having money makes you bad at running a restaurant. Which is silly.
implying what? that "workers" can't start something?
Technically if there's no company yet there is nowhere to work and thus no workers. You need "founders" to get the company started for there even to be workers. Now those people have to decide if they want to never hire anybody new, 'give away' a a piece of 'their' company each time they hire, or give up on the worker-owned idea all together.
Of course most "founders" used to be "workers" and often become "workers" again after the company is founded, but the act of founding a company is fundamentally different from the act of working at a company
As someone who founded a company and had employees: it's not all that different, though the specifics depend on the kind of business. The biggest difference is that in order to found a company you need capital and workers generally don't have enough capital to found a company (and if they do and do found a company, as you said they become founders themselves).
There is of course different work to be done at every stage of development of a company and this means that founding a company may require skills running it may not or vice versa but there is no reason someone who is good at founding companies should continue to call the shots or pocket most of the revenue once the company is fully operational. That's an expectation tied to the return on investment primarily and our system being set up in such a way that founders are owners and workers coming in later are not.
Please be kind in your interpretation. Build and run are two very different phases. You need lots of capital for the former, mostly hands for the latter. Capital formation is probably harder for a group of workers because it leads to messy questions about residual earnings.
I think this is the issue. Starting a company is a lot riskier than working at one. To do that you usually need capital and/or someone who is willing to work their ass off for peanuts for a couple of years. The only reason people will take risks is for outsized returns.
In the case of a bankruptcy, the property will pass to a curator who has to try and settle debts as much as possible; I'm sure the staff and the curator struck a deal there.
* Somehow finances have to work, which is usually a harsh reality for some. Ex: Hey we can't pay workers $250/hr without raises prices to above what customers are willing to pay
* Consumers despite "Least common denominator" which is often the result of "design by committee". Usually consumers are after something niche, unique, artistic, and creative, which is the inspiration or vision of an individual.
> As for making business decisions, it’s done democratically. The entirety of the member-owner group votes on major decisions, and the bylaws outline scenarios where employees are authorized to act independently of a vote
I don't see this working in the long term unfortunately unless a majority of the workers have a lot experience with business, especially something as cashflow-sensitive as a restaurant (which typically operate on razor-thin margins). But I do wish them luck in their experiment.
In my experience the opposite is almost always true:
> Somehow finances have to work, which is usually a harsh reality for some
At most places I've been involved in the workers are more careful with money because they are standing together and want the business to succeed. They have transparency into the finances, so they know what's possible and try to make sure not to go overboard.
> Consumers despite "Least common denominator" which is often the result of "design by committee". Usually consumers are after something niche, unique, artistic, and creative, which is the inspiration or vision of an individual.
All of the worker owned places I've been have been exactly this: creative, interesting, and individual. These aren't giant chains designed in a megacorp boardroom.
> I don't see this working in the long term unfortunately unless a majority of the workers have a lot experience with business, especially something as cashflow-sensitive as a restaurant (which typically operate on razor-thin margins). But I do wish them luck in their experiment.
There are many of these and though I don't know the success rate compared to hierarchical businesses in the food industry in particular, co-ops have a higher success rate than hierarchical businesses in general and there's been a lot of research into it, though I don't know if an exact "why" has ever been established. I suspect it's that there's no handful of individuals who can get greedy and ruin things by trying to maximize profit. Even for-profit co-ops generally have a better sense of balance since the workers don't want their business to dry up and if one person gets greedy there are lots of other people to keep them in check.
> At most places I've been involved in the workers are more careful with money because they are standing together and want the business to succeed.
This doesn't contradict anything GP said. Worker owners are careful with company money because they have to be, due to being invested into it. That's a responsibility that not everyone wants, especially when an organization approaches the scale of tragedy of the commons. How many regular voters bother to read the raw, uneditorialized finances that the government provides?
> co-ops have a higher success rate than hierarchical businesses
This is only true when you're defining success as a binary "does this company still exist." Worker-owned companies are significantly less likely to expand because they would be creating risk but would have to share the additional profits with the new hires. This would especially be the case for a restaurant which doesn't benefit from economies of scale (see Publix supermaket as an example of a worker-owned corporation that does).
Even if Jude's can sustainably pay $30/hour, it would take hundreds of similar restaurants to match the success of a single "nice" privately owned restaurant chain like In-and-Out, which also pays above-market wages to thousands of employees, albeit not as above market as Jude's.
> This is only true when you're defining success as a binary "does this company still exist." Worker-owned companies are significantly less likely to expand
Why would that be a criteria of “success”, though? A worker owned business capable of supporting all its employees and maintaining itself long term is definitionally a success.
The notion that everything has to expand is a product of our investor-driven economy. I think it's unhealthy. I'd much rather have a million local business than one giant megacorp.
The existence of a few restaurant co-ops doesn't preclude the existence of a soulless megacorp like McDonald's. If your goal is to give more people a fair wage, it's much more effective to expand as much as possible.
When talking about the model itself, success could be defined as the proportion of business operating under that model. If the model is successful for all parties involved, it would be logical that more and more restaurant move to a co-op system.
Worker co-ops aren't less likely to expand because of risk, it's because more employees diluted the pie, so they don't have an incentive to grow for the sake of growth, but only if there are significant economies of scale or social need.
why should this new employee automatically dilute the pie before their "worth" is made real (by virtue of working and contributing to the bottom line)?
if adding this new employee creates more value, the existing owners shouldn't have a problem with adding. Of course, unless the employee start owning their share before being first able to be vetted.
Well if they start hiring “non share packages employees” it kinda stops sounding like worker owned and more like owners and workers, eh? Seems to defeat the purpose of being worker owned.
Maybe if you have a vesting period of something. But even then it is one employee, one vote or is voting dependent on something else like number of shares?
Just because the name says worker co-op doesn't mean every employee has to be vested.
In the Netherlands a coop is an acutal legal structure that businesses may adopt. It will surprise you to hear that we even a big bank which is: A co-op.
The core characteristic of a co-op isn't that the workers all have shares. It's that they have members and that the members instead of the shareholders may receive payouts based on the company income.
I realize this is different than the American case of a worker co-op. Your reaction though speaks to me that you don't consider this a serious form a company might take. Whereby you ignore that some very big and wealthy companies are in fact co-ops. I assert that this is merely because the US legal systems don't facilitate co-ops, and I wonder whether that isn't a missed opportunity?
It will surprise you to hear that we even a big bank which is: A co-op.
There are lots of those types of co-op banks in the US, as well as other large businesses run as the type of co-op you're talking about. That is however a competently different thing than what is being discussed here.
I used to like the idea that the Rabobank is a co-op, but it actually seems to be the least ethical of all the Dutch banks right now. The screwed farmers into taking loans for bad investments, and completely refuse to take their social responsibility seriously, which has become an important thing for banks after 2008.
Why cant they hire non share packaged employees? Why do they have to shrink their pie?
How many non-owner workers can you have before you stop being worker-owned? If four workers own 25% of the shares each, and the company employs 400 (or 4000) people are they still "worker-owned" in any meaningful sense?
I think it's not perfectly black and white, and we shouldn't really put some arbitrary line here. Would be nice if more worker-owned businesses shared details about their ownership structure, though.
Yes, and they put a fair degree of effort into making it accessible. One good place to start might be with the Treasury’s fiscal data site [0].
As their plucky little public outreach page [1] points out:
“A regular Statement and Account of the Receipts and Expenditures of all public Money shall be published from time to time.”
U.S. Constitution, Article 1, Section 9
>> Usually consumers are after something niche, unique, artistic, and creative, which is the inspiration or vision of an individual.
I mean, I feel like a quick survey of the american restaurant landscape implies that consumers are mostly after something reliable for their time and money.
but also the idea that front of house having a say in the business would mean the menu is anymore design by comittee than any other restaurant is weird, especially because menus aren't generally decided by the owner of the restaurant anyway.
In small groups where decisions must be made in a timely and decisive manner, a mediocre leader is often better than the best democratic committee. Even in programming teams, somebody needs to put their foot down eventually or things will be bikeshedded to death. FOSS projects too, generally benefit from a BDFL.
Be careful about extrapolating this out to the rule of countries though, dictatorships can make things go south worse than any other system. At least with FOSS projects, people can fork without fleeing their homes.
Are you alluding to some particular hypocrisy in my comment history, or do you consider me a hypocritical merely because I have nuanced opinions on leadership that depend on the stakes and context?
Democracy is a fine way to run a nation, but not a ship, plane or platoon of soldiers. Context is everything. If you think there is any one single system of leadership that is ideal in any conceivable situation, then I fear you must be a clueless ideologue. Lacking an appreciation for nuance is the mark of shallow thinker.
In what way? There are plenty of blue-collar fields where this applies. In many of them, when the workers outgrow the competency of their bosses, they just strike out on their own and become another competitive force (GCs/SCs, carpet workers, plumbers, truckers, etc). This isn't as possible with large tech companies since they require large capital to startup/compete and generally have to worry about getting sued for intellectual property infringements; but it does happen.
> * Consumers despite "Least common denominator" which is often the result of "design by committee". Usually consumers are after something niche, unique, artistic, and creative, which is the inspiration or vision of an individual.
Dollars to donuts you wrote that bullet point without having read the article:
* the extant worker-owned restaurant discussed in the article is the epitome of "something niche, unique, artistic, and creative," which was "the inspiration or vision of" the owner making a pitch to the staff to become worker-owned. It even mentions getting employees because of the unique approach. I can't imagine they haven't drawn non-trivial consumers to their restaurant for the same reason
* pictures of the food exist in the article
In short: I know "design by committee" food. I've worked with "design by committee" food. That fried chicken sandwich, sir, is no "design by committee" food.
Here's the reduced-down version: You get some stake for free when you join, it entitles you to a fraction of the profits while you're there, and you lose it if you quit or get voted off the island according to some bylaws. Stake also gives you voting power for hiring new employees (including managers), and how much stake to give them. And nobody can buy shares, especially those who aren't employees. To simplify things, there are no wages.
But idk, this just sounds like a worse version of a regular corporation. New employees' stakes will pay out in a way that's competitive with local wages. More profits than usual will have to be paid out rather than reinvested in the business (think high dividend yield, low P/E), otherwise new employees just needing to pay bills won't trust it. If they want to offer some wage and less stake, it's the same.
The takes in this thread are so funny. Oh no, what if they have too much money and there aren't owners siphoning it off disproportionate to their value? People might fight over it! Or they might have to plan on steady operating income, but how can they do that if they didn't go through the rigorous schooling that the ownership class does?
Non-employee owners vs employee owners taking extra profits, same problem. Difference is the un-democratic owners can more easily reinvest to expand the business instead, and in many cases they do.
It's incredible to see the unironic take here that we need undemocratic do nothings to actually make business decisions. Some of the oldest and most successful companies in the world are worker owned and operated. Just look at the Mondragon Corporation in Spain, which has been around since 1956, has 12b in yearly revenue, and has 80,000 employees. The idea that a co-op wouldn't be capable of investing in the business is ludicrous.
If the business is doing very well, why not just raise prices? Most restaurants simply don't scale or lose alot when they do. They are great because it's the team and leadership that work there that makes it awesome. Not every single restaurant has to become the next franchise in order to be considered a success.
Sometimes they do raise prices, sometimes it'll scale to at least an expanded set of tables next door, and rarely they'll just let the line get really long (usually cash-only ramen shops). Unless the restaurant benefits from exclusivity, it's usually more profitable to expand if the owners are capable of managing that.
Sounds like a great way to turn a business into even more of a hyper-politicized environment than it already is. It becomes not about what you can do, but who you make like you.
