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Taking Ownership of Hospitality: 3 Stories of Worker-Owned Restaurants

October 18, 2023

How a centuries-old ownership model is addressing the industry’s biggest challenges today.

September 2023 saw a milestone in our industry: for the first time in more than forty months, U.S. restaurant employment caught up with pre-pandemic levels. In February 2020, 12.34 million people worked in bars and restaurants. Over the next three-plus years, the industry struggled more than any other to bring workers back. But as of last month, the food service sector has finally regained the ground it lost, now employing 12.37 million people. No sector in the national economy, in fact, is hiring faster than restaurants right now.

This time, though, things are going to be different. From conversations over the last few years with restaurant owners, employees, and diners, a distinct sense pervades the industry that the bad old days of restaurant culture cannot come back. Employees won’t tolerate it and diners don’t want it. Staff are unionizing in record numbers and politicians are getting behind pro-worker laws like never before.

In today’s worker-first era of restaurants, one economic model stands out as more empowering than any other: the worker-owned cooperative, or worker co-op.

The Daily Press, a café & bar in Ocean Hill, Brooklyn, has been able to expand business since operating as a worker-owned cooperative.

An ownership model with centuries of history, the worker co-op is essentially a business that is owned and run by its employees. Details about corporate structure, compensation, and management vary from business to business, but all worker co-ops feature cultures of peer accountability and a focus on employee well-being uncommon in conventional businesses.

“Worker-owned cooperatives offer a critically important alternative to traditional corporate governance,” writes Carmen Huertas-Noble, a law professor and activist who has partnered in the creation of numerous worker co-ops in New York City. “The governance structures of cooperatives mandate equitable distribution of earnings and democratic operation of the entities.”

Learn more about National Restaurant Workers Day 2023

Worker-owned restaurants, in other words, dispense with the exhaustingly adversarial relationship between management and employees. Decisions are made democratically, profits are shared equally, and hard conversations are tackled by the people affected most.

It’s not necessarily the easiest model to make work, as evinced by the fact that less than a thousand worker co-ops operate in the U.S. today. But once they get going, worker co-ops are more resilient than conventional businesses. During the pandemic, only 20% of worker co-ops lost more than half their revenue, compared to 28% of conventional businesses. Half kept operating hours level with pre-COVID operations, and 80% remained open for the majority of the pandemic.

In conjunction with National Restaurant Workers Day, BentoBox spoke with three food businesses using a worker-owned model: one established, one transitioning, and one aspiring.

All have in common a bone-deep commitment to centering employees in the company’s decisions and operations. Not in search of praise from the media, but because it’s the employees who own the business.

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Arizmendi Bakery

In five locations scattered across the Bay Area, one of the country’s most prominent worker co-ops has been operating steadily for more than 25 years. Arizmendi Bakery, named after an iconic Basque labor leader, is worker co-op royalty.

Arizmendi’s 9th Ave branch. Via Instagram.

The group was founded in 1997 when two UC Berkeley professors approached the famous Cheese Board Collective (now going on forty years of business) with the idea to borrow their business model for a bakery.

One of those co-founders, Timothy Huet, was a lawyer familiar with co-op law. According to Heather Farnham, a worker-owner at Arizmendi’s 9th Ave location in San Francisco, having an expert in cooperative law in-house was a huge advantage.

“We have a set of bylaws and a board of directors — things you would have in a traditional corporation. But they’re all slightly different,” Farnham says. Cooperative law is very distinct from corporate law. Not only are the tax treatments different, but cooperatives operate according to rules that have to be written very deliberately.

“Our board of directors includes every person who’s a worker-owner,” says Farnham. “Each of us has a vote that counts in any decision-making process. Our hiring and firing processes are completely different from a traditional restaurant, because as an owner, you have more rights. Your standing is in a different place.” And that’s just referring to group-wide governance. Each of the five Arizmendi branches also has their own meetings and decision-making processes.

The good thing about a cooperative isn’t just sharing the benefits, but sharing the responsibility. Figuring out how to operate the space together.

Gabe Caldwell

Bartender, The Daily Press

All of which is to say that the design of the worker co-op’s bureaucracy is paramount. But provided the group’s bylaws are cogent, the benefits include equal pay and a general sense of stability.

“Worker-owners receive a wage, just like a regular employee,” Farnham explains of Arizmendi’s structure. “But we also receive, for each hour worked, a percentage of the annual profit. If a restaurant manager owned the business, usually that person or group would take that cut. We divide it evenly amongst all the workers.”

The result is a sense of ownership and security among the workforce. Individual talents have a chance to contribute more than they would in a straight hierarchy, Farnham believes, because the all-hands-on-deck model encourages more open collaboration between, say, employees from different locations. What’s good for one is good for all.

“We are very supportive as needed,” Farnham says. “Like we just had a fire in our bakery and had to close for three weeks. We gave all our stock and prepped food items to the other bakery. And vice versa, they came to us when their oven was down. It’s a very copacetic situation. Any of the bakeries would do that for the other.”

Reem’s

With an empowering ownership structure and emphasis on stable management, worker co-ops are also becoming a viable option for restaurant succession planning. For an owner looking to do right by their employees but eager to get out of the game, what could be better than the win-win of selling the business to the people who know it best?

