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Is the Membership-Based CSA Model the Future of Restaurant Financing?

Why community-supported restaurants are gaining traction nationwide.

The Gleanery/Facebook

One of the challenges for any new restaurant is cultivating regulars — those people who come in multiple times a week, know the names of the staff, and recommend the restaurant to all their friends. But is turning diners into literal investors the shortcut to getting people invested in your restaurant? This seems to be the thinking behind community-supported restaurants, a phenomenon that has only started taking off in the last decade. Similar to the model of grocery buying known as community-supported agriculture (better known as CSAs), CSRs allow customers to pay a membership fee in exchange for extra dining credit, special events, and more.

For farmers, CSAs are a no-brainer: A cross between a farmers' market and a buying club, these programs allow people to pay one farmer up-front in exchange for a share of his or her produce throughout the year. CSA farmers know they'll have a market for their goods (even slightly bruised but still delicious fruit), rain or hail. But CSA members exchange a lot of risk — either that the crop will be ruined or, more commonly, that they won't figure out what to do with six bushels of kale — for a discount on local produce.

For farmers, CSAs are a no-brainer: But not every restaurant that's tried the model has been successful.

There are a lot of benefits to running a CSR: customer loyalty, financial backing without going to a bank, and free advertising. But not every restaurant that's tried the model has been successful. Christine Ruch, the owner of Boulder, Colorado CSR Fresh Thymes Eatery, is pragmatic about the costs of running a membership program. In the year-and-a-half since the restaurant first opened, Fresh Thymes has moved away from the CSR model and has no current members. "The membership benefits eat into your food costs," Ruch says. Restaurants already operate with slim profit margins, and unfortunately the member perks associated with CSR membership don't come out of thin air. "If you try to get too much money it can mess you up," Ruch says, adding, "a lot of restaurants that have done this have gone out of business."

But in the era of internet crowd-funding, perhaps it shouldn't come as a surprise that some restaurants have rebranded the model for themselves. And, for the CSRs still in business, it seems to be working.

Photo: Braise/Facebook

Finding an Audience

When Milwaukee chef David Swanson first wanted to open a restaurant, he may not have had all the start-up capital he wanted, but did have a community of fans ready to support him. In addition to working as a chef for another well-known restaurant in Milwaukee, Swanson also ran a culinary school and home food delivery service. "By the time the restaurant opened, I'd spent seven years building up a big following," Swanson says of Braise, his Milwaukee-based CSR. "People knew we had a pretty good track record and knew what we did." For banks, restaurants are a risky proposition, even if the business under consideration isn't a first-time restaurateur with limited start-up funds. But customers are more concerned with the quality of the food than the business experience of the owner, and Swanson says it didn't take much to win them over. "Our members subscribed to the theory behind the restaurant," he says.

Using his email list and passing out pamphlets at events, Swanson offered his customers memberships ranging from $250 to $5,000. In return, members get first dibs on special events and an added return on their fiscal investment, in the form of a gift card for the amount of their membership fee, plus a little extra (20 percent, not counting extra perks like a home-delivery membership and a private cooking class). As Swanson puts it, "it really is lucrative for our customers to take part in the program."

"It gets people more committed than a gift card or dining reward program could ever do." — David Swanson

And at Braise, members have the added benefit of seeing their money put to use outside of the restaurant. "I didn't want someone to get into the CSR program and think that they'd bought napkins," Swanson says. Instead, he earmarks the money for larger projects like a green roof, solar hot water heaters, and other environmentally friendly but expensive upgrades. Though the membership program is essentially a lucrative gift card, the fact that customers think of it as a form of financial support rather than a purchase for themselves changes the nature of their relationship with the restaurant. "It gets people more committed than a gift card or dining reward program could ever do," says Swanson.

But what happens when new restaurants don't have the luxury of seven years worth of community outreach? At Lenoir, an Austin CSR, owner Jessica Maher decided to wait until the restaurant was open to start signing up members. "We had friends and family who supported us," Maher says. "But to drop $1,000 on a friend when nobody knew if we were going to pull it off — that's a pretty big investment." Today, most members of Lenoir's CSR members were strangers before they started frequenting the restaurant. Rather than a method of fundraising, Lenoir sees the yearly membership fees as a way to get through the slow months. "January is pretty slow, and it's a good time to have a little bump in revenue," Maher says.