Yeah, or it works ok at a small scale but you can never expand, and a competitor (maybe your own ex-employees) eats your lunch like what happened to Cheeseboard. Which is still ok, you can be in that cool little niche if that's what you like, but don't tell me it's a better model overall.
For example there's a British study that shows that 76% of worker cooperatives tend to survive the first five years, compared to 42% of all companies overall, making them particularly stable businesses.
You've also got typically higher job satisfaction from the employees (so less likely to have the ex-employees to create competitors out of), and more productive employees overall.
Honestly that sounds like a pretty good model for businesses overall to me.
Because of the big leap involved in "worker owned cooperatives that have been created by workers buying a business." Either the workers are unusually wealthy and dedicated or a rich owner is doing a bit of charity, in both cases their odds are way better with a corp too. If you're starting with nothing, it'll be difficult to find investment for a co-op.
Why would the workers be unusually wealthy? They can always get a business loan, a bank is going to be relatively confident if you're buying the same business you have worked in for years and know all the ins and outs.
Do you have evidence to back up that claim? I would imagine that only a minority of coops are actually founded by existing workers, and the majority would be new companies - certainly this is the experience I've had with worker coops near me. But it would be interesting if that wasn't the case.
EDIT: the France study is particularly interesting because they specifically talk about this as a potential reason for the surprising longevity, but then point out that "the overwhelming majority of cooperatives are created from scratch, and hence this explanation remains incomplete".
Created from scratch probably means someone with a lot of money beforehand decided to do it. The same study calls coop formation rare, and it's hard to control things when you're sampling a rare case.
That's true of conventional businesses too, though. It's not like banks hand out loans to anyone who walks in off the street with grandma's best bolognese recipe.
"A worker cooperative is a cooperative owned and self-managed by its workers" is what Wikipedia says. If investors are given stake in the company, it no longer matches that definition. It's not just a technicality, it changes the incentives to being for the profit of the investors.
I do wonder about selection criteria biases, it's not like both types of business were started with the same set of circumstances. I.e. if you flipped a coin on a non-cooperative and if heads made it a cooperative would it's probability of success increase or decrease.
Some of the studies do try and control for the type of business, and the effect still seems to come through. Feel free to click through the sources - that's why I provided the Wikipedia link, because I was too lazy to copy all of their sources into my comment! ;)
"type of business" is not really sufficient of a control to glean anything really. I know economists/social science make a profession out of trying though, it does not mean we should listen to them.
It just all seems so very fragile. It would be very easy for institutional culture to slip, or for whatever the restaurant equivalent of technical debt is to accumulate.
You see the same thing with a lot of non-profits - they mean well, but they send so much of their funding right back out the door - and the first unexpected expense ruins them.
And yet evidentially, they aren't so very fragile. Clearly there's something about coops that make them viable businesses, even if that goes against our intuition for what viable businesses ought to look like.
I think part of it is that workers typically have very good insights into the immediate needs of a business. You bring up technical debt as an example of the dangers that businesses face, but technical debt is famously a problem that is noticed initially by the workers, and only later by the business as a whole (as velocity falls and new features start becoming painfully slow to implement). The companies that handle technical debt the best are typically the ones where developers are given the freedom and flexibility to make decisions regarding paying off that debt.
Similarly, you might expect that when the small problems in a restaurant show up, it's the workers who will notice them first. And the point of a coop is that those workers then have both the motivation (it's their business) and the power (it's their business) to fix those problems immediately, rather than being forced into handling less relevant tasks by a management that doesn't have full visibility of the problem.
Fwiw, I'm a fan of the idea of worker coops, but I don't think it's the only setup that works, nor necessarily the best setup in ever case. But worker democracy as a whole - the idea that workers in a company must have a right to contribute to the decisions of that company - seems both moral, and also practically very useful. If you want a good overview on this topic, I recommend the YouTuber Unlearning Economics, who has a whole video on worker democracy and what different forms of it look like (and what the costs and benefits of those forms are):
The only reason we have the intuition that these would not be viable is because we've been indoctrinated by a capitalistic system since childhood. All the evidence, as you have shown repeatedly in this thread, suggests that workers give a shit when they have a stake in the business, and when they have a say in how the business is run. The results should not be surprising.
Most American kids are never taught economics, and if they are, it's a basic version in late high school at best. If you ask a kid who owns a business or how prices/values are determined, they'll probably have no idea. Guessing that the store manager owns the store seems more natural than thinking there are invisible stakes that may have traded hands between entities you never see.
It's almost certainly a better for the people who are working somewhere they actually care about for more than minimum wage with performance potentially tied to income.
Except that looking at the two linked here (Seward and the pizza place) both are struggling - raising prices, cutting hours, and both are essentially begging the community to fund them so they continue to exist.
There are plenty of non worker owned restaurants doing the same in today’s economy, of course.
Non-chain restaurants are kind of weird businesses, really. Owner owned or worker owned they’re rarely big money spinners and often owe a lot to the community around them to keep them viable.
Idk how Cheese Board is doing. They were fine last I checked. Just probably would've done way better as a corp. The Avedisyan couple turned their cheese shop into a coop decades ago, and it was basically an act of charity when they could've kept ownership instead. The store didn't expand much despite decades of exceptional work and high popularity, which is a missed opportunity for profit, but that wasn't their goal. I do wonder where they got the initial investment for the shop.
Arizmendi and Cheeseboard are separate companies though, same with Cheeseboard and Sliver (which is btw not a co-op). Not sure about Mondragon's structure since it's headlined as a corporation/federation of co-ops, which sounds like the workers don't collectively own the entire business and there's a higher level that's just a regular corp.
Anyway, I'm not saying co-ops can never expand while still maintaining collective ownership, only that it's harder. Also harder to start, or to exist in general.
Just because the employees own the store doesn't mean they pay everyone above market rate. If they do, then yeah, some lucky employees will get paid extra at the previous investors' expense. Meanwhile a regular corp restaurant could offer the same pay but fill the spots with higher skill to match, and some do. Same thing except the corp more likely thrives.
These points are solved by the workers electing an executive or directors who makes those decisions, until the workers are sick of them and replace them in an AGM or an emergency meeting.
In the long run, that is bound to generate a separate managerial class, with all that it entails. It's how most cooperatives eventually die: they turn into regular businesses.
I mean, that’s fine, no? As long as regular non-manager employees are still on the corporation’s Board, the managerial class (CEO et al) still all have the Board’s sword of Damocles dangling over their neck at all times.
In theory. In practice things will evolve in subtle ways that will effectively insulate managers - scheduling meetings at unconvenient times, passing rules that allow for fewer and fewer people to make big decisions, etc.
I mean, even regular businesses in practice end up this way - nominally with lots of shareholders, practically run by (and for) a few powerful individuals. That's why we have a concept of "activist shareholder" - in theory all of them should be "active" but in practice almost no one is, so the few who do are labelled (and often "bought" one way or another).
Sure but nobody is pretending that there shouldn't be some kind of way of making decisions in these organizations. The point is that the people making those decisions were chosen by and accountable to the workers at the firm, not external shareholders. The incentives are completely different.
> Somehow finances have to work, which is usually a harsh reality for some. Ex: Hey we can't pay workers $250/hr without raises prices to above what customers are willing to pay
If it was worker owned wouldn't you just pay everyone some reasonable wage that the business can afford and then also split profits evenly?
I mean, it's usually part of the premise of "worker owned" that there's going to be a heavy reduction in what you might kindly call administrative staff.
Concretely: I recently saw a worker-owned coop offering everyone 60k euro per annum regardless of role (fully remote).
That's livable almost anywhere, and it's a reasonable salary for a mid-level dev in the Phillipines, but more experienced folk are going to find it hard to give up the option of earning 2-4 times as much.
Their product is flaky as hell and it's driving customers away in spite of their unique positioning.
Yes, but only if there is enough money to pay the base wage in the first place, which is far from a foregone conclusion. Let alone having any profit left to distribute.
You are joking, but that's not untypical for worker owned businesses.
There are studies about coops that show that workers are more engaged in the business and will decide to suffer temporary wage cuts in hard times (opposed to layoffs) in order to maintain the business long term.
Two friends of mine actually have worked in the same restaurant coop at different times. The pay was fair, the conditions were good, the people were great and they had a high degree of agency. As you can imagine, they had high standards in terms of where they buy, what they produce and so on. Preferably local, fair etc. It's also a restaurant that exists since a long time.
The negatives that both reported were:
- Long meetings each month, there was no hierarchical structure. When the better argument wins (and not from who it is) then you need time to discuss things.
- Criticizing or firing people is emotionally taxing.
There was _never_ a complaint of shared responsibility in financial terms. That's a given. That's what you sign up for.
What is "reasonable," what is "fair." These words signify a death spiral in wage discussions. The reality is that businesses cannot increase prices forever and have a market that still wants to pay them. If I sell burgers for $10k and they're shit burgers then I'd make no money and have to shut it all down. Just like my friend who shut down his cabinetry business because he was paying his employees more than himself (doing the "right thing"). He is a one man shop working out of his van and is doing much better, but his employees' wages became 0.
The restaurant has been in business 10 years. I think that evidence makes me dismiss your comment as pessimistic hyperbole. If the wages really didn't work, the restaurant would have been long gone.
I acknowledge that you have seen something similar not work out, first hand, but in this case it is apparently different.
> What is "reasonable," what is "fair." These words signify a death spiral in wage discussions.
Another commenter commented on a burger-joint giving a share to "climate" causes. What a share entails in this case, whether it comes from profit, or whether they pass the cost of this cause to the customer is unknown.
Additionally I live in a place where there are reparations discussions and where unions agreed that teachers of a certain ethnicity would be eliminated first in the name of equity if it came down to staff cuts.
How does this play into the scenario if these types of events happen more often, even discussing these things is difficult and people could veer away from. I heard that Amazon inserted "woke" discussions into union talks in Georgia in an effort to de-rail them, not to engender unity.
> Just like my friend who shut down his cabinetry business because he was paying his employees more than himself (doing the "right thing").
I've listened to almost all the How I Built This episodes, and paying your employees more than you are paying yourself is fairly common. You need to pay everyone market rates to retain them, and there often isn't enough left over to pay yourself well (if at all).
What you are referring to is a zombie business. It does not offer enough value so it can only survive via low wages, something that is not guaranteed and is externally controlled. I think banks should does including this measure when it comes to financing. If have to pay your people below market wages to survive you don't have a business, you have a zombie that can't only survive as a parasite on others. Figure out how to manage the business or increase your value add or be explicate this is a passion project not a viable business. I cannot buy produce from a farmer for less than it costs them to grow it, but somehow businesses think they can pay people less than it costs to live.
> If have to pay your people below market wages to survive you don't have a business
How does one pay below market wages? Someone's market wage is established by observing what they are being paid. They will always be equal, unless you mean an employer is illegally withholding funds owed to the worker?
> I cannot buy produce from a farmer for less than it costs them to grow it
Haha. As a farmer, I have lost money selling my produce more times than I wish to count. The customer couldn't care less about how much it costs you to produce a product. They are only going to pay what it is worth to them and not a penny more. The secret to a sustainable farm business is understanding how to weather those times when it costs more to grow the food than what the customer will pay.
Well, probably the most traditional way is to hire for approx market rate... and then given little or no raises/cost of living adjutsments. Bam, 5 years from now, you're well under market rate.
The market rate is established by observing the sales that have taken place. If the sale price continues to be the same five years later, the market rate hasn't changed. You would not end up being paid an "under market rate" just because five years have elapsed. You would still be paid the market rate.
