When it’s time to settle the bill at Cause DC, a bar and restaurant in Washington’s popular U Street nightclub district, patrons get to make one last menu choice: Which of four featured nonprofits do they want to benefit from their entertainment experience?
Cause DC opened in late 2012, creating a buzz with its unusual business model: It gives away a portion of its profits to worthy organizations. Other “philanthropubs” have opened in Houston and Portland, Ore.; another is rumored to be in the works in Melbourne. Cause DC co-founder Nick Vilelle doesn’t mind the competition. “If someone steals the idea, that’s fantastic,” he says. “The more, the better.” Even comedian Stephen Colbert has chimed in, giving a “wag of the finger” to what he described as a new trend of “drunk donating.”
Although all of these establishments aim to do good, their business models vary widely. The Oregon Public House, located in a gentrifying neighborhood of Portland, operates as a nonprofit. The two-story, brick-walled space, built as an Oddfellows Hall in 1909, was painstakingly rehabbed by volunteers. A pub operates on the ground floor, and an upstairs ballroom is rented out for special events.
Sweat equity and a long-term lease allowed the Oregon Public House to open debt-free. During opening weekend in May, the place was packed with diners who were tucking into cheeseburgers and other pub grub. Proceeds from just the first two weeks of operation enabled the pub to give away $2,000 to eight nonprofits.
Cause DC has somewhat more upscale ambitions. Vilelle and his cofounder, Raj Ratwani, recruited an experienced business manager and a veteran chef to design a menu that would appeal to twenty-somethings out for a night on the town. “We don’t want people to say, ‘Oh, it’s a nonprofit bar, but the food’s not any good.’ Our staff is very good at what they do,” Vilelle says. (Yelp reviews back up his claim.) The chef sources most food locally, and specialties like African chicken groundnut stew make for “an adventurous menu,” Vilelle notes.
Unlike the Oregon Public House, Cause DC is a for-profit venture. Actually, it’s a pair of ventures. One LLC owns the property; another operates the bar and restaurant, leasing the space at a subsidized rate. The founders recruited impact investors to buy into the idea. “They’re making a real estate play that allows us to make an impact,” says Vilelle, who began to develop the business after returning from a Peace Corps stint in Togo.
Like a set of rotating taps, the array of nonprofit organizations that benefit from these establishments’ generosity changes frequently. At Cause DC, would-be beneficiaries use a streamlined online application process, and an advisory board chooses a slate of recipients each quarter. The board favors organizations that are “innovative and working at root causes,” Vilelle explains. Recent beneficiaries have included international NGOs like One Acre Fund and local nonprofits with a focus on arts or youth mentoring.
Cause DC predicts that its annual donations will reach $100,000 once it recoups its start-up costs. Oregon Public House expects to generate $120,000 annually for charities, and it plans to cut checks for them every month. “The whole point is to raise money for charities, not to be just another nice pub,” says Ryan Saari, founder of the Portland bar “We want to get the money out to them fast.” Both organizations plan to publish reports on their donations online.
These socially minded barkeeps eagerly share what they’re learning with anyone who asks for advice. Vilelle estimates that he has fielded at least 20 calls from interested entrepreneurs around the world.
Perhaps the most valuable benefit of the philanthropub model is the way that it matches good causes with potential supporters. “Younger people aren’t your big-check philanthropists,” Vilelle says. “Here’s an opportunity for them to get involved in the things they want to support just by doing what they already do.” Cause DC customers who write an email address on their receipt will get an update on what the beneficiary organization has accomplished with its donation. “That’s positive reinforcement,” Vilelle adds.
Read more from Nick Vilelle about lessons learned after Cause’s close.