Via reemscalifornia.com

Reem Assil, an award-winning chef based in Oakland, CA, knew from the start that she wanted to build a worker co-op. In the beginning of her career, Assil parlayed an education in culinary school and a passion for labor organizing into a tenure as a worker-owner at Arizmendi’s. But unlike her former workplace, Assil started Reem’s as a conventional restaurant.

“I wanted a little bit more stability before turning it into a worker-owned space,” Assil told BentoBox. “My goal is to build, build, build, and then sell it back to the employees.”

Read more: 10 Women-Led Restaurants Changing Hospitality

In order for a cooperative to work, the worker-owners need to be more than just engaged employees; they need to know what they’re doing. For Assil, simply going out and finding a restaurant’s worth of people who would work well together and also run the business was not possible. So she decided to build a restaurant first, and develop a co-op-caliber staff inside it.

“Sometimes you have your worker hat on and sometimes you have your owner hat on,” Assil describes. “Both are important. You need to make the thing run, but then also you have to make really tough decisions that are based on the business.”

Reem Assil. Via reemscalifornia.com

Assil calls Reem’s system of governance “participatory management.” Some decisions are made by the staff, others in consultation with the staff. Transparency is high. “That’s to encourage people to exercise that muscle and be invested. And it’s worked out really well,” Assil reflects. “Employees see their opinions matter and actually get implemented, so they feel like owners.”

During the pandemic, Assil started a 15-month apprenticeship program to teach employees skills they will need when they run the business: everything from how to be a better communicator to how to read a P&L sheet. Producing the course was not cheap (employees were paid for their attendance) and Assil had to secure outside funding for it. But the program, she feels, was worth it to facilitate the transition she’s always dreamed of for her restaurant.

“It was a double-down investment in our workers,” Assil says. “These were employees who had been with us and who were already, in fact, leaders. It helped them build their skill set and their confidence, so they feel they have the tools they’ll need to make good decisions.”

The Daily Press

Transitioning to a worker-owned model doesn’t have to be part of a political project. Sometimes it’s a matter of turning over a faltering business to the people who know it best.

Steps away from New York City’s Broadway Junction subway stop, The Daily Press is a neighborhood bar & café serving the people of Ocean Hill, Brooklyn. Bartender Gabe Caldwell had been a regular for years before joining the staff in August 2020. Two years later, he played an integral role in helping the staff organize a sale of the business — to themselves.

Unlike Arizmendi or Reem’s, The Daily Press was not opened with the intention of becoming a worker co-op. Instead, it was employees who hatched the idea to rescue the bar.

In late 2022, the then-owner announced plans to reduce hours and staff. The workers felt it would not be a temporary (or effective) solution; they sensed the owner wanted to move on from the business entirely, and probably planned on closing the café. Caldwell and other employee leaders mobilized to try to save their jobs.

Bartender Gabe Caldwell: “A bar or a restaurant is a social space. If the staff are happy, they’re making a better spot for customers.”

“Our first reaction was to unionize,” Caldwell recalls. The employees sent a letter to the owner requesting that he recognize the workers as having formed an independent union. A contentious back-and-forth ensued. The matter finally came to temporary rest when Caldwell agreed to help the owner with some of the administrative burden of the business in exchange for delaying the work cuts.

Poring over the books, the employees realized that the underlying business was strong enough that, under their stewardship, no one would have to work reduced hours. When things got contentious again with the owner, the employees decided to exercise their collective power by going on strike. “But if that happened,” Caldwell explains, “he probably would have just sold the business. So we were like, ‘Well who’s he going to sell to?’”

Instead of striking, the employees lined up an offer to buy the business. The sale would be a direct transaction between the owner and Joshua Thies, one of the longest-tenured managers, who Caldwell describes as “someone trusted by the owner and by the employees,” in addition to having access to the necessary funding mechanisms. Thies would then sign a contract with the union agreeing to only operate the space with members of the union, essentially establishing a “closed shop.” The operation of the business, meanwhile, would proceed as if the co-op were in charge. All decisions would be made collectively. The goal, shared by all parties, would then be to raise capital as a proper worker cooperative and purchase the business from Thies.

The owner accepted the deal.

During the pandemic, only 20% of worker co-ops lost more than half their revenue, compared to 28% of conventional businesses. 80% remained open for the majority of the pandemic.

Having rescued the bar, the employees immediately set about running it as a worker co-op. “The good thing about a cooperative isn’t just sharing the benefits, but sharing the responsibility,” says Caldwell. “Figuring out how to operate the space together.”

The staff quickly proved to be adept managers. Employees, more hands-on than the owner ever was, decided democratically to front-load some essential investments and prioritize debt repayment. Hours were not cut; in fact, service has expanded. “The place is open around twenty hours a day,” says Caldwell. On the roadmap is bringing a chef in-house and beginning food service. And, of course, completing the transition to a worker-owned co-op.

Creating a social space

Caldwell is anything but triumphalist about the fact that a group of workers have done a better job of managing the business than its owner. Actually, he sees it as a reflection on the nature of the hospitality industry.

“A bar or a restaurant is a social space,” he says. “So what happens when the people who organize this social space are victims of wage theft, fraud, inconsistent hours, no benefits? What does precarity mean for the vibe-setters? I think that’s why you see so much churn in the service industry, and now so much focus on organizing. If the staff are happy, they’re making a better spot for customers.”

Better hospitality, in other words, starts with empowered employees. And nowhere are employees more empowered — more safe in their jobs and in-control of their surroundings — than in businesses where they call the shots and take home the profits.