An under market rate would only be significant to outside interests. If I am paying someone $20 per hour and you want to pay the same person $10 per hour, then the $10 per hour offer would be under market rate. However, if for some reason the employee jumped ship and accepted your $10 per hour offer, you would not be paying an under market rate. $10 per hour would become the new market rate.
You're getting paid the market rate from 5 years ago. Due to inflation, this is 99.9% certainly less than market rate today.
You're ignoring the time element.
You hire the $10hr guy when the market rate is $10... and then give him just enough crumbs not to quit. So in a few years when the market rate is $15, he's making maybe $12. See how that works? Obviously many will jump ship, but many won't or can't (e.g. can't afford a gap in pay/insurance coverage).
> Due to inflation, this is 99.9% certainly less than market rate today.
There is no market rate until the market has made a trade. If I traded an hour of my time for $10 with you five years ago, and I again traded an hour of my time with you for $10 today, $10 is still the market rate.
> You're ignoring the time element.
It is not ignored. It is in there.
> So in a few years when the market rate is $15, he's making maybe $12.
The market rate for the given person in this scenario is $12. Maybe someone else will pay $15, but they have to prove that for the market rate to adjust. Some drunk guy at the bar saying "Oh yeah, I'd totally pay $15 per hour for that guy" does not establish this person's market rate as actually being $15. Talk is cheap, as they say. An actual trade has to take place to prove it.
Perhaps what you are trying to suggest is that people are fungible? If Joe is paid $15, and his identical in every single way twin is paid $15, then Sue – no relation – must also be worth $15, and paying her only $12 is below what actual sales have shown what the market is paying for a person of her kind? We do often talk about commodities that way.
But my experience with people in general, as a coworker, and as an employer, says people are most absolutely not fungible. Even for the same job, no two people are going to fit in equally. I think we can agree that some workers are better than others. In fact, we agonize over resumes and interviews to try and find the best of the bunch. If people were fungible, you wouldn't need to care. Just pick one at random. They're all as good as each other.
Since people are not fungible, the market value of an individual rests entirely on the trades an individual makes. It cannot be observed any other way. Their pay cannot go below their market rate. Any time their pay drops, their market rate comes along for the ride.
Some years ago a burger joint opened in my neighborhood, a very hispsterish kind of place. I went once, and saw a message attached to the menu, saying that 50% of the revenue obtained from every burger would be donated to some cause du jour, probably climate change related, bla bla bla. To me it signified that the burgers they sold were at least 100% overpriced when compared to what they should cost if they were trying to have a profitable business. Fun fact: they were, and their burger joint went under in a couple of months. Capitalism wins in the end, it doesn't matter if you want to fight it, the sun always rises again.
> Hey we can't pay workers $250/hr without raises prices to above what customers are willing to pay
You seem to be suggesting that workers are cartoonishly naive and have ridiculous demands that cannot simply be met. When in reality they usually just want a living wage, a bit more input on shift planning, things like this. People aren't generally stupid, and if they can get it together enough to form a worker-owned co-op they're not likely to immediately run it into the ground doing stupid stuff like giving themselves a 1000% wage increase.
Well they sound like they have picked a higher base wage than average (particularly for servers) and aren’t making a profit.
Personally if it’s owner-run I would assume you would be better picking a lower base wage, then sharing profits (with the profits making up that shortfall).
That way there is also an incentive to be an owner, and the business is more stable - sounds like if they have picked high wages and low/no profit though they are running it hot and risky from a cash flow perspective.
But there aren’t profits for owners to share at the moment - possibly partially because they are overpaying on labour.
Noone is saying that restaurant employees would make $250/hour. While the rates cited in the article are higher than most employees earn in equivalent environments, the are still modest in comparison to other industries (and they are absorbing some risk by buying shares, something that most $30/hour employees don't do).
The committee that you spoke of have a vested interest in the outcome of the decisions and, in certain cases, the decision must have full support of the board. While this will have problems, it is unlikely to suffer from the symptoms that most people think of when they think of something being designed by committee.
The other thing to consider here is that this is a relatively small business. As such, it is possible to recruit a board that is more likely to share a common vision and train them in operating a business. We are not talking about a fast food chain with tens of thousand of employees and little interest in training beyond the skills to fit a singular role.
I don't know if operating a restaurant as a cooperative is viable in the long run, but I am not going to argue against it from a prejudiced position.
I completely agree. Restaurants operate on razor-thin margins and are primarily about efficient management, not the workforce.
The only successful worker-owned models I’ve seen involve a tight-knit partnership, like a husband as the chef and wife as the bartender. And that is their “part time” job: the majority of their time goes into tough logistical tasks—dealing with suppliers, managing food costs, managing lease, fixing, schedule, and so on.
> Somehow finances have to work, which is usually a harsh reality for some. Ex: Hey we can't pay workers $250/hr without raises prices to above what customers are willing to pay
Somehow finances have to work, which is usually a harsh reality for some owners. Ex: Hey we can't have collective payout to investors totaling $10M this year without raises prices to above what customers are wiling to pay.
Also a reason that at least some (perhaps many?) franchise restaurants don't allow owner-investors, they must be owner-operators. McDonald's is one, at least they were last I knew.
> * Somehow finances have to work, which is usually a harsh reality for some. Ex: Hey we can't pay workers $250/hr without raises prices to above what customers are willing to pay
This is one of the most interesting parts of business to me. How do a bunch of people below the "head honcho/top dog" collectively agree "you're right, I don't selfishly look out for myself and think I'm worth $99999999/hr, that person does more than me and their skillset is worth more than mine, I will bow out and not contend to ask for more than them an hour"
From there, you get hierarchy
You'll have one person paid the most at the top, and it trickles down
In worker owned, the people at the bottom... why are they ok with being paid "relatively" the least? Why don't they feel like their work is entitled to as much as those making more than them? How are they ok with not looking out for their own self interest at all times?
Everyone is different and has different motivations. We don't all think the same way, either.
Some workers just want a stable, sane work environment and are willing to compromise on pay for other benefits. These same people are typically willing to let others do more work for more pay because it makes their own lives easier.
One possible approach: you could do an exercise where everyone gets $N imaginary dollars and they can bid to not do certain tasks. The bid against each task is then the compensation for that task.
But nobody is saying that everyone has to be equal. Coops have measurable pay ratios just like everyone else, they just tend not to be as large as non-coops. More important (or harder to find) roles will obviously get paid more.
At the end of the day, most people want to get paid, and to get paid, at least in the long term, you need a viable business. So workers tend to make choices that ensure the business is able to survive, because that is more valuable in the long run than lining their own pockets right now and not having a job to go to tomorrow.
Why? You can lead a place as a dynamic and mother of the company waitress but pay your mission critical and hard to find cooks some dollars more. Why is there a hierarchy?
Same supplies in technology: you pay your project manager less despite he is the boss of the developers which earn a lot more.
I am literally in a position where I earn like half of what people two levels down of me earn and deserve, nevertheless I lead them and fire them in doubt. I am in a different country of a multi national.
I worked in car sales for a decade, being as good as #5 in the US for a large brand.
One year I made $260k, more than anyone that actually worked above me at the automall including the CPA comptroller and GM (the other brands at the 'automall' had a bad year while mine had a breakout year due to new models).
I started a year before cash for clunkers came out. I basically was making $200k a year after learning the ropes for 6 months. The owner that year lost over a million dollars.
Not all compensation is based on hierarchy. Commission sales and performance based pay has its advantages.
why is the person at the top (i assume you mean the person running operations and making business decisions) automatically the person who gets paid the most? that's very hierarchical business thinking, that being the manager makes you the highest status and highest paid worker. i can imagine a worker co-op restaurant in which the chef is the highest status and highest paid employee and someone else runs the business end of things because that's what they're good at.
> unless a majority of the workers have a lot experience with business,
That may be the wrong way to think about it. Vanishingly few people have enough experience in all aspects of any business to make good decisions without others inputs. So in many cases we are reliant on someone's domain expertise, not to make the decisions, but to get the the right decision point. Once the pros and cons are laid out properly, anyone with a real stake can contribute to the decision.
The bigger the decision, the more people with a stake need to be involved. In the typical business world this shows up all the time: "that's a board-level decision", "we need all the execs to agree on this one", etc.
We don't know the actual implementation, but it's possibly it's just a reasonable reflection of that practice into collective ownership...
As a parent who is part of running a co op school where only the teachers are paid I can tell you that there is a day to day executive function with delegated powers. The assembly deals with functions similar to a traditional board.
That said the two main problems that come up over and over again in our setup are.
1. People don’t understand what being a coop member means legally and financially. They are on the hook for losses for example.
2. It’s hard getting people to volunteer to do needed day to day work.
3. To much drama, every little thing is blown out of proposition and sometime we are forced to use executive privilege to get something done.
4. Coop can distract from delivering the actual services (school).
> Usually consumers are after something niche, unique, artistic, and creative, which is the inspiration or vision of an individual.
Consumers want that in theory, but much of the time choose lifestyles that favor the opposite. Basically every suburb is the most generic horrible place possible with a tiny amount of commercial activity relegated to a strip mall in a parking lot wasteland filled with the same few shitty restaurants; where culture goes to die.
> Consumers despite "Least common denominator" which is often the result of "design by committee". Usually consumers are after something niche, unique, artistic, and creative, which is the inspiration or vision of an individual.
The committee can decide to delegate tasks and decisions to individuals and set roles and responsibilities for individuals as well.
It would be interesting to see reports of long-term experiments of this sort, see how businesses run this way fare over time and whether this sort of model is unsustainable, or if these people are onto something effective that stands the test of time. Any other restaurants who have tried this sort of model in the past and stuck with it?
The simple fact that you never ever heard about something like that, tells you all you need to know aboit the long term prospect of business owned by "the collective". In my part of the world we have a saying " what fattens the cows is the owner's gaze". A company that belongs to everyone working there belongs to no one, and it will eventually become a freeloader's dream. I have heard of one or two examples of this things being tried, one even a restaurant close tomy home town. It never lasts.
Mondragon Corporation is the poster child for worker-owned cooperatives and has been both successful and robust for decades. I believe it was Ford and GM, no doubt others, were studying their model at some point. But convincing stakeholders - including lenders - to divest interest in a company after a set period is, from my understanding, why the model has such a hard time in the US.
> Hey we can't pay workers $250/hr without raises prices to above what customers are willing to pay
There are restaurants that charge north of 800$ per person which are always fully booked half a year in advance with glowing reviews even from the worst critics hellbent on being negative.
You certainly can pay workers $250 an hour without raising prices above what customers are willing to pay depending on the product. Of cause that's not the case at those restaurants, the workers make closer to $30 bucks an hour and the money goes to the owner/investors. Imagining a restaurant with that kind of success where the owners and investors are the workers is a nice thought.
I know of one of these restaurants that always top the list of best restaurant in the world basically gave their main dish washing guy a small owning stake because the owner/chefs like him, and he's now making way more than just $250 an hour washing the dishes. But that is of cause just a case of the rich throwing leftover bones to the dogs eating scraps at the table for shits and giggles, not a case where workers owning a restaurant leads to a fair distribution of the profits for all of them.
I’m going to call bs on that. I’ve dined at high end restaurants and there is no way you can pay people that much and survive. The problem is everything cost more. It’s not like it’s a $20 meal that’s 800.
There’s expensive plates, bowls, silver wear, custom presentation items. High end materials every where. You’re hiring more staff so that you can pay attention to every detail. The wine cellar might have several million dollars worth of wine in it.
> Well, Noma can charge customers up to $1500 per person and average worker is paid around $50/ hr.
What are you talking about? This was never the case, and when Rene had to pay market prices on labour he shut the place down.
