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

“Food is not going to solve the world’s problems because food is itself a part of the problem, but food is an opportunity to begin thinking about it.” – Tunde Wey

When airlines and other big industries were getting federal aid at the start of the pandemic, chef and artist Tunde Wey argued that the restaurant industry — his own industry — wasn’t worth saving. In this episode, we’ll hear what Tunde thinks is so wrong about how restaurants operate, what the pandemic has done to the industry, and the solutions some restaurateurs are pursuing to re-image a more equitable future.

This podcast was created by Just Human Productions. We’re powered and distributed by Simplecast. We’re supported, in part, by listeners like you.

Hey, everyone. Dr. Celine Gounderhere. Wow, what a week it’s been. Joe Biden won the presidential election. He announced a COVIDadvisory board of physicians, public health experts, and scientists, including me, to help guide the Biden-Harris team’s response to the pandemic. Ron Klain, my former co-host on the show, was namedBiden’s Chief of Staff. And… the pharmaceutical company Pfizer announced its phase 3 COVIDvaccine trial was effective 90%.

All this news, especially about the vaccine, has a lot of people breathing a sigh of relief. But it’s important to remember that the pandemic is not over. The United States is breaking records almost everyday for new daily infections and hospitalizations. When we recorded this episode, the U.S. averaged more than 100,000 new coronavirus cases every day.

As the weather starts to get colder, it’s going to be even more important than ever that everyone continue to wear masks and social distance. And get a flu shot. Remember, just because the coronavirus is here doesn’t mean seasonal flu goes away. There is still a long way to go before the pandemic is under control. Find encouragement in good news but don’t let your guard down. We can only get through this if we all work together. Thanks for listening. Here’s this week’s show. Tunde Wey: Food is not going to solve the world’s problems. Food is itself a part of the problem, but food is an opportunity to begin thinking about it.

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

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

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

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

Celine Gounder: Prince’s hot chicken is really hot. And has a loyal following…

Audio clip: I wake up sometime in the middle of the night. Twelve,  or 4 o’clock in the morning on weekends just to get some Prince’s hot chicken. The taste, It’s that good.

Tunde Wey: It started in, um, in Nashville, uh, but it’s now  everywhere. And if you look at who, who has benefited from it financially, reputationally, it’s white owners.

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

Tunde Wey: But that’s a consequence of like the continued appropriation of black food culture, black culture, black, um, labor.

Celine Gounder: So Tunde came up with a series of dinners he called “hot chicken shit.”

Tunde Wey: Well, hot chicken shit was about, um, housing. The way I can see this, restaurants have become, um, a tool of gentrification. Um, they anchor new developments, they drive, visitors to communities and they also drive up, uh, um, real estate prices.

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

Tunde Wey: So that the plan is to, um, sell hot chicken to white people for exorbitant sums and use that money to secure the long-term, um, affordability of housing in this black community

Celine Gounder: Black guests from the neighborhood ate for free, but white guests were charged crazy high prices. $100 for one piece of chicken. $1000 for four pieces. Diners has to hand over a property deed in Nashville to get a whole chicken with sides. Proceeds were donated to the community.

But Tunde isn’t just using food as a way to look at problems outside the restaurant.When the pandemic hit in March, while airlines and other big industries were getting federal aid as business dried up, Tunde argued that the restaurant industry… his own industry… wasn’t worth saving. He published an essay with the title “Don’t Bail Out the Restaurant Industry.”

In this episode, we’ll hear more from Tunde as we look at how the pandemic has impacted restaurants. We’ll see what Tunde thinks is so wrong about how restaurants operate… what the pandemic has done to the industry… and the solutions some restaurateurs are pursuing to reimage a more equitable future. Today on EPIDEMIC, disrupting the restaurant industry.

There’s a phrase that Tunde kept using in his essay. “Let it die.”

Tunde Wey: Let’s imagine fine dining. In fine dining restaurants, where there is that say you have the potential to make the most money as an employee, that money is made in the front of the house.

Celine Gounder: Servers, bartenders, hosts. Those kinds of jobs. Jobs where someone gets access to tips.

