Over the years, critics have called restrictive covenants violations of U.S. antitrust law and there have been some cases in which a company’s right to use them has been challenged in the courts. Back in 2010, a Walmart representative told The Sheboygan-Press that, “We welcome competition in the marketplace, but what we can’t be doing is providing infrastructure for our competitors in the same market.” So far, judges have found this line of reasoning to be legally sound.

Stop & Shop is hardly the only supermarket chain to use restrictive covenants; the clauses are also employed by the likes of Albertson’s, Albertson’s subsidiary Safeway, and most significantly, by Walmart, the biggest grocer in the U.S., according to a report by the Institute for Local Self-Reliance (ILSR). Nationwide, ILSR found, U.S. residents spend 25 percent of their grocery budgets at Walmart. This, argue the authors of the report, “illustrate[s] the failure of corporate antitrust policy.”

Kang points out that federal antitrust legislation would be the most straightforward and efficient way to address restrictive covenants. The issue “seems so black and white, because [restrictive covenants] have no purpose other than to block out a competitor,” Kang said. 

And yet, some legal experts worry that in the eyes of the Federal Trade Commission (FTC), grocery consolidation might be way-too-small potatoes to care about. If the agency was compelled to act, however, Beyranevand, thinks FTC would be able to address restrictive covenants by invoking a little-used piece of antitrust legislation called the Robinson-Patman Act, which was “designed to protect small and independent businesses from price discrimination,” as The Hill reported. In essence, the legislation was meant to prevent large grocers, who can sell goods for less money because of their greater buying power, from putting smaller grocers out of business. 

In the absence of federal action, some municipalities have tackled the issue on their own. Notably, Washington, D.C. prohibited restrictive covenants back in 2018. The problem with this approach, according to Beyranevand, is that it’s piecemeal—it could take literally forever to abolish restrictive covenants everywhere they crop up, and a community often only finds out about their existence when a supermarket moves out and a new one fails to manifest. Another significant problem is that municipal legislation is applicable only to new contracts and can’t be retroactively applied to existing ones.

Beyranevand believes that in order to make any sort of dent in restrictive covenants’ muscle, municipalities have to begin using a lot more caution in allowing development within their borders. “Proactive zoning measures are going to be the thing that moves the needle going forward, so you don’t have these sprawling cities where people are just throwing up big retail centers all over the place and then in five years abandoning them…and suddenly you have all these empty storefronts,” she said. 

Vermont, for example, has its longstanding Act 250, a land-use law where, said Beyranevand, “If you want to develop property, and you get to a certain size of acres, you have to go through a pretty significant review process to get it approved.” This could prevent a grocery chain from, say, buying a second or third large parcel of land then sitting on it. Other possible courses of action would be giving cities the option to demolish an abandoned supermarket and to build another one in its place—and mandating reuse plans for a supermarket building before a company abandons it. “In essence, you create your own restrictions on development,” said Beyranevand. Still, none of these address the retroactive issue.

As bad as it is that restrictive covenants impede food access in certain neighborhoods, they clearly aren’t the only problem. The mere presence of large-scale grocery chains can have broader ripple effects that can destroy communities from the inside out, according to ILSR. When a powerful chain like Stop & Shop or Walmart moves in, they can afford to offer prices low enough to put mom and pop food outlets out of business, for starters. “And I would say the odds of those businesses that got pushed out ever coming back are not very high at all,” Beyranevand said. So begins a spiral of impoverishment: The supermarkets offer typically low-paying jobs to community members who are often forced to shop where they work; if that supermarket decides to up and leave the community, those jobs go, too. Add a restrictive covenant and any economic benefit the presence of the supermarket could give to a community, Beyranevand said, “That’s all gone.”

Back in designated food desert Central New Haven, before Stop & Shop arrived in 2011, that cluster of neighborhoods had had zero national chain groceries for a year; the arrival of the supermarket was considered a score for residents. But Kang frets about what would happen if Stop & Shop pulled out now. She concedes that she’s lucky—she can always hitch a ride to Trader Joe’s with a friend. But “I’m deeply concerned about [what happens] even if [Stop & Shop] moves two miles away from their current location; a lot of people can’t walk those two miles to get their groceries,” she said. “Where are they going to go?”

The post How some big grocery chains help ensure that food deserts stay barren appeared first on The Counter.

It worked. Bell’s revenues and staff have more than doubled since that pivotal summer day, and now the Ryans are talking about how to add a retirement program with four percent matching funds, a longstanding goal that will also bring them in line with state-mandated legislation.

“We said, ‘If we’re going to change, this is our time to change,’” Greg said. “If we are not trying to be a better business, and a better business for our staff and the people that work with us, we are going to be so upset with ourselves.”