People who dine at these places are all too self-infatuated to ever realize but you are litterly working for slave wages in those kitchens, the saying goes that 'you were paid in knowledge' in order to start your own concept if you survived (as very few would decide to stay as a Sous) those barren years of your career. Never would they offer $50/hr when most heavy season days are easily 12+ hours long.
Just the amount of money they paid to stages racked up 40k GBP/month [1].
Personally speaking, Noma had the cache because of Rene's affiliation to Feran Adria cohort and then Bourdain (who initially dismissed Adria's work as needless snobbery) to most outside of the culinary World, but after El Bulli closed I felt that an era had ended (culinary avant garde) that would never be truly replicated again as it existed mainly during the bubble era before 2008.
Noma tried to re-ignite it with it's creative work-shopping and focus on local-foraging twist but it had all the pitfalls El Bulli had with none of the ground-breaking innovation (I think David Muñoz did a better job of that with XO concepts and he never worked for Feran), including not paying it's workers.
> There are restaurants that charge north of 800$ per person
All of them will have a star chef/brand who'll have to leave lot of money on the table. i.e. only way everyone will make $250 is if someone is giving it for free.
The Seward Cafe in Minneapolis has running successfully as a "cooperatively owned, collectively operated restaurant and community-oriented venue" for 49 years.
I always enjoy these kinds of articles - "Could this radical new way of doing things ever succeed?" where the "radical new way" has a history going back to before the Reagan revolution. We're a really kind of unimaginative people when it comes to talking about how one arranges things in society.
I also really enjoyed “Against the Grain” and “Seeing Like a State” by James C Scott - both really dig into social narratives and the ways we talk about history and society.
I used to love cheeseboard. After covid, it's like they hate being there. They cut the days open down to 4 a week, short hours, and basically act like they're doing you a favor serving you. But not in a smug way, more like they're an unhappy slave. Ruined some of the charm of the place.
Sort of. They shut down during the pandemic and have only recently rebooted, but apparently with a totally new staff, and they're still figuring out food service. I'm pretty sure they had a lot of financial issues over the years. I used to go there all the time but I always thought there prices were too low.
"All dine-in checks include a 15% service charge, and all to-go, delivery and curbside pick-up orders include a 20% service charge. 100% of these charges are distributed to our employees in order to keep compensation as fair as possible to everyone"
I guess this is mentioned on the page to signal that menu price is the final, no need to tip? US' tipping culture is so strange. Normally you don't need to mention anything, people would pay the menu price and you'd include whatever you'd need for paying the staff. That's how it is in the rest of the world.
A built-in "service charge" is a scam: it just lets the restaurant advertise lower prices than what the meal truly costs. Same goes for not showing the after-tax prices. If they really wanted to "keep compensation as fair as possible to everyone", they'd simply pay them a proper hourly wage, and adjust their prices to suit, instead of making their pay dependent on that day's sales.
A lot of US business practices are all about scamming people with deception, and restaurants are the epitome of this.
I've been to restaurants that do this, and the menu price typically does not cover service charges, unfortunately. You just expect to see it tacked on the check.
That list is not correct for Europe/Southern Europe at least.
Nobody expects anything. The most tipping is done by rounding up. You have a 1.8 euro bill for coffee, you leave 2 euro.
The biggest difference between NA and Europe is that in NA a lot of people work for tips, as in, they're going to try to service you to get them. This is not the way it works in Europe, waiters do appreciate tips especially in places that have lower purchasing power, they will take your order, bring your food, bring your bill, and be on disposal if you want to call them anytime, but they're not going to try to look outgoing and approachable and hassle you with "is everything ok" questions for better tip.
Their 2012 page (https://web.archive.org/web/20120411013004/http://www.seward...) is significantly more better organized (For instance, address is right in the top right, as is opening hours), and easier to read in general. It also has features like embedding a google map into the page.
The new one doesn't tell me an obvious address -- the only one appears to be the handwritten pixelated background image, which is partially blocked on every single page by a foreground photo.
I dig retro and minimalistic pages. This is just bad design.
If anyone wants to start a coop there is an accelerator for them based in NYC called start.coop. I've joined a few of their calls and it seems like they're pushing for pretty great stuff.
This was a fundamental question for me before taking the plunge into starting a coop. Long story short, I did a lot of research and there wasn’t anything that really compensated risk in early stage startups hence the dearth of platform coops.
We ended up structuring our coop to have equity split from voting rights to allow employees to have ESOPs and investors to invest as they do in traditional corporation minus their control of the board. In theory we would be able to IPO down the line, and perhaps become the first coop to do so without demutualizing or a separate investment vehicle on the side.
I remember going there once in Sunnyvale. Decent pizza, but the price was too high even for the area, so I didn't return. There's also a funny "wall of shame" full of pictures of customers who were supposedly very rude, according to each description. Now I'm just there to kindly buy pizza, but I want 0 chance of somehow getting blamed for something and ending up on a public enemy list. There were like 20 paper signs telling me what to do cause of covid19 protocols, and maybe I'd miss one. I can appreciate quirky places that don't treat the customers like kings (cause they're not), but they're supposed to be cheaper as a result.
Next door is an Indian restaurant that makes very good wraps, and they're friendly. Easy decision.
My favorite pizza shop is a co-op too, Cheeseboard. Supposedly $2.50 for a slice or $20 for a pizza, idk if that's accurate but I remember it being reasonable either way, especially given the quality. Making exactly one kind of pizza all day is more efficient, so it makes sense.
Awesome, that's so good to see. IIRC the founder was ex-Cisco. I haven't lived in San Jose in over a decade but Slice of NY is the only thing I miss other than my friends.
A “standard large pizza” is 14", the size of their small; 16" is a common extra-large size, their large is 18” (1.65× the size of a “standard large pizza”, by area.)
$43.20 ($40+8%) is quite reasonable for an 18" multiple topping pizza.
Thanks for helping remind me of the Bay Area / tech wealth bubble. Meanwhile the first pizza place I find with good reviews elsewhere in the country has a 18" multi topping for $25, and two 16" for $37.
Sure, i'm not commenting on the tastiness. Just that I remember balking at the $40 I spent for a pizza there, and am surprised that anyone thinks the prices are "reasonable" when it's likely one of the most expensive pizza places in the entire country.
>Because it can be hard to get everyone in the same room, most votes are held via a Discord server. People respond to proposals with a thumbs-up emoji for yes, a thumbs-down for no, and a monocle to signal they want further discussion — a closer look, if you will
I would love a retrospective on the role of Slack and Discord as tools of revolutionary politics in the last decade or so. Seems like no matter where you fall ideologically, there's a Slack channel or Discord server for you and it's doing the emoji vote thing.
This seems fine during the good times, but I can imagine a big problem of having a no-hierarchy worker-owned operation is what happens when the market shrinks and you can't afford to pay everyone the promised minimum salary. Do you all just collectively agree to take less money?
What about the one person who actually can't afford to do that because they'd already budgeted assuming that money was coming in?
What about if you need to reduce headcount? Do you just all vote on who should be fired in effectively a popularity contest that will cause build up of resentment later on? Draw the shortest straw? In this case, an "owner" is probably best because they can all collectively "hate" the owner and bond together as staff.
What about if someone is secretly planning to leave in the next few months and wants their money now as salary rather than investing in long term projects for the company, etc... They might destabilise the long-term success of the company if they vote not to invest, but be unmotivated and work poorly if they know some of "their money" was invested and they're never going to see it.
There seem to be so many edge cases where the traditional hierarchy structure seems like the best viable solution. There are some examples of co-operatives in the UK, the most famous is John Lewis. I think they work around it by just running mostly like a normal business, paying fairly normal salaries for different roles, but then bonuses for profit sharing.
Well, looking at real-world examples, one large Basque cooperatives managed a downturn by agreeing for everyone to take a temporary pay-cut.
> the Erreka Group averted layoffs by temporarily trimming wages by 5 percent. It continued to pay workers stuck at home in exchange for the promise that they would make up some of their hours when better days returned.
You are talking about a 5% reduction. No one even talks about a "round of layoff for hard time" when the number is that low.
What would it look like if the company had to downsize by ~30% ? Would people still be able to pay rent ?
Any. Eg of what's happening next to me: a tunnel has to be closed for repairs, so it's becoming way harder for customers to access your location. As a consequence you are loosing a lot of customer for whom it's really inconvenient to come now. You have roughly 50% less customers for now. Repairs will last 2 years, and insurance helps you pay for the rent until the end of the repairs.
More info about John Lewis and its current situation [0] and [1]. Most interesting to me is:
"Insiders claim that some years’ borrowings were ramped up in order to avoid having to think the unthinkable and cut the hallowed John Lewis staff bonus, as profits failed to keep up with the pace of store openings."
It only takes a few years of mismanagement for a partner owned company like Waitrose to borrow too much and step on the landmine of unserviceable debt. The company is then has to be sold and metastasises into a normal company. Obviously the most unjust thing in that story is that upper management probably not only get paid too much while causing the situation but likely negotiate a personally beneficial settlement for themselves as the ship burns and sinks.
Interesting that although worker-owned they were still managed by professional managers and had that hierarchy. And it was the hierarchy that failed, not the worker-owned aspect. Managers incentivised to act in their own interests rather than the interests of the organisation is a source of much evil.
I don't think it would be hard to collectively agree to take less money or reduce everyones hours if the alternative is to lose the business entirely. You could use majority voting to prevent a single person from sabotaging the business.
I think the biggest obstacle for worker owned businesses is the funding, not the absence of a hierarchy.
Funding is the easiest part. Workers agree to bootstrap the business themselves by loaning their own money to the coop at a pre-agreed rate. Salaries are reduced until that loan is paid back. Increase the loan rate if not enough people are willing to pitch in money.
Toronto has a good and popular seafood restaurant downtown that I understand operates as a worker-owned cooperative.
Of course hierarchy is unnecessary, but there are a lot of people with resources and vested interest in it appearing otherwise.
The group in the article take the approach of consensus-based decision making. For high velocity work like in a software company, I am more interested in the consent-based decision making processes pioneered by the Quakers and formalized in frameworks like Sociocracy.
Also in Italy there is a region where a lot of "companies" are cooperatives, (Emilia-Romagna), I'd say it's one of the wealthiest regions in Italy, I've lived there and was one of my happiest time in my life. I'd say a restaurant owned by workers can work, but as everything depends who do you work with, more than class, is personalities that make the difference, that's why I don't like these kind of articles, I think they are most useful to push a narrative and please a segment of the people, some "newspapers" would find a restaurant going bankrupt due to being owned by people, some other one would find a restaurant working being owned by people, they're just cases, people are diverse. In the end regardless of what happens to businesses funded by workers or by rich daddyskids we need better wealth redistribution, more taxes and better worker protections
It's probably a customer co-op. A funny thing about this is that every kind of alternative ownership structure is considered leftist and somehow "publicly owned".
But in a customer co-op that doesn't include the workers and in a worker co-op that doesn't include you.
Actually, customer co-op often include the workers, at least in France. They either get the same share as customers once they start working, or they have preferential price to get bigger shares.
You can even have co-op without workers (there was one in Stain, northwest of Paris when I lived there) with really good food at really good price, but you had to work there like 4-8 hours a month to be customer.
Sometimes coops are customer-owned which still subjects the workers to wage labor, such as REI. Customer-owned coops are not aligned with the anarchist principles that inspired OP
Many countries have co-op grocery chains or other outcrops of the cooperative movement using that name, but most of them (including in Switzerland) are member (customer) owned rather than worker owned.
