On Panzanella Closing and The Responsibility of Community-Owned Businesses

Panzanella RestaurantLate this afternoon, via social media linked to a News and Observer article, came the gut punch news that beloved local restaurant Panzanella is closing.  On a personal level, this is just very, very sad.  Since my wife and I got married over a decade ago, we have celebrated all sorts of major life events, and perhaps most of them– graduations, birthdays, wedding anniversaries, rare visits from cherished friends, you name it – at Panzanella.  With such good food, valuable relationships with local farmers, brewers, and other food producers, not to mention what has always been consistently a warm and friendly staff– this is a big surprise that nobody saw coming.

The restaurant business is a very challenging one, with many promising places going under less than a year after opening.  But this is no ordinary restaurant- it is part of the Weaver Street Market Co-op, billed as “Carrboro’s Community-Owned Italian Eatery” on the website www.panzanella.coop.  With this ownership structure, one would think that instead of making a unilateral decision to close, presumably by the Board of the Weaver Street Market Co-Op, there would have been some consulting with the broad pool of owners (I’ve been a member for 12 years, and at least 8,000-10,000 others have joined since I did)  about their perceived value of keeping Panzanella open, and what financial or other resources were needed to keep the restaurant open in its current location, or to explore what other choices beyond “close the doors and lay people off” existed.

There are a whole host of questions that come to mind that might have led to a different result, including:

  • The news article talks about an increase in costs and a drop in sales. Did Carr Mill Mall raise the rent?  If not, what costs are driving the closure? Are the same cost challenges facing the co-op’s grocery operations?
  • Did WSM consider relocating Panzanella within Carrboro? There are supposedly spaces for dining at the new PTA Thrift store in either the current or second phase. Would that have been a place the restaurant could have relocated to?
  • What about shrinking Panzanella’s relatively large dining room?  If half of the dining area could be turned back over to Carr Mill Mall and rented to a retail store, would a smaller version of the restaurant with the same kitchen be able to survive?
  • There’s a mention that the restaurant made more sense when the bakery and offices shared space with the restaurant.  But the bakery and office functions are now mostly (I presume, someone correct me if I’m wrong) at the food house in Hillsborough. That’s either new rent or a new mortgage compared to the “everybody-crowded-into-the-back-of-Panzanella” scenario.  Why is the restaurant suddenly characterized as a drain on the bottom line but the relatively new food house is not?
  • If the cooking/back of house space is underutilized at Panzanella, was going bigger-say, STARTING a real full-service bakery- ever considered?  I think most WSM members, when pressed, will admit that despite the best efforts to get stuff from the ovens at the food house to Carrboro and Chapel Hill, the freshness of the baked goods has definitely declined a small but perceptible amount since the baking function left the Carrboro store.  Bread and Butter in Chapel Hill is nice but it’s hard to imagine it’s meeting that need alone when Durham has Scratch, Loaf, Ninth Street Bakery and Daisy Cakes all within close proximity to each other.
  • The Carrboro store just finished its big remodel.  Part of this outcome was supposed to be a 60-80% reduction in utility bills.  Were none of the savings from this ongoing operational cost improvement enough to transition Panzanella to a more sustainable business model?
  • Are we owners going to get a big dividend this year?  After this, the answer better be “NO.”  If Panzanella closed down and consumer-owners received a big dividend, and the retention of that dividend might have kept Panzanella open, then that would be a huge mistake.  Frankly, most of the long-term member base is used to non-existent to miniscule dividends per dollar spent at WSM cash registers.
  • Was this discussed at the September 9th Annual Meeting in any way?  I can’t imagine it was; it would have been big news then, too.  Why not?
  • The 2013 Annual report for WSM shows a 2.6% net profit for both 2012 and 2013 after a very lean year in 2011.  Sales growth is steady (see page 3), averaging about 8% over the last three years, and the report appropriately boasts about saving more profits and reducing debt and increasing equity for the co-op.  Finances for Panzanella are not broken out so it’s hard to understand how much any dynamics of operating Panzanella did or did not contribute to threatening these positive trends for Weaver Street Market.
  • The cafe at WSM is about to be renovated/expanded.  Could a smaller version of Panzanella be incorporated into the expanded cafe?
  • The Draft (?) Vision 2022 document posted by Geoff Gilson online dated May 17, 2012 lists 10 strategies to help WSM reach their 2022 goals.  (I feel compelled to say that I have no idea if this is an official document but it would be a very strange thing for anyone to take the time to fake) Strategy Number 3 is “Engage owners more fully.”  Sub-topics under this heading include “Communicate about the co-op and the larger industry,” “survey owners regularly” and “create store advisory groups.”  These are all good ideas- why weren’t any of them pursued in making this big decision?  If the restaurant was struggling, why not empanel a Panzanella advisory group from owners to help problem-solve?