Even before Covid upended the restaurant landscape, operators large and small were staring down the growing burdens of dwindling foot traffic and poor staff retention. The pandemic, however, turned those concerns into crises. 

Revenue shrunk, debt mounted, and employees, fed up with the industry standard of shoddy pay, grueling hours and nonexistent benefits—not to mention having to risk their health for poor compensation and rude customers—hung up their serving aprons and chef’s whites for good. With the food service industry still down 819,900 jobs as of this March compared to February 2020, according to the Bureau of Labor Statistics (BLS), and any future federal aid uncertain, restaurant owners like the Ryans were left to find their own alternatives to the old, dysfunctional model. 

Many operators have seen a chance to experiment and lay the foundation for a more sustainable industry, which means starting with the individuals who keep it afloat: A healthy staff—physically, mentally, financially—will be far more likely to contribute to long-term success than a team running forever on fumes.

The Ryans built a formula: They figured out how much they’d have to bring in from each seat, down to the penny, to break even, while they guaranteed all their employees more than a living wage along with benefits. 

The couple performed back-of-the-envelope math while plugging into a Google spreadsheet hard costs like real estate, and more flexible ones like food and labor. They consulted with an industry brain trust of former and current management from Union Square Hospitality Group and the Thomas Keller Restaurant Group, as well as the restaurant operations support group Oyster Sunday, about what the ideal model would be. And they arrived at a surprisingly simple solution that many restaurants have turned to throughout the pandemic: a pre-fixe dinner menu. 

At $65 for five courses, plus a 20 percent overall service fee in lieu of tips, the price and format felt like a deal that guests could swallow. And, Greg said, it meant that “I’m at least breaking even or I’m not losing a ton of money every second.” The pre-fixe operation not only has helped the team better manage their food costs, but the consistency means they can regularly plan to source salad greens or uni from local producers they’re confident in, versus buying commodity vegetables to accomodate a constantly rotating menu. The service fee, while carrying a significant drawback in that it is reported as income, meaning Bell’s has to pay taxes on it, was a major boon because it removes customers from having any power over their staff’s wages and ensures a guaranteed—and more transparent—revenue stream to help pay for employee costs. 

As of October 2021, the menu now runs $75 per person—the $10 increase due to inflation and growing food costs, with 65 to 75 covers a night. Greg says that the menu price is effectively their break even point, while add-ons like wine, caviar and bread all help to ensure profitability. The new model looks like a success: As the staff—and the total restaurant’s costs—have tripled, the number of customers per night has jumped from the ballpark of 40 in June of 2020. Revenue more than tripled as well: Before Covid, in 2019, the restaurant was clearing $1 million a year. In 2021, despite an on-going pandemic, that number surged to about $3 million. And employee retention has been above 95 percent. 

Greg regularly points out that privilege and good fortune have played a part as well. Early on, he and Daisy purchased the building housing Bell’s instead of buying a home, essentially locking in their real estate costs; their decision to live with Daisy’s parents in the meantime has also helped reduce their overhead costs. The publicity from Daisy being named a Food & Wine Best Chef and Bell’s earning a 2021 Michelin star has helped ensure a continued demand for their food while also allowing them to expand their revenue. And a $93,000 Paycheck Protection Program loan as well as a $150,000 Economic Injury Disaster Loan, along with private funding, helped provide the cash flow to implement these huge workplace overhauls. 

“If someone’s like ‘What’s the blueprint?’ I’m like, it’s a lot of luck, it’s a lot of hard work and it’s just being in the right place at the wrong time, but also the right time,” Greg said.

Still, it’s possible to innovate on more of a shoestring. Stella Dennig, co-owner of Daytrip, a restaurant and wine bar that opened in Oakland, California last October, listed several experiments the restaurant has incorporated to expand its revenue streams, including beverage clubs curating natural wines, beer and aperitifs and a pop-up nighttime wine bar with a menu of easily preparable snacks. She may start a coffee and pastry service as well, which won’t require a full back-of-house team to prepare the food. 

“A dinner restaurant sit-down table service is one of the highest labor versions of what we could be doing, and we want to, as we grow and expand, think of things that can keep labor tight,” Dennig said. “Every five hundred dollars, every thousand dollars all makes a huge difference, so the more revenue streams that we can pull in, that can do that for us every week, every month, it all adds up.”

Dennig estimated that Daytrip’s employee costs range from 40 to 48 percent of the restaurant’s total costs on a good week, greatly exceeding the conventional industry figure of 30 percent. The non-salaried staff starting base wage of $16 to $18 an hour, slightly higher than the $15.06 minimum wage in Oakland, is bolstered by a 20 percent service fee that is pooled and evenly divided among hourly staff. The restaurant also provides access to quarterly financial workshops and a scaling health care stipend, which totals $300 a month for an employee working 40-hour weeks. Retirement plans are a possibility down the line. 