I’m curious about how the partnership works and would have liked more details on how it works. In particular after 6 months, do people still have to put in $1000? If the staffing level increases does everyone’s stake get diluted? When you stop working there what happens to your invested capital? Do you maintain profit sharing? Do you get bought out? Does it work like law firms and other professional partnerships?
This model really should be expanded to just about everything. Revenue per employee ratio at Apple is $2.4 million a person or so. If that company were to shift from the present shareholder model to a cooperative model, its not hard to imagine labor seeing some substantial gains. Having more money in the part of the economy that actually circulates more of their income would probably bring on wider economic benefits as well, compared to the present where some of that revenue might go on to be parked in unproductive, perhaps even unhelpful, speculative investments like gold or oil.
> Revenue per employee ratio at Apple is $2.4 million a person or so.
Seems net income per employee is only ~$120,000, though. The way you put it might leave people thinking they have $2.4 million to give to each employee, when in reality they have bills to pay.
WRONG - it should be voluntarily expanded to everything.
One dealbreaker for me and far-left thinking is the required authoritarianism of implementing their ideas in society.
If your ideas are so good, go start something yourself, and see if it catches on. If people still want to work for Apple, there must be a reason, despite the lopsided revenue distribution.
I have often had the same conversation with people in that spectrum, that people should just start coops if they feel like it but to not force me into them, and they tell me that it only works when all businesses are coops, ie workers own the means of production everywhere. Well, if it requires such a fundamental change to society, perhaps it's not actually a feasible solution at all?
You can do it but part of the issue is that the market effectively silences you to begin with. Its like you are at a thermodynamic disadvantage when you are a coop bootstrapping the company with your own owned means of production, versus one that is able to sell itself off to speculative investors for capital to "growth hack" as they say. The experiment of seeing if it catches on would therefore always fail even if the idea was actually better for most people. I'm not imposing on anything, I'm just highlighting how logically it makes a lot of sense to spread wealth around, and yet the very nature of capitalism perpetuates it to the exclusivity of all else, collectively shared vs individually held benefits be damned. I can see why Marx thought the only path forward from capitalism to a collectivism would take a revolution. Greed is sadly more competitive in a free market business environment where natural wealth is divvied up into private ownership.
Workers don’t have capital, by definition. How would they start anything significant, in general?
The current authoritarianism of the capitalist class is what keeps workers from having capital, by not paying workers the full value their labour produces. They enforce this with laws, courts police and armies.
Workers did in fact also start things themselves and got attacked for it. From monopoly practices to starve co-ops to coups, sanctions and wars against countries that collectivise.
The whole article and HN comment thread is about how people are doing this! Themselves! As the proletariat! So don't force me at gunpoint to do the same
In a few isolated cases. Very good, but not enough on its own.
Stop forcing me at gunpoint to give up a large portion of the value I create. And stop supporting your country forcing others at gunpoint to be like it.
It’s a bit complicated, those companies can’t really borrow money (because the bank can’t seize the capital and fire the management of things go south). A friend of mine had her coop buy its HQ, that means the workers/owners had to personally borrow the money.
Side note: we can trace the dictatorship style of cooking to August Escoffier, who introduced the brigade de cuisine to French cooking and is credited with popularizing French cooking at the Ritz-Carlton. https://en.wikipedia.org/wiki/Auguste_Escoffier
Democracy only works when just about everyone wants the same thing. And even then leaders generally abuse power. The lower the stakes, the worse it gets.
Democracy works when most involved disagree actually, that's its primary function over other formats. Otherwise just go with a king since everyone wants the same thing.
I think I agree with the point but people don’t need to want all the same things so I think I’d rather phrase it this way:
“Democracy fails when the people and their leaders fail to realise that the thing they want above all is peace and general prosperity, and that neither of those is a naturally occurring phenomenon.”
Because the peaceful transfer of power as well as respect for the truth, and equality before the law is the absolute foundation that any prosperous democracy needs.
Doesn't that just kick the problem down the road to the definition of peace and general prosperity? If people have irreconcilable differences over what those mean, they still may not be able to find the common ground needed for running a business or country. With something more nimble like a business it's easy to imagine vastly different views on how the business can prosper, which makes the benevolent dictator (business owner) model all the more attractive.
Well, I don't think people around the world have vastly different definitions of peace and prosperity. For example, Ukraine is definitely not experiencing that at this stage in time. Neither is Sudan, Ecuador, etc.
It's amazing how many people have been brainwashed into supporting dictatorship in the workplace, isn't it? So-called free men, who find the idea of no gods and no masters to be unthinkable. You have nothing to lose but your chains!
Not really. Democracy requires an incredible amount of work. Most people don't want that work. Even in governments which are technically democracies, the vast majority of the population never participate and accept a dictatorial rule. Not because of brainwashing, but because they don't want to get involved. They just want to live out their life and let someone else make the decisions.
That lightens the load somewhat, allowing you to do your work at the constituency office instead of having to travel long distances to the central meeting place. But the vast majority will never even make it to the constituency office.
And fair enough. It’s still a lot of work to even participate without lengthy travel. It is completely understandable why most are content to be under dictatorial control. They don’t need brainwashing to get there.
It’s a hellish concept. The workers relationship to the company becomes less transactional, and they get all the stress of owning a business but without the outsized profits.
Have you worked at a worker-owned company? I think, largely, a goal of worker-owned restaurants is to make the work experience less transactional. Is there anything besides stress (which is not mentioned in the article) that would make transactionality and outsized profit a necessary thing?
They don’t get all the stress of owning a business per-se because they most likely vote on a CEO/a council to handle that. Just like the Walmart heirs aren’t stressed about owning a business because they vote on a CEO to do that part, or how you as a voting citizen don’t get all the stress of running a country.
It is true though that an employee will be much more personally invested in that kind of voting than a typical investor given that’s they essentially can’t diversify like an investor can, without being so rich that they make more from investments than working anyway. And that they may choose to give themselves the option of direct democracy to varying degrees instead of representative democracy. In a standard white collar corporate environment that could kick up workplace politics to insane levels.
Most restaurant workers would gladly take the stress of owning a business over the stress of being paid 40 hours worth of near-minimum wage for 80 hours worth of actual work.
> stress of being paid 40 hours worth of near-minimum wage for 80 hours worth of actual work.
which restaurant workers is this true of? tipped FOH workers make a little to a lot more than minimum wage depending on the shift. BOH workers are indeed getting minimum wage or a little more, but wage theft to the tune of 50% of a paycheck is incredibly rare.
In San Francisco, the Rainbow Grocery Cooperative has been around since the 70s. While working in the food industry in San Francisco, I had heard that employees there made in the ballpark of 100k~ a year, but that's purely hearsay and I have no idea how accurate it is. Before Bay Area tech workers chime in with how even 100k~ is effectively unlivable out there, I'll mention that I lived on about 25k a year in the Bay Area between 2010 and 2017, and lots of people -- food and service workers, teachers, warehouse workers, delivery drivers -- scrape by on similar or less, with no benefits or equity. You might be surprised how many restaurants and bars and grocery stores in the Bay hire their cashiers, busboys, dishwashers, and cooks as contractors, or pay them cash under the table.
Back on topic: there's also the Cheese Board in Berkeley, CA, and Arizmendi Bakery but not sure if the salaries are as great. There used to be a great bakery in South Berkeley that was worker owned and fairly well known, but the name is escaping me (edit: it was Nabolom Bakery). In any case, that one struggled more with the business side and employee salaries were close to minimum wage.
Another aside: it's interesting to me how lots of tech workers in the Bay Area live in an entirely different Bay Area than me or most people I knew out there -- these two worlds seem to scarcely talk to each other in any meaningful ways.
I'm curious about the pay at Arizmendi but not that curious. The Oakland Arizmendi started taking tips towards the end of last year on a trial basis (and of course it stuck around), so I can't imagine the workers are getting paid too well. Then again they're pretty reasonably priced.
I'd say up until early/mid-2022 or so you could get by on a surprisingly small amount of money in San Francisco. Watching prices skyrocket over the past 18 months or so has been a wild ride.
Another aside: it's interesting to me how lots of tech workers in the Bay
Area live in an entirely different Bay Area than me or most people I knew
out there -- these two worlds seem to scarcely talk to each other in any
meaningful ways.
Publix is complicated. One family controls about 30% of the shares, and the company has done things (like donate lots of money to conservative PACs) that many employees are unhappy with.
We have tons of worker-owned cooperatives in Berkeley, including Cheese Board Collective that is successful, and one block from that The Local Butcher, also worker-owned. A few blocks down was the worker-owned bike shop but it went under for reasons related to having admitted a notorious bozo into the co-op. We also have Nabolom Bakery that failed after decades as a worker co-op but survives today as an owner-owned business.
I love Cheese Board, but look, several of their members left the coop and opened a regular corp Sliver as a direct competitor, which expanded to multiple locations. They can't remake the brand, but their pizza is just as good. "You either die a hero or..."
We have an embarrassment of good pizza around here. Speaking for myself I am little tired of the theme and I prefer a pizza that was in no way influenced by Alice Waters. We have plenty of that too, luckily.
I enjoyed the amount of pizza when I lived there, but it was getting annoying how many boba shops there were. Got to the point where a business I enjoyed shut down, and I could guess pretty accurately that a new boba shop would replace it. And somehow the average price for boba went up each time a new shop opened.
Is Zachary's Pizza in the same category? (I seem to recall being told there was something unusual about their structure but I can't recall the details)
> Zachary’s was founded in 1983 by Zach Zachowski and Barbara Gabel. Our employee ownership program began in 2003 via an ESOP (Employee Stock Ownership Plan). Through the vision of our founders, Zachary’s is now a 100% employee owned company.
Btw the definition varies a good bit around the world but generally a social enterprise is more about the goal of the organization and a coop (or worker-owned) is about who has power the make decisions in the org.
Is this a chain-style restaurant? Fine dining haute cuisine? Fast food?
What happens when they don't want to do the actual work anymore? Do they still keep their partial ownership of the restaurant and hire wagies? What if they can't work anymore? It's not easy to step and fetch for 10 hours a day at age 50. What if they just need to reduce their schedule to 10 hours a week (and not pull their weight)?
What if most people willing to do grunt work also aren't very good at managing a restaurant? At menus, at book keeping? What if people prefer to be served by the cute young things that you tend to see at many chains (even if they're dressed more modestly than those at Hooters)? You know, the same sort of people who are just unlikely to want to become invested in such a place, where they'll be tied down to it?
There’s a whole chain of department stores and supermarkets in the UK that’s ‘worker owned’ John Lewis which also operates Waitrose supermarkets. It’s a partnership, everyone that works there becomes a partner in the firm after a probation period. It’s a successful business; there’s a John Lewis in every big city in Britain and Waitrose is in many large towns and cities.
Very interesting reading the comments. My impression is that a lot of people saying this can’t possibly work are in the camp of “one day I’ll found a business and this kind of thing could ruin that”. It’s the same thinking that says “don’t tax billionaires - one day I might be one!”.
This reads to me like it's written to evangelize the concept of worker co-ops more than to earnestly investigate the question posed in the title - which is fine, but this doesn't seem like a very good example to choose to make that point.
They say they have ten employees, and the buy-in for ownership is a thousand dollars. But there's no way the start up capital for a quality restaurant in Seattle was only $10k, so either the original founders absorbed those costs or some later employees paid in extra to cover them - either way with no expectation of increased control or return. That's more charity than alternative economic organization.
They also mention that the business has been around for ten years, but isn't profitable - and it's implied probably never has been on any consistent basis, or they would certainly have called that out. Somebody is covering that shortfall, and they're not getting anything in exchange for doing so - very noble, but again that's a reliance on charity for the business to continue existing.
