Zazie Sold to Its Employees, What a Great Restaurant Story
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In a year full of restaurant closures in San Francisco, it’s nice to hear about a beloved Cole Valley bistro making its employees, owners.
Zazie, Cole Valley’s fine french foodery has been on the right side of history in the restaurant business for years, especially when it comes to taking care of its staff. Years ago, Zazie owner Jennifer Bennett created a 401K employer-matched contribution for workers, with healthcare, dental and paid time off too. This is not something you see in the restaurant business outside of unions. It was, and is, a very progressive (and some would say risky) move to invest in your restaurant staff like that. Zazie also proved that the ‘tip-free’ way of serving is a winner with both staff and customers, while many called them crazy for trying that too.
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The service industry in America is not known for investing in its employees, and the city of San Francisco, with its extremely high cost of living and mounting taxes, has only made it tougher on restaurants, their owners, and hourly workers, who cannot compete for housing with software engineers making $250,000 a year. (That’s the median salary at Facebook by the way). The meal delivery apps only kill foot traffic to restaurants and deprive servers of their tips, the landlords raise up rents unchecked, and the city only adds new taxes each year. Add to that the astronomical price of insurance, and you’ve got a city full of empty storefronts.
Long time owner Jennifer Bennett has brought in three of her employees to be part owners with her, and it just feels right. Zazie recently achieved legacy business status in San Francisco which really helps with rent stabilization, and that’s a key factor. Only a handful of legacy businesses (8) are awarded each year in SF, and that’s a shame because at the rate that places are closing down, there won’t be any restaurants or nightlife left to protect.
I asked two of Zazie’s owners some questions about just HOW they pulled this off, because more great restaurants and bars in San Francisco should be protected with rent stabilization, as well as become employee-owned, and tip-free businesses.
BAS: How long have you and your (2 other new owners) been working at Zazie, and what were your positions?
Server, and New Owner of Zazie Megan Cornelius: “The three new owners have a combined 50 years experience at Zazie. Mario, the GM and brunch host legend, (21 years). Francisco, the ‘strong yet silent chef”, (17 years). and Megan, server, (12 years).”
BAS How do the hourly worker’s rights and the tip free movement improve things for workers and customers at Zazi
Megan : “This IS key! I’ll be honest, I wasn’t so sure how the No Tip concept would work or be financially sustainable when it started years ago. But I knew Jen, and she would never leave us in a situation where we wouldn’t be making a fair wage. She was already providing fully-funded healthcare/dental/401k with 4% match and paid time off, so she would never steer us in the wrong direction. I also knew that the kitchen should make a bit more, but we were tapped out on salaries the restaurant could afford. They work extremely hard to put us in this beautiful situation and often don’t get to hear the praise we get on a table by table basis. And let’s be honest, praise doesn’t pay the bills. This profit-sharing has allowed all of us on the front lines to be ourselves instead of dancing for our tips and it allocated a profit share for our hardworking kitchen, and just alleviates the question for the guests at the end of the meal.”
BAS Any advice for servers who want to buy the place they love?
Jen Bennet (owner since 2005): “Talk to the owners about your thoughts! Let them know it’s a possibility. Save up a deposit so you can show you are serious. Most owners would rather have the place they’ve worked so hard on for so many years go to someone they know and trust, they just don’t know how to do that.
The way this purchase is structured (without getting too far into the hundreds of pages of legal agreement) is basically like this:
-I had a professional assessment of the business done to determine its value on the open market.
-the new owners agreed to that price and put down a deposit, about 10% of the purchase price. They were able to do this because they could each take a loan from their 401(k)s, which they had built up quite a bit while at Zazie.
-they each signed a promissory note to me- so I am the lender and the seller. It’s a ten year note, but they can pay it off early without penalty. The note is at the lowest allowable interest rate per the IRS… 1.9%. Based on Zazie’s usual profits, I estimated that the note could be paid off in 6 years barring any expensive repairs/ remodels- so we made it a 10 year note to allow for the possibility of drama!
-we all signed an extensive Operating Agreement for the LLC. The OA covers every “if” we could think of and took a good year to finish! But it’s important, so we all know the steps if anyone needs to be removed or wishes to give up their share of the business.
-I stay on as a 25% owner until my promissory notes are paid in full. That means I keep my salary and benefits for 6-10 years, and keep oversight of the business. The operating agreement gives me veto power over any big decisions (say they decided to close for brunches or something!) but in general they will have the freedom to make changes. I’ll be available for consultation but not dealing with the day-to-day running of things.”
How do you make your breakfast potatoes so goddamn delicious?
Megan: “Hahaha! Nice try!!! You’ll have to wait for the Zazie cookbook…”
Jen: “They are ridiculously labor-intensive. Most restaurants just use pre-cut potatoes- we (ok, who am I kidding, Victor) cut 150 lbs of potatoes every day. They are soaked overnight in cold water and salt to leach out the starches (which keep potatoes from browning), then boiled with whole garlic cloves, the baked to dry them out, then fried in olive oil w/ salt & pepper. It’s a PROCESS. It is true that I’ve always wanted to do a cookbook for Zazie, so hopefully that will happen in the next few years, now that I’m not trying to run two places!”
Would a sale like this have been possible if the owner wasn’t someone like Jennifer Bennett?
Megan: “This concept can be possible IF there are more restaurant owners like Jen. That remains to be the question. It’s a difficult industry and I’m learning so much about the back end, but it’s obviously possible, without destroying your basic humanity.”
How could the city/supervisors help out small businesses?
Jen: “I’ve thought a lot about this question over the years. Health insurance is the single most expensive thing on our monthly bills- over $16,000/ month. I would love to see the city encourage “high road” employment practices, and for most businesses the best encouragement is money. Perhaps the city could give tax credits to businesses that fully fund their employees health insurance? The Gross Receipts tax for SF is quite high (Megan, we are going to calculate that when you get back- so fun!). That would be a great place for the city to give high road employers some relief. Business registration taxes would be another.”
“In an industry that takes so much time and commitment, to volunteer for anything is incredible. Why is this city FILLED with small businesses and we haven’t created a paid task force to address these issues?? It’s an obvious issue that needs desperate attention. Also, I’m not a politician but something needs to be done about capping the rents on small businesses, providing tax cuts for employers providing health insurance and cutting through all the ridiculous red tape and permit laws that cost precious time and money. The health insurance is KEY and that is more of a national issue that needs to be addressed. If affordable health care was not an issue in our country our world will be full of infinite possibilities.”
You can find Zazie in Cole Valley, it will be the place that smells like french heaven and has a line out front. But don’t fret, Mario will put your name down, and even find you on the back patio of Finnegans Wake when your table is ready. I recommend any of the eggs benedict, but you can check out all their menus here.