Decisions and Values

I recognize that at a certain level, this was a decision about dollars and cents informed by values, and that businesses come and go or change how they do things all the time.  When Facebook changes their layout for the umpteenth time or undoes some other privacy setting, we all know:

  1. They didn’t ask our opinion and they aren’t going to
  2. They believe that their stockholders will benefit financially from this decision in some way

But the whole point of a co-operative business model is to cultivate a better version of capitalism than a single-bottom-line approach.  Weaver Street Market has been  trying to walk that talk for 25 years, with what I would describe as better than average success.  I appreciate that, and have spent money in their store on products I know I could pay a little bit less for elsewhere, even within walking distance- because I have trusted that the local community impact of the dollar I spend at WSM is better than paying less in cold numbers somewhere else.

The flip side of this deal is that consumer-owners and worker-owners have the right to expect more from WSM, especially when they use the phrase “Community-Owned” in their materials, over and over again. The core of WSM’s brand is that there is a “Values Conversation” between the owners and management, that it is a two-way conversation, and that it is ongoing.

With that in mind, I hereby put the list of questions above on the table for Weaver Street Market.  I also hope that if Weaver Street Market rises to the occasion and grapples publicly with these questions before the end of the year, that they do so starting from a posture of MAYBE THERE IS AN ALTERNATIVE TO CLOSING THE RESTAURANT, and if so, we should tell the owners what that is, even if it means sacrificing or delaying bring other priorities to fruition.  In doing so, WSM may find that those of us disappointed in this news may well reach the same conclusion that they made without us, or we may all find a third way forward that is neither a closing nor the apparently challenging status quo.

So Weaver Street Market leadership- care to comment?

This article originally appeared on Patrick's blog about Carrboro, www.citybeautiful21.com, on October 24, 2013. 

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3 Comments

Geoff Gilson's picture

Community-controlled ...

Patrick, um, welcome to the club. All of what you say is pretty much what I've been asking on my WSM blog these past eight years. In sum, why doesn't our local friendly co-op act like our local friendly co-op?The answer is pretty simple. It ain't enough to be community-owned, you have to be community-controlled. WSM isn't. It is controlled by a small group of self-appointed individuals in the WSM corporate office.Why? At the risk of pissing everyone off - including you, Patrick - because y'all just get happy-clappy when WSM calls itself a co-op. Without paying close enough attention to whether or not it is behaving like a co-op.Until, that is, the self-appointed few make a decision you personally don't like. Then you pay attention. Turn over the stone. And find tacky, conventional, profit-driven capitalism, alive and well in downtown Carrboro.What to do? Find candidates who want to stand for the WSM Board of Directors because they care about democracy in our co-op, as opposed to liking natural food, or liking the opportunity to dance on a lawn (the reasons given by this year's two Consumer-Owner candidates in the WSM Annual Report), and then voting for them.Meanwhile, your thoughts about WSM's finances, and why now? Good questions. I can only guess.But. Based on closely observing the WSM corporate office management team in its natural habitat these past 8 years; from paying attention to what is going on around me as I work at WSM; and my earlier incarnation as a management consultant, I would say this smells of a bank (to whom we still owe $6 million in what was supposed to be short-term debt) getting antsy about our immediate financial planning.Forget the Annual Report. The problem is that the WSM corporate office management team are in empire-expanding mode. That was the main point of the strategy document (official) which I shared a year or so ago.Our corporate office management team like vanity projects. And they love going over-budget. Profit is not used to pay down debt (check it out). Nor to build equity. Nor to build a contingency fund, against future recessions.No. It is used as a ready line of cash to engage in the vanity project of the moment (Carrboro refit; new stores, whatever). The problem with this is that it leaves us totally vulnerable to any shifts in costs or sales.I suspect a close examination of our books (good luck with that; try going to a Board meeting, and asking your questions ... ) would show that we overran on the refit; sales are dropping in the Carrboro store (which, in a commendable but ill thought out (and under-consulted) attempt at energy saving, was left with the atmosphere of an under-used morgue) and our cash flow is, all of sudden, quite tight.Along comes someone - a bank, our own finance manager, whoever - and says, gotta make something balance. Boom. Bye-bye Panzanella. Why no consult? Because this happens all the time. It happened with the last major expansion in 2008. Why don't you know? Well. I write about it all the time. Begging you good folks to get involved and stop it happening. Why don't you? Cos. Heck hem. You stopped listening to me a long time ago, too.Over to you, Patrick ... [By the way, the WSM Employee Policy Handbook now requires that I point out that these are my personal views only ... ]

Ruby Sinreich's picture

A co-op in name only

I have been frustrated for many years about Weaver Street's lack of interest in the priorities of its members. I actually went to the annual meetings several times, but they are mostly feel-good events with all the jockeying for the board arranged behind closed doors, adn no menaingful discussion about co-op policies.In fact, I have been a member since the early 90's and we weren't consulted when Panzanella opened either!

CVS, etc.

You do know WSM went and sold the old realty/radio station property across the street to CVS, without even consulting with Fleet Feet and others that had expressed interest in it if it ever came up for sale? Just got my $7 dividend instead of the old 5% off, what an improvement :\Needless to say, I don't feel guilty shopping at Whole Foods anymore.  At least they give a damn about me and carry the products I'm looking for (read: gluten free).  They seem to give back to the community a lot more too.