Can a worker-owned restaurant work? Sure, I think there are plenty of examples that prove it. Does this one work? Not as a business, by any reasonable standard.
This is a really fascinating idea. At its heart, it’s a charity in which the person risking their capital assumes all the risks, while gifting the potential rewards. Big kudos to the beautiful, big-souled gentleman who put it together.
Because someone had to put up the original capital, and it's not necessarily the same people working there. And if non-workers hold onto ownership, it's not a worker co-op.
If something is owned by workers then that means they are the ones who put in the capital. They could have bought the business from the original investors, or made the initial investment with common funds. If there are other investors still owning a part of the business then it’s not worker owned (at least not fully worker owned).
Yes, and that's what happens sometimes. But it requires the workers to have a lot of capital in the first place, which is rare. Or they'll rely on family and friends for the funding. Then they're being charitable again if they give more out to hire new employees. Other times, the owner will distribute the business for some charitably low price to the workers, like the Avedisyans did with Cheeseboard.
No matter how it's done, someone somewhere has to be extra generous.
> But it requires the workers to have a lot of capital in the first place, which is rare.
That depends entirely on what sort of business it is. Far from all businesses require up front investment. E.g. starting a service company like a cleaning business or computer contracting firm or whatever with a group of friends wouldn't require much up front investment.
Indian Coffee House is a chain of restaurants owned by its workers (through co-operative societies), that has thrived for more than half a century and has somehow managed to maintain its fanbase...
I find it hilarious (and sad) that people are surprised organizations like this can work. “You mean the peasants are capable of ruling themselves?” Turns out, yes.
This probably works fine at a small scale. With a small number of employees, you can cajole people into voting for something they're not 100% on board with, with the understanding that they'll get something they particularly want later on. There can be give and take.
But if you had a large, 1000+ person company, unanimity would obviously never work. You would have to go by majorities or supermajorities instead.
Like so many idealistic things, this kind of setup works only as long as the people joining or taking responsibility for the thing continue to have and practice the same ideals as what started it.
Start to lose that just a little bit, where responsibility gets diffuse, the original intention gets lost, or you start hiring people who don't have the same understanding, and it all falls apart.
Not every worker wants to have an equal share of the grunt work. Not every worker believes that they contribute equally to the success of the restaurant and are willing to split the proceeds in that way. Not every worker wants to have to live the restaurant as if it's their life.
Worker owned coops have as many failure modes as "evil" corporate ones do. And in some senses are all the more disappointing because of it.
If it is worker owned, then each worker has their own money invested. This is enough to ensure everyone will take responsibility for the success of the business. If someone did fail to do so, they would be voted out and their investment would be returned and someone else would be brought in to invest and replace them.
I'd argue the traditional worker owned business is the family business. From there extended family - tribe - confederation... Etc.
If anybody is gunho about a worker owned business, just go and start one. It's a free market and we can let the empirical results show us what is possible.
Coming from the Socialist Republic of Denmark, this seems like a very silly question. Why should ownership be a problem for restaurants?
If a restaurant is owned by an investment fund, the fund will try to get as much money out of it as possible, regardless of the restaurant's long-term fate. But owned by the workers, they have a common interest in having good and secure jobs for a long time to come, and so can set up running parameters to best ensure that.
Now the _leadership_ is a different matter. If everybody tries to be the head chef,.you get a confusion. But that is distinct from ownership and can be arranged in many different ways, some of which work.
If all business were worker-owned, one would be right to ask whether a nom-worker-owned business could work.
The largest worker cooperative in the world, Mondragon, hires someone to head the company. Big decisions are democratic but decisions on how to execute the big decisions are left to the executive.
This makes me miss Blackstar Co-op in Austin, TX. Great microbrewery with excellent food that has a hybrid worker/consumer ownership model. If you're ever in the area (and if it's still around, it's been years since I've lived there) look it up!
I'd prefer the term Owner-Worked... because once you're an owner, you shouldn't be able to just think of yourself as a "worker". It's about taking responsibility for more than your assigned role. That's what owners do.
Benign dictatorships are almost always easier to pull off than board management models.
Board management models generally only work if it the restaurant was individually owned at one point and then that owner left
Starting a worker owned restaurant from the ground up is a terrible idea because the end customer doesn't really care and your artificially creating additional managerial barriers to entry when you have to move fast early on
If someone has the capability of leading a worker owned restaurant (there is always a leader even in these models - e.g. a board chair), they are also equally capable of running a simpler ran benign dictatorship with less red tape.
The other issue with board management runned operations is if you want to expand operations (e.g. opening up a second restaurant). It will get political very fast and not work because there will be disagreements on how money should be spent and allocated
A worker owned business is just a more complicated business. It can work but it needs very specific conditions and it's prone to political issues
I have seen though however a benign dictatorship take on funds from investors to expand operations, but that only works if there is a well established culture (e.g. usually the restaurant has built a few successful stores on their own). It's not very that far off from startups taking investor funding
There's a reason we call restaurant entrepreneur as restauranteurs
I run my own nonprofit currently (board management) and have done startup consulting for the restaurant space for over a decade. Restaurants and startups operates on similar principles
I don't see how any of your points don't apply to 'having shareholders' equally.
A board management can elect a leader/ceo/dictator if they wanted (and from the sounds of it probably should).
Just like having a company run directly by shareholders is probably a bad idea.
Having a company that is 100% Owned by the same people that it employs does not make a decision on how it's run, it just aligns workers and shareholder interests completely.
you could have a worker-owned business where one person is appointed "benevolent dictator for now" when things need moving fast. "worker-owned" doesn't mean "every decision has to be collective"
I can't tell if this some subtle satire on the 20th century of other similar "benevolent dictators for now" that, any day now, will relinquish control to the masses of workers. If not, that would be some true irony.
no, just a play on "benevolent dictator for life" - my contention is if the situation calls for a "dictator" who can make decisions fast and unilaterally, that could as well be a job as a position of power.
Worker ownership leads to more stable companies that tend to put more wealth in the pockets of workers and fuck customers less. The problem is getting enough startup capital from people who despise the idea.
- the UK, or rather UK trade unions, basically invented the concept of modern cooperatives 150 years ago.
- by now, cooperatives have effectively been out of fashion for decades. Even the flagship Cooperative Bank has recently been de-facto "normalized" into a regular business.
- the cooperative model can, however, still be attractive for small groups of artisans, like software developers. Hence the link from parent poster. This doesn't mean that it's been "adopted" at large scale, or seen a mainstream resurgence - it has not.
Can't read that tweet cosTwitter is crapping out with GraphQL errors, but co-ops are an old and successful model of business ownership. They've lasted centuries. Co-ops run successful banks, manufacturers, industrial farms and food processing. And yes, restaurants and cafes.
But even if you want to wipe away all of that, they aren't exactly facing a resurgence in the UK.
- If the business grows and starts needing management skills beyond what a cook or a waiter would have, you will have trouble hiring a qualified manager for same wages you pay to waiters
- If you need a loan to expand, lender is likely to want some control over how a restaurant is run rather than leaving it up to workers
If you are content to stay at a small scale where these factors do not matter, sure go ahead.
>- If the business grows and starts needing management skills beyond what a cook or a waiter would have, you will have trouble hiring a qualified manager for same wages you pay to waiters
Waiters generally make more than managers in restaurants in the United States at least.
>If you need a loan to expand, lender is likely to want some control over how a restaurant is run rather than leaving it up to workers
Co-ops get loans all the time. You just need a governance structure of some sort and collateral for a loan.
Mondragon, the largest worker cooperative in the world, hires top level people with the skills to manage the company. Those people, instead of reporting to public shareholders, report to the worker/owners who decide the company direction.
Curious about how the business responds to workers leaving/joining. I expect that a worker wanting to leave needs to find someone to buy in, and the new worker has to be approved by the collective. This sounds like a recipe for inflexible departure.
Next, expansion. I expect expansion is a tricky proposition because it means dilution, which is both a hard sell and a risk to the workers.
The worker leaving doesn't have to find someone else to buy in. They just leave and receive the value of their investment. The cooperative finds someone else to buy in. Usually there are lots of people looking to do so.
People save up for years so they can apply to buy in and work at Mondragon.
A very small one might. But a lot of family owned businesses employ their kids or other employees as regular, wage-base staff, without having a say in decisions.
Why doesn't the word "rent" appear in here anywhere? If the landlord becomes aware that the restaurant pays way above industry norms, it will raise the rents at the earliest opportunity to squeeze that money back out of the business. Either they own the building or have an existing long-term lease.
That is generally not how things work. Your same argument could be made if they realized the restaurant was very popular/profitable (with low empoloyee wages). Rents have to be somewhat in line with market. They can't just increase rents ignoring the rest of the market. If you are arguing that switch costs are high, so they can. That may be somewhat true, but I know of multiple restaurants in my area that have moved. It's not that high and commercial real estate is not in the best place, so landlords aren't looking forward to vacant property
This is like the contemporary example of rent seeking and during my years of experience in the industry was absolutely a key factor in the long term success or failure of many restaurants.
When you hear of a popular, well-reviewed, by all accounts successful place closing after 5+ years with no whiff of professional scandal or business partner discord, this is usually the reason.
> That is generally not how things work. Your same argument could be made if they realized the restaurant was very popular/profitable (with low empoloyee wages). Rents have to be somewhat in line with market. They can't just increase rents ignoring the rest of the market.
No, that is actually pretty much exactly how things work. Successful restaurants get higher rents on lease renewal which is why they're incentivized to sign longer lease terms. The restaurant is usually paying for all the necessary renovations to kit a property out with their equipment, decor, and branding, so the switching costs are very high, and the landlord is heavily incentivized to squeeze them. It's one of the largest, most common, and most existential issues for restaurants as a business, and a major reason why the largest and most successful chains usually operate on a franchise lease-back model where the corporate entity owns the free-standing building, preventing mis-aligned landlords from making the business unsustainable and eating into their profit-margins. Have you ever wondered why an Applebee's or similar is a free-standing building even on a mall property, even though it doesn't need a drive-through? Because Darden Restaurant Group, just like McDonald's, is as much a real-estate investment company as it is a restaurant company, and it understands that both the franchisee/operator and their primary corporate entity benefit from cutting out landlords that are incentivized to be a rent-seeking as possible.
Your comment is deeply misinformed and it's clear you've never been involved in running a restaurant as a business. Rent is often the #1 factor that can drive a restaurant out of business, because it's the thing you have the least control over. You can often structure your menu to help manage food/ingredient and staffing cost, but you cannot do the same about rent. Restaurants are somewhat unique in that for single-location entities, too /much/ success can actually kill you because of asshole landlords.
The Applebee's location is also leased by Dardens (or McDonalds) from the mall...the difference is that they are leasing the plot of land and not a building, so they get to build the restaurant to their own specifications. (For franchised locations, Dardens/McDonalds then leases the completed restaurant to a franchisee. Sources differ on the %, but McDonalds only owns about 40-60% of the land, and about 66-75% of the buildings, for its restaurant locations.)
Successful restaurants usually get higher rents because the value of the location increases with the success of a restaurant. This generally means higher costs for the property owner. This is also why most successful restaurants have long term leases, meaning 10 years or more, and major chains like McDonalds can have even longer leases; it's not unusual for an Applebee's location to have a 30 or 50-year lease.
To be more exact, individual owners may not be able to sign longer lease terms, especially when starting out. The franchise-based restaurants generally arrange things so that the corporate entity (let's say McDonald's) owns or long-term leases the /land/, and then builds and owns the building, which they then lease-back on shorter terms to the franchisee so they can afford to start/operate the business.