Now in their fourth year of the CSR, Lenoir has seen not only many members renewing each year, but new members wanting to sign on, as well. Like with Braise, Lenoir's members see it as a fundamentally good deal. The restaurant offers a 120 percent return on the membership, in addition to prime reservation slots and even a private in-home dinner for eight, with wine pairings, for the highest investment level. Though the CSR was inspired by the agricultural CSA model, Maher believes community-supported restaurants might be less risky for consumers. As Maher puts it, "Chances are pretty good we're not going to go out of business within a year." The CSA, on the other hand, "has more of a non-profit feel."

Photo: Lenoir/Facebook

Idealism Pays

The deals are an added perk, but people often sign up for CSAs because they believe in supporting local farms and produce. Most CSA-ers wouldn't allow their local Safeway to send them a motly assortment of food — even for a discount. Without that last hint of idealism, the model doesn't work. And that may be true of CSRs, too.

"Members bring in customers. They're our immediate advocates and our greatest advertisers," says Ismail Samad, chef of the Gleanery, a CSR in Putney, Vermont. The Gleanery takes local food to a new level by gleaning a majority of its produce from local farms' extras. Before opening the restaurant, the Gleanery went into the community to conduct tastings and build relationships with farms in the area. The problems that farmers were having with surplus became the Gleanery's biggest selling point. "As long as you're engaging the community, you have something the community will rally behind," Samad says. Local food is a hot topic in Vermont, and by tapping into that fervor, the Gleanery found a built-in customer base. "It's a built-in cheat," Samad says. "You've got the people engaged in food and sourcing, so it's almost like plinking the chord of locavorism."

"Our social capital is so great that it covers our lack of financial capital." — Ismail Samad

The Gleanery's biggest challenge has been figuring out how to manage their members' expectations. "The promises aren't internal," Samad explains. "They [belong] to the people who have shared their cash because of your ideas and goals." When the Gleanery had to cancel a few monthly cooking classes promised as perks, they had to find a good way to communicate that to their members. "Our social capital is so great that it covers our lack of financial capital," adds Samad.

But sometimes simply supporting the community can be a rallying cry for a CSR. Cow & Quince is located in a small town called New Glarus, Wisconsin — about an hour's drive from Madison. One of the newer CSRs, it opened in September 2014, and like much of the Midwest, New Glarus has many farms nearby. "But all the farms take their produce to Chicago or Madison and we don't get any of it here," says owner Lori Stern. "Rural communities get this reputation for not having the taste and desire for local and organic that city dwellers do." Yet in the last half-year, Stern has made inroads in disproving that stereotype. Cow & Quince is half restaurant and half grocery store, bringing the kind of produce to a town that previously had to drive to Madison to find something similar. New Glarus is full of tourists in the summer, but when Stern was thinking of opening her restaurant, she wanted to make sure it was a place where locals would feel welcome. "What we see in town is a lot of people who open with the tourists in mind," Stern says. "If it's all just gift shops, it doesn't feel like a community."

Though Stern runs a membership model similar to other CSRs, her price points are much lower. A $25 membership gets investors (and a guest) an invitation to an annual backer's dinner. Cow & Quince's most expensive membership, $360, earns customers 15 percent off items at both the grocery store and restaurant year-round. Stern is running a business, yes, but she wants it to be a business her neighbors can be part of. "To me it just feels so much like we are trying to build a community," she says. This is why she's toying with the idea of allowing local students to decorate their main window and has brought a high school cooking class into the kitchen for lessons about local food.

Overall, most CSR owners highly recommended the model, as long as restaurateurs use it wisely. When asked, Samad says that he can easily see the CSR spreading to other cities and engaging communities in the issues that matter to them: "Right now people care about local food and local sourcing," he says. But communities can also invest in restaurants that offer job-training programs or serve other missions. If a town wants to fund a restaurant that gives locals a place of their own, they're just a membership drive away.