Tunde Wey: Front of the house is usually whiter and the back of the house is browner, it’s darker. So you have folks who are in this bit, working in Black and Brown folks, even folks who are on the line, working are Black and Brown folks. And then you have a head chef who is, you know, a white person, white man, usually. That’s the sort of like racial gender segregation. White in front, Black and Brown in the back.

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

Tunde Wey: Of course the folks who are going to be most affected by COVID, uh, um, Black and Brown folks, working class folks. But of course, you know, it, it, it couldn’t have happened any other way.

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

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

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

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

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

David Henkes: And, uh, you know, not that any part of the industry has been been spared, but that’s really the one that’s going to be impacted the hardest.

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

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

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

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

Celine Gounder: Take-out and delivery were options available to some restaurants, but David says it’s harder than many think to pivot to delivery service all of the sudden.

David Henkes: You really have to strategically do it. Right. You have to look at your menu and what travels well, and what kind of packaging do I need and all of this. And so, you know, the, the, the ones that have survived and I don’t want to say thrive, but certainly have done better during the pandemic have been those that have been more successfully able to pivot to that off-premise.

Celine Gounder: David says there are a lot of things restaurants are up against. One of which is low margins.

David Henkes: Right. I mean, most restaurants, in the best of times are living on, you know, maybe 5%, five or 6% margins, right. That they’re taking home after all the costs are paid. And so, you know, you start to, you know, reduce your revenue by 20, 30, 40, 50%. Right. And, and, you know, the costs are not going down by the same amount. It ultimately becomes kind of a cashflow situation where you’re forced to close up and you know, you can only do that for so long.

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

David Henkes: You know, in essence, we’re going to be losing a lot of that creativity and soul that comes from those, you know, chefs and entrepreneurs.

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

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

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

Tunde Wey: I think the bailouts shouldn’t happen, period. I think what should happen is instead of focus on, um, a universal welfare system that allows more choice both for the employees and the employers too.

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

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

Celine Gounder: Tunde’s not alone in seeing opportunities to rethink the restaurant industry in the middle of a pandemic.

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

Celine Gounder: After the break, we’ll hear how a pizza shop is rethinking what ownership and equity looks like in the restaurant industry.

Celine Gounder: “Verified”, the investigated documentary podcast from Witness Doc, is back to ask tough questions about who we trust and why. Hosted again by reporter Natasha Del Toro, this new season investigates whether a group of women developed ovarian cancer from dusting their bodies with Johnson & Johnson’s baby powder. Perhaps it’s most iconic product, and one that’s been selling since the 1800s. One woman’s mysterious illness falls into thousands of court cases, each claiming that baby powder is to blame for their cancer. “Verified: Dust Up”, is the story of a trusted brands fight to convince consumers and speculators that baby powder is safe and to discredit the work of the scientists who claim it isn’t. Verified follows this decade-long story to ask, could this product so many of us have in our medicine cabinets be putting us at risk? Listen and subscribe to “Verified: Dust Up” right now on Stitcher, Apple Podcasts, or wherever you find your podcasts.

Celine Gounder: Kirk Vartan was working for Cisco in Silicon Valley when he decided to quit his job and open a… pizza parlor? His wife wasn’t wild about the idea.

Kirk Vartan: Leaving high tech to open up a pizza shop was really not something that she was a hundred percent supportive of and neither was my mom, neither were uh, a number of folks.

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

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

Celine Gounder: Over the years, he became friends with the owner… a guy named Benny.

When Kirk moved to Silicon Valley he was disappointed in the pizza out there. He tried to convince Benny that he should come out to the Bay Area.

Kirk Vartan: I said, why don’t you come out here? He goes, no, no, you find a place. I’ll help you start it. Nine years later, he didn’t half years later, like Benny, I think I found a spot.

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

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

Celine Gounder: Kirk called his pizza shop A Slice of New York. When the business opened in 2006, he wasn’t thinking about social justice or alternative ownership models… he was just trying to make pizza but —

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

Celine Gounder: Getting a leg up like that is a big deal in a place as expensive as the Bay Area. Especially when you’re working in the service industry.

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

Celine Gounder: Kirk says they have always paid their workers more than minimum wage, but he was looking for other perks he could offer his employees. He brought in a lot of elements from his time in corporate America. Things like performance reviews and annual bonuses.