So sure, McDonald's might have a 50-year lease w/ the mall property owner, but the actual franchisee/operator likely has a 1-5 year lease w/ McDonald's for the building + land that's tied to their franchise license.
I allude to this very thing in my prior comment, by pointing out that landlord's incentive to rent-seek in turn incentivizes restaurants to look for longer lease terms.
How does the landlord know how much money the restaurant is making? All they would know is that the rent is paid on time and the restaurant "looks busy," which really isn't an accurate picture of income at all.
> How does the landlord know how much money the restaurant is making?
They don't. But when the local newspaper food reviewer gives you a glowing review and there's lines out the door waiting for a table when you have full covers for the night, and they happen to drive by /their/ building and see this, it doesn't take a rocket scientist to figure out you're doing well. The unfortunate reality of restaurant economics means you could have booming business and still making little or no excess profits though, depending on how adept you are at controlling other business costs, but since the landlord can't see your books they use these other indicators to decide to fuck with you instead.
There is neither a legal nor inherent natural requirement that a landlord choose a reasonable or accurate metric to decide to raise your rent. In fact, in most parts of the country (world?) raising your rent is an entirely arbitrary decision in their full discretion. You seem to be under the impression that the just world fallacy is a truth, when in fact it's not only untrue, most landlords are scum who will happily do as much financial harm as possible to you to the very edge of the limit for what it takes for you to go out of business. The landlord doesn't want you to go out of business or move, which is the only incentive tempering their greed at all.
This is why Adam Smith hated rent seeking behaviour and I think its the biggest flaw in how we do capitalism: the wealthy create wealth by controlling stuff - especially natural monopolies like land, not by doing any actual work. It's parasitic.
That's literally the capital in capitalism. There's not some other way to do capitalism that's not like that: it's inherent to the model and what you want is some other system.
Commercial leases tend to be much longer to prevent the landlords from raising the rent. Which of course, also makes commercial landlords picky about who they rent to.
Land value tax would solve this. (We have property taxes, but they're not as good, and in California they're capped.)
Over the last 3-4 years, I've spent a lot of time around RE folks. I can't speak for places like malls, but I have encountered quite a few that own your typical plaza/strip mall, and this is not at all how they think. Most are relatively simple folks, who make less than your typical SV SW engineer. Their goal is not to maximize profit, but rather to not work. That's why they really like triple net lease[1] - so they don't even have to think about it.
Once they've covered all their expenses so they can "retire" from their regular job, they put all the extra income into other RE efforts (namely buying other such strip malls). For lease renewals, they'll usually charge just the market rates. They are very unlikely to hyperfocus on one particular business they rent out to - they have better uses of their time, and don't want volatile income. They want something steady and reliable. They know restaurants have thin margins and may fail.
There's an Indian restaurant in one of the top food streets in my city that people love - a lot of folks consider it amongst the best in the city. I once jokingly told the owner "What will it take for you to open in my suburb?" She said that before she opened where she did, she tried to open at a plaza close to my house, but the rent was too high. I was shocked - that plaza is a graveyard of restaurants and businesses, and is not at all a happening location. Yet a top food street in the city charges less?
Why would that be different in a worker-owned business compared to any other business? Wouldn't a landlord be equally likely to jack up the rent on a company that posts high profits?
I'm not an expert on commercial leasing, but I suspect a landlord who tried to do that would quickly find themselves with no tenants.
That's the exactly the same reason why basic income can't work if it's introduced on its own. This money will immediately land in the hands of landlords who'll just increase rent.
Doesn't any landlord who defects from colluding stand to gain though? Like how Georgists argue that their land tax won't get passed directly on to renters because if it's applied to the whole market at once then absent perfect and universal collusion on behalf of the landlords renters will arb out those with the highest rent spikes.
Considering a handful of companies already control most rental pricing, and already extract "maximum value" from those properties, I'm not sure it would be any different in any direction.
I don't get why there isn't some level of Trust Busting going on regarding the rental property pricing management at all.
Because it's not true. People only think this because of an innumerate article from ProPublica.
Almost all landlords are small time, only own one or two buildings, and can't organize a cartel. Except there's one way they can - by changing the law to favor them by banning new construction.
They don't need to collude explicitly. They just watch posted prices in their region and match that. Since the posted prices are always above average (you start higher than the old rent and keep lowering it until somebody takes it), rent keeps going up for everyone.
Rents don't always go up even nominally; you've just listed the upward pressures without the downwards ones. I believe they're still down in SF compared to last year.
Posted prices can be misleading because they prefer to give discounts (X months free) rather than lower the sticker price, so it also depends how you count.
Employee-owned co-ops are extremely common in Southern Europe. The Mondragon Corporation has 81,000 employees. Your ideological bias is showing if you think this is even a question. Empirically speaking, the answer is a resounding yes.
The answer is yes. It has also been well studied (https://en.wikipedia.org/wiki/Workplace_democracy). If you want to understand more of the history, look at the IWW, or other resources such as the Chomsky's book A People's History. Usually the idea that it will not work is a capitalist view pushed from the top down onto workers. I.E. You are not smart enough, or you are too lazy, to be productive without a figure of authority making decisions for you. Even the concept of what is considered productive use of time can be a topic of discussion in this regard. Anarchy is largely misunderstood also, it is a philosophy that focuses on the collective making decisions, instead of a central figure of authority.
This still seems like capitalism. Not all the workers own the company. Just the ones deemed worthy and will to put up capital.
It's a fine business model for at least this use case, it appears.
That's the great thing about capitalism. You get to try out all sorts of models for running your business and whatever works for you is what you can run with.
tangential, but what happens to worker-owner who leaves. Does he have to sell his share in business? When you employ a new worked does he have to buy part of the business to start working?
Yes, an owner/worker who leaves get their share back, whether it has increased or decreased in value. A new worker has to buy in. I watched a documentary on YT about Mondragon and a new employee talked about how he saved up the money so he could afford the shares to get a position at Mondragon.
Family restaurants almost always come with a lot of built in hierarchy, even beyond the owner structure. Non-family members always rank below family members and the internal family hierarchy tends to become the restaurant hierarchy, almost regardless of what the formal ownership and leadership structure on paper is. 4 waiters and 2 line chefs will never be able to vote down 'mom' no matter what the paperwork says.
Worker cooperatives still have some kind of hierarchical structure because each owner has a different job, but major business decisions are still democratically voted on by every owner.
Profit isn’t the only indicator of success for a company like this. If they can break even while paying generous wages and providing value to their community, that’s still a success.
I don't think it's fair to say that. Teamshares will sell up to 80% to the employees. Many worker-owned cooperatives have laws specifying that shares can only be exchanged internally. Teamshares isn't particularly transparent on their actual structure.
So for instance, an employee(s) might sell their shares back to Teamshares or another agency, at which point the worker agency is diminished. Particularly in the former case.
I'm not sure what you're trying to say or how it's relevant to the question.
I work for Teamshares, and while not everything about the company is public, what we do is buy small local companies when their owners retire, and transition the companies to an employee-owned model. Everyone gets to keep their jobs, workers get a share of the profits, and local communities benefit from business continuity. It seems to work very well, and there's no catch.
The appeal of a worker-owned coop is the fact that the workers in aggregate have complete control. Relinquishing 20% of that by default, and one might surmise 25% due to the installed president, runs contrary to the purpose of a worker-owned cooperative.
And that's where things are unclear. That 25% can mean a lot of things. Is it simple tribute, or rent-seeking, which WOCs seek to dismantle? Does Teamshares vote with that? What sort of contracts exist to subordinate the companies to Teamshares?
How are the shares traded? Does/can the employee sell them back to Teamshares? Can they sell them to Yum! Brands? If so they're selling current and future employees' agency. If they can only be exchanged between the worker and the company - that would be more closely aligned with the idea of WOCs.
I just don't think it's fair to really draw the comparison without being completely transparent about how it works. However, I do like the idea and have an appreciation for what Teamshares is attempting to do, but I think they should seal the deal and completely abdicate if they're going to front like they're facilitating the development of WOCs.
A lot of this information is quite simply non-public, but again it's besides the point.
We're talking about employee ownership as a business model at a high level, and you're complaining that the specific terms (which you have no knowledge of) may or may not be generous enough.
I can't disclose non-public information, but what I can say is that if I didn't feel great about working somewhere, I wouldn't work there very long haha.
One thing that I never understood was, if an employees wages are tied to the success of the company, would that not incentivize better work ethic as a whole? That is how it works in the start-up world. You get equity, you have literally invested in the company, and you know that your work should (in theory) directly benefit you financially.
Instead we end up in a system where the employee/employer relationship is inherently antagonistic. If you work at McDonalds, in is 100% in your interest to do the absolute bare minimum possible to not be fired, and in your employers interest to pay you as little as legally possible. This costs more overhead and resources from managers, and dealing with angry customers, and food loss/waste, which could largely be avoided if the employees were invested in the success of the workplace.
It looks at how Toyota took GM's worst plant and made it one of the best using the same workers. And how GM's management refused to learn lessons from that.
I think the current antagonism is something that started with management many decades ago. But now it has a lot of momentum, such that people on both sides are used to it and will carry it forward. I remember reading a great zine piece from a video game tester who'd had a variety of shitty jobs. He finally found one that was really good: good pay, good working conditions, nice bosses. But he felt compelled to steal office supplies in bulk because that's what he'd done at his shitty jobs. He was sort of mystified by it, but he couldn't stop.
However, there are alternatives. I live near an Arizmendi bakery [1], which is a worker-owned co-op. It's great. The food is really good, it's sanely run, and the people behind the counter seem serene and present. It's inspired by the founder of the Mondragon co-op [2].
Or you could look at companies that shift to employee ownership later. Bob's Red Mill was actually started by a guy named Bob who sold the company to his employees in 2010. [3]
I don't think those are going to be utopias. But I do think they lack some of the structural disincentives against sanity and compassion that you find in the typical corporate structure, where every dollar in a worker's pocket is a dollar less in economic rents for the owners.
Good points and info, IMO. One suggestion, though:
I think the current antagonism is something that started with management many decades ago.
I think the pattern goes back, well, as far as you want to go back. There have always been individuals who think that they* should be in charge. There's a continual 'tug-of-war'.
For centuries, only a very few people were able to participate directly - when the world largely consisted of monarchies, empires, "hoards", and all of that**. Ancient Athens, and more recent "Enlightenment" ideas about "natural rights" and "mandate of the masses" etc. have generally been unusual in practice until quite recently.***
The data strongly support much more shared power past a certain level of technological and economic development, but, even if aware of the myriad examples, people with power-lust aren't going to stop. It's directly contradictory to that worldview, ambition, etc. - in multiple ways. And, any given person is likely to tack more towards or away from such notions over time, depending on multiple factors.
Right now, it seems there's much more interest, in multiple realms, on consolidating power, again.
Caveat populus.
* Not consciously intentional play on "the royal we"
** Before that, there's a lot more variation, AFAIK, but also a lot less confidence and evidence - though, ancient Egypt and China (three kingdoms etc.) come to mind as particularly early examples with solid enough information regarding ruling over large numbers of people by individuals (and various attempts &/ smaller "kingdoms" etc.)
I heard about an Arizmendi customer who went to Paris and was really excited to try real French bread. When she got there, all she could find was horrible like you could find in any supermarket. She told her French friend about her disappointment and asked where she could get some real French bread. The friend's reply was, "Berkeley."
> If you work at McDonalds, in is 100% in your interest to do the absolute bare minimum possible to not be fired, and in your employers interest to pay you as little as legally possible.
