Cause was a bar and restaurant in Washington, D.C., that I started along with my partner, Raj Ratwani. The place became known as a “philanthropub” because it was designed as a vehicle to generate donations for charitable organizations. We had a for-profit model in which, once we had covered our costs, we would direct 100 percent of our profits to a rotating series of charities. After five years of brainstorming and hard work, we opened the bar to much fanfare in October 2012. (SSIR covered Cause in “Donations on Tap,” an article in the fall 2013 issue.) Unfortunately, just 14 months later, we had to close our doors. In that time, we were unable to achieve regular profitability—and thus unable to achieve our mission. Along the way, though, we learned some important lessons. And since we still believe in this type of business model, I want to share a few of those lessons.
Don’t oversell the mission. We knew from the start that we were entering a very competitive industry—most new bars and restaurants don’t succeed—and that we would have to stand out not because of our mission, but because of our food and service. Based on our Yelp reviews, we did quite a good job on that front. But I now see that there were a couple of ways that we let our mission interfere with our business. First, we relied on earned media to do too much of our marketing. While the publicity was great, we should have developed a strong marketing campaign of our own. For each great piece of coverage that we got, we would see a huge spike in Web traffic, but barely a blip in sales at the restaurant.
Second, we may have done ourselves a disservice by putting our mission front and center. While the mission generated an amazing amount of publicity for us, all of that publicity focused on our business model and not on Cause as a bar and restaurant. You know that it’s bad when even a Washington Post food writer spends half an article talking about the mission and the model. Because there was so much focus on that side of things, the fact that we had a great menu and top-rate service got lost, and we struggled to establish an identity as providers of a service that people would pay for. The question remains: How do you translate mission-related buzz into actual business?
Don’t rely on the mission. People loved the idea of Cause. The idea of combining good food, good drink, and good works really struck a chord with folks. To be successful, however, we needed to build a base of paying customers. I had countless conversations with folks who had heard of the bar, who loved the idea, who had all sorts of questions. But when I asked if they had been to our place, all too often they said, “Oh, I’ve been meaning to,” or “Yeah, I went once, when you first opened.” As it turned out, all of that interest didn’t lead to a behavior change. It didn’t change where people went out to dinner on the weekend.
The nonprofit market is not always profitable. As a lifelong NGO guy, I should have known better. While we often generated plenty of foot traffic, we were continuously surprised by our nightly sales totals. For all of the business that we were getting, the numbers weren’t adding up. We came to realize that members of the nonprofit community—the first people to fall in love with Cause—weren’t exactly what you’d call big spenders. And who can blame them? Making $35,000 a year and living in DC isn’t easy. So be warned if you’re planning to make the nonprofit community a target market for your enterprise.
The charitable world is not always charitable. While most people in the nonprofit community warmly embraced us, we also saw some disconcerting things in our interaction with parts of that community. It made me wonder if the cutthroat battle to raise funds was preventing people from seeing the forest for the trees. We got countless requests from nonprofit organizations to do stuff for free: Donate beer, donate the space, donate food. And, fair enough, lots of people just didn’t understand our business model. But then, when we had to turn down these requests, some people would get angry with our managers and refuse to have their events with us. In some instances, organizations would take their business to another bar—even though that bar wasn’t donating anything to them, either! To me, that kind of thing was really disappointing. All of us in the social sector need to realize that we’re working together as part of a greater whole.
Now it’s time for me to get off my soapbox, have a beer, and figure out what comes next.