Another thing was stock. When he worked for companies like Cisco or GE, Kirk said stock options made him feel like he was invested in the success of the company. He wanted that same motivation for his employees. But stock didn’t make sense for his pizza shop. So, he asked team members who were interested to volunteer their time to figure out an alternative.

Kirk Vartan: So we actually created a business development team internally and had about 13 people meet on Sunday mornings when we normally don’t open up till 12:30. They come in at nine o’clock. And for like five to six months straight, every, every Sunday or every other Sunday, we would come in and meet as a group.

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

Kirk Vartan: To me, a worker cooperative is, uh, a mini government. It has its own constitution. It’s got its own elected members. Its members are basically its citizens. The citizens elect the board, which is like its local government. It’s got its own constitution, which is its operating agreement or, um, the directions on how the business functions and then the board represent, which is made up of the people that work there make decisions on behalf of its fellow members, which are the workers in the business. It’s based on a one person, one vote, which means there is no one person that has a dominant voice in any of the conversations.  It’s a pure form of democracy. It’s quite awesome.

Celine Gounder: Today, Kirk says around half the employees of A Slice of New York participate in the co-op. They practice open-book accounting so everyone who’s a co-op member can see how the money gets spent. Co-op members get training in legal, human resources, and other aspects of the business so they can fully participate.

When the pandemic hit, Kirk says they had to make a lot of changes to their business.

Kirk Vartan: I mean, we had to do substantial changes to our business operations, uh, and you know, for social distancing, we, we, we usually have two, three people on the table making pies, but we had to bring in other tables and we have now one person per table is separated. The reality is kitchens you’re in close quarters, no matter what you do.

Celine Gounder: But what’s unique is that the employees weren’t told they had to show up to work or lose their job. Afterall, it’s their business too.

Kirk Vartan: So we wanted to create a work environment that people were comfortable with and so the decisions we made, we actually talked to people and ask  what, what can we do? How do we, how do we do this? What’s going to make you comfortable here?

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

Kirk Vartan: It’s a different focus. Our decision isn’t based on profit. It’s based on employee health and employee safety.

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

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

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

Kirk Vartan: We had a problem before this crisis. We had the Silver Tsunami, meaning the baby boomers, trying to retire or sell their business. Trying to sell their business to kids don’t want it, and they just closed their business, do an asset sale. And the business  is gone. It loses that resource. I strongly believe that employee ownership, worker-owned businesses and co-ops specifically worker-owned co-ops give an option, a financially valid option and a model that allows current business owners to transition, to employ your own businesses that will allow us to be more stable, more scalable, and start having that wealth disparity, uh, come back, uh, in check a little bit.

Celine Gounder: The pandemic has wrought a lot of destruction on the restaurant industry. But it’s also going to create a lot of opportunities. It could be a chance to rethink the ownership structure of a business, like Kirk’s pizza co-op. But it’s also going to shake up real estate. The pandemic forced a lot of businesses to close. Rents for commercial real estate have fallen since the start of the pandemic. Tunde says he benefitted from a similar situation when he opened his first restaurant in Detroit. After the 2008 Recession, cheap rents in the city made it possible for newcomers like him to open a restaurant. But Tunde sees a cautionary tale when it comes to who benefits in the long run from the disruption caused by shocks like the Great Recession… the pandemic… or a storm.

Hurricane Katrina devastated New Orleans in 2005. The storm displaced tens of thousands of residents. Besides the flooding and loss of homes, clean water and electricity were in short supply for weeks.

Tunde Wey: The restaurant industry was particularly affected. Uh, because New Orleans is a, is a tourist city and the restaurants and hotels anchor the tourism standing here. But what came after that? I don’t think many people would have thought possible that the city responded spectacularly.

Celine Gounder: Ten years after the hurricane the city was booming. And the food scene was a big part of that. But Tunde says these numbers were deceiving.

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

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

Tunde Wey: That that is in my mind, that is the moral of, of Katrina and that is the moral of COVID is that for white folks, these disasters are an opportunity to come back stronger. Um, for black folks or black folks, this is another blow. This is just another one and it doesn’t necessarily get better. It just looks different.

Celine Gounder: For Tunde… if the restaurant industry doesn’t take these lessons to heart… and work for a more equitable future… then maybe it should die.

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I’m Dr. Celine Gounder. Thanks for listening to “Epidemic.”