Having worked that gig before, that isn’t how it works. You don’t want to work hardish, you simply don’t get hours. If management doesn’t want to give you more than minimum raises, you leave for something else, and turn over is high. There is still leverage to do good things (both on worker and management side).
A lot of people working there (mainly managers, but some crew) wanted to be owners, McDonald’s had a franchise system in place to do that but you had a better chance of getting one if you actually learned the ropes at another store for awhile.
Wages tied to success of the company, ie profit sharing; how much more profitable could a restaurant become if every employee gives it their absolute best labor output? A few percentage points here and there? Certainly not orders of magnitude. Maybe theres no improvement in some situations at all? I don't see it as much of an incentive, especially if the variable compensation is partly in lieu of fixed compensation.
The startup scenario you mention offers the potential for huge payouts (of course this plays out wildly across a spectrum). A far easier sell to employees, IMO.
I think it would incentivize bailing out as soon as times get slightly rough, and last thing you want is all your best (and most mobile) employees quitting when you need them most.
For example, if my company has a bad quarter and makes $0 net, does everybody get paid $0? Most people wouldn’t stand for that and would start job hunting pretty quick. The “work for equity at a startup” crowd does it because they can afford to take the risk of $0. Most people can’t or won’t take that risk.
> If you work at McDonalds, in is 100% in your interest to do the absolute bare minimum possible to not be fired
That incentive won't change much under this new system. Joe Average at McDonalds has little to no power to significantly increase the company’s, or even their franchise’s profits. Sure, they could maybe move the needle slightly, but working (say) twice as hard to make 3% more is probably not a rational move.
Usually it's not zero though, like it's base pay + the promise of a maybe-payout down the road if things go really well.
But part of it also hinges on the organization being small enough that individuals can actually make a difference. Otherwise it's back to just being a prisoner's dilemma / shared commons, where the incentive is to slack off and let everyone else carry you.
At the lowest levels, most employees don’t stand to share in any gains or upside attributed to their hard work. At best there will be a small bonus if the company does well which will be weakly correlated with their individual efforts.
In white collar jobs and as you move into management then the bonus programmes become more aligned with business unit and company performance so maybe you can move the needle and get paid for it. Companies also have the carrots of promotions and pay rises.
I (naively) think a restaurant would have an easier time detecting people who are doing the bare minimum. The issue becomes how to "punish" freeloaders who are also owners? Imagine the nightmare scenario of a restaurant where every employee is a part of the LLC that owns it. "Firing" someone becomes an onerous legal process.
You can handle it in advance by requiring "vesting" periods where you are working but not an owner. The existing owners then get the chance to offer you ownership, or not. This is how most private physician practices work, and AFAIK a lot of law firms as well.
So if you're a lazy employee for your initial 2-year contract, you don't get any offer when your contract expires. If you're not, you might get a contract extension or an offer to buy in as an owner.
Does it? If the rest of the community doesn't want you there, seems pretty cut and dry. There are no "managers" at Valve, yet they fire people all the time. You would simply receive your pay, and whatever your portion of the dividends owed to you up until your date of firing.
And how does your remaining equity position work? If you lose it on firing then you aren't really an owner in any meaningful sense any more than a tech employee with unvested RSUs is.
Valve is still a corporation with a single majority shareholder.
And I can't imagine a restaurant could work the same way as Valve. In a restaurant, you have to feed people day in day out. You can't deliver a Michelin-quality meal when the inspiration hits you and nothing when it doesn't.
Valve also seems to have a strangely forgiving customer base. I don't think I've ever seen anyone complain about micro-transactions in their games, whereas other publishers seem to get a lot of hate for it. (Then again, ever since I stopped playing games, I've began to notice that each publisher had their own unique method of fleecing their customer base, so it may be that Valve got the players that tolerate micro-transactions, whereas others would have the ones who tolerate endless DLCs.)
If you hang out with the tf2 people you might not see much in the way of good vibes towards valve. The community in that game persists despite valve, not because of them.
Should a worker-owned company be an LLC? An LLC[1] is a union of assets put together for a common purpose. It's not a union of people. A worker-owned company should have a different legal structure, usually something created specifically for such an organization, though one would imagine partnerships would be suitable if the law doesn't provide for a special structure.
[1]Granted, I'm thinking of European definitions here, because I get really confused when I try to educate myself about American ones. An GmbH is more or less an AG with stakes rather than shares, whereas an American LLCs seem to behave somewhat differently (taxation, for example is pass-trough).
Entity laws are all state-by-state in the US, but in most (all?) states, LLCs and corporations are essentially the same ownership-wise. A person buys membership interest/stock in an LLC/corporation, and becomes a partial owner. The organization is a separate legal entity then owning the contributed assets and the members/shareholders own the LLC/corporation. The bylaws will lay out how to divest a member/shareholder of his interest, usually involving the other members/shareholders or a board of managers/directors voting to buy out his shares.
It's not really a union of assets nor people though. The former would be a trust or arguably a non-profit, and the later would be a partnership. And LLCs can elect to be taxed as a C corporation, although I can't fathom why one would. (And most small businesses can elect pass-through taxation!)
No. Taxation of an LLC is not pass through. Taxation of a single member LLC that is a disregarded entity can be pass through. LLCs can also opt for sub K, sub S or sub C.
I also would not refer to an LLC as a collection of assets for a common purpose; instead I would say it is a popular entity form that limits member or manager liability. However you could take a different view.
Horatio Alger stories were about humble, brave, smart and hardworking boys from troubled, deprived backgrounds who found terrible, unrewarding jobs or situations, worked hard, smart, or bravely at them, and were observed doing this by successful, wealthy, and wise men who recognized that raw merit, plucked those boys from their situations, moved them into their businesses and homes, and gave those boys real responsibility and a start on their road to inevitable success.
Horatio Alger was a pedophile who preyed on young homeless boys and orphans.
It is very easy for the best burger flipper at McDonald's to remain the best burger flipper at McDonald's forever. His job is safe. The harder he's willing to work without getting a raise, the longer he will be working without getting a raise. One day, he will probably become assistant manager, and his promotion will mean a pay cut because now he's on salary, and his responsibilities will become greater because he has to show up when others don't. They know he will, which is why they gave him the job. Meanwhile, he works under a series of managers transferred from other locations, or hired from other companies. Eventually he gets sick, and his awful health insurance runs out almost immediately. He's demoted, then fired because he can't keep up at the job anymore. Then he's homeless, then he's dead.
Goofus, however, did the least possible in order to keep from being fired, and went to community college at night. He eventually was able to wrangle a paid internship at a company where there was a career path, and quit McDonald's. Everybody was happy to see him go, because he was a person like them who managed to get a good job, and also because he was terrible to work with because he was always so tired from school and didn't put a ton of effort in. Goofus is now middle-class.
postscript: Goofus later also got sick, his insurance ran out, and he became homeless and died. US healthcare is terrible.
Have you worked at a McDonald's as a manager? Because I have, and their insurance for full-time staff and managers was the same as you get at most employers. Anthem, or whatever major provider. Salaried managers also earn middle-class incomes. Perhaps your experience was different, or perhaps you are making it up.
This is a concept that dumbfounds people today (at least many on this startup incubator forum) but that Adam Smith explained over two-hundred years ago. Yes, workers and owners end up forming two distinct groups with two distinct class interests.
But somehow having a freeloader at the top that siphons off profits is totally fine? I would much rather have someone that I quite literally worked with, and the rest of the staff interacted with freeloading, than some franchisee owner who literally does nothing for the business. Not only would it be much easier to identify, it would be easier to socially address, or remove this person. I couldn't fire my project mates in school, in this scenario you could.
I never did a single group project at school that had a legally binding contractual agreement or a board of shareholders, so I imagine these are entirely different situations.
Capitalism was not designed to create a mutually beneficial relationship between workers and owners, it was designed to make as much money as possible for the owners at the expense of the workers. Even if that means everything runs inefficiently and less money is made overall, the people in charge don't care so long as they get all of the profits.
>> One thing that I never understood was, if an employees wages are tied to the success of the company, would that not incentivize better work ethic as a whole?
It would probably incentivize you to ensure everyone else's work was up to par. This doesn't seem that different from a small startup with heavy equity comp -- everyone is incentivized to work hard, but there are also plenty of times where people want everyone else to work hard but not themself.
In the extreme case, imagine two co-founders. It is common for each co-founder to try and take distracting side jobs / consulting or not quit their dayjob, while the other puts in the hard work to grow the value of the startup. Generally this is a hard-NO from an angel/vc investment standpoint, but outside an external party clamping down, there is an incentive to cheat.
It reminds me of when people complain about stuff like Electron apps.
If you hate it, go do it yourself. You’ll either a) succeed and solve your problem or b) develop a much more complete understanding of the problems being faced by someone in a different role.
I think every worker would benefit from being more involved in the business operations, or really any other jobs that help their company/project function.
Exactly right. All large enterprises I have worked give full freedom to devs to develop alternative to any SAAS product they dislike. As simple as that.
Hahaha. Okay but seriously, I’m reminded of the four months I spent as a dishwasher and the hundred times the half drunk line cook ranted about how he could run a better restaurant. Then do it! Quit and start your own SAAS app!
To be clear I don’t mean to take your ball and go home the moment people aren’t doing things your way. Everyone has a responsibility to communicate and raise concerns productively. But if one finds themselves constantly thinking everyone else is a clown and they could actually do it better… go do it!
You know why they don't. The people who have started the organization they're complaining about had more resources and opportunities than the person complaining.
Not in any successful way, because the entire profit margin is being eaten by delivery companies like Uber Eats. There is no financial future in restaurants, worker-owned or not.
The restaurant industry is a top contender for worst investment of time, money and effort. Wether you're opening a restaurant or want to work in one. Low profitability coupled with high demand on worker skill and efficiency makes sure you can never relax. Yes, restaurant work is highly skilled in order to deliver high quality food at acceptable speed. Restaurants not requiring skills do not offer any career advancement, but top restaurants requiring skills do not offer much of a career either.
Restaurant work is easy to get in to without having to submit yourself to academic humiliation and corporate humiliation, and since good workers are always wanted, you'll always have a job if you show good work ethic, whereas in other industries your job mostly depends on politicizing at the workplace.
But honestly, the restaurant sector I wouldn't recommend for anybody. The only way to expect a reasonable return on your efforts is to have your own place - and then you'll be working for your landlords who'll keep increasing the rent if they see you're being successful, or wasting decades paying interest on a mortgage. And since customers don't accept higher prices, you can't offer higher salaries. Then you start resenting your employees because they won't stay with you for a long time, and you're always rotating the roster.
Or maybe you have the money to buy a restaurant property in a good location outright. But then the question is: If you have that money, why not continue doing the thing that made you that money instead of investing in the worst sector?
Covid was the wake-up call. A huge part of remaining restaurant workers got laid off or put on "pause" without a salary. They realized that they were expendable to the employers and to the industry, so got new jobs and new careers. No matter what jobs they got, it was guaranteed better than their former restaurant job. With the added bonus that you can actually advance in your career and pay when you're getting more skilled at the job.
I don't know what the future holds for restaurants and eating. Maybe more mix-in with show business, so that people have more incentive to visit and don't mind paying a higher price? Maybe people start learning better to cook? It's not difficult. Maybe better quality microwave/air fryer food, in refrigerators instead of in freezers at the supermarket?
Of course. There is no requirement for a restaurant to provide carry-out. Or to lose money providing it. I don't know why they let Uber push them around on that.
Lots of restaurants are dine-in only. If you provide takeout, nothing's stopping the customer from then delivering it to a secondary customer, but also idk why you'd want to prevent that.
This is not the first decent workers owned restaurant I've known, so I'm going to answer: yes, it can work.