“There’s so much more that I would like to do and that I know that we will get to,” Dennig said. “All I’m doing right now is what feels like the bare minimum to me, and it’s revolutionary only because the bar is so low in this industry, and that’s not OK.” 

Investing in staff wages and benefits can result in a virtuous circle effect: People are more likely to stay at their jobs, which then decreases the costs that result from replacing them. Tim Taney, co-owner of the burger restaurant Slidin’ Dirty in Troy, New York, estimated that training new employees cost him at least $500 a month. A year after expanding his staff’s benefits package to include employee-covered health insurance and a membership to the YMCA, among other perks, staff retention has improved drastically, with only one employee leaving during that time.

“It’s a significant savings,” Taney said. “It certainly doesn’t pay for everybody’s health care for the year, it’s not like that alone covers that, but it’s a part of it.”

Micah Fendley, a server at Bell’s, has been in the industry for about 20 years, and thanks to the changes there has a health insurance card for the first time. That’s affected not just his physical well-being but his outlook on his job and employers, too. 

“I’m proud more than anything that I have a job that respects me enough that pays for my health insurance,” Fendley said. This past February, while the restaurant staff was on a paid winter break, Fendley traveled to Six Flags with his girlfriend, washed his car, had lunch with coworkers, even played disc golf. Returning to the restaurant post-break, he said, “I was able to have an out-of-body experience at work because I was so well rested.”   

Anne McBride, vice president of programs at the James Beard Foundation, noted that not all improvements for workers require employers taking on immense additional costs. Citing findings from a recent report by the organization, McBride said that a number of people left the industry in recent years because there were not clear career paths laid out for growth at restaurants. By simply instituting structures for employees to progress to higher hourly wages or positions, restaurants can turn jobs into careers and reduce turnover. 

“It’s something that restaurants should pay much closer attention to because, not that it’s free, but it’s something that you can do without having to change anything to the financial structure of your restaurants,” McBride said.  

Greg Ryan is encouraged by how the restaurant’s transformation has bettered the lives of Bell’s staff, but he’s already thinking about what more he can do.

“We hope to get to dental and vision, we’re finally working on our 401(k) program,” Greg said. “It’s all these things that make people feel and hopefully see that there is a reinvestment going back into them as people and not some cog in the machine.” 

The post Happier employees, higher profits: Restaurant owners spend more, and it pays off appeared first on The Counter.

Prices for soybean oil—which, according to the Department of Agriculture (USDA), was the most widely consumed edible oil in the United States last year—have roughly tripled in the past two years. While commodity analysts, agricultural economists, and trade organizations all agree that the most recent spikes in edible oil costs are directly tied to Russia invading Ukraine, there may be a more enduring factor behind these record-high prices—specifically, the escalating use of commodities like soybean oil not for food purposes, but rather in the production of greener, renewable fuel.

“We can resolve weather problems, and we can resolve the Ukrainian situation,” said Bill Lapp, president of the commodity price consulting firm Advanced Economic Solutions, “and we still would be faced with a food-versus-fuel debate with regard to vegoil supplies, and trying to burn our food.”

Vegetable oil prices have dogged food processors and restaurants like Steny’s over the past two years, driven higher and higher by a perfect storm of conditions—Russia’s invasion of Ukraine cutting off major global exports of commodities like sunflower oil, the continued fallout from Covid-19 supply chain disruptions and labor shortages, and volatile weather conditions across the globe affecting soybean, canola, and palm oil production, among other factors. Yet underpinning these escalating costs are U.S. federal and state policies that, since the advent of the Renewable Fuel Standard (RFS) in 2005, have mandated and encouraged biofuel production like renewable diesel. The Biden administration has championed the RFS as it seeks to address climate change and develop fossil-fuel alternatives. And lately, that has meant it’s not just bakers and chefs like Melenchuk treating soybean oil like “liquid gold.” 

These myriad government policies have been a boon to farmers, who appreciate commanding higher prices for the corn and soy they grow for biofuel production. Energy companies are also cashing in on RFS and other renewable fuel policy incentives like California’s low-carbon fuel standard (LCFS), as they start to manufacture—or ramp up production of—renewable diesel, a biofuel made with plant materials and animal byproducts that emits less carbon emissions than petroleum-based diesel. Animal tallow and used cooking oil can be used to produce renewable diesel, but the same soybean oil bottled and displayed on grocery store shelves is also used as source.

It’s true: The renewable fuel boom is boosting industrial demand for vegetable oils at the same time that prices for cooking oils are soaring. But is that boom turning up the heat on Melenchuk’s fryer oil prices? In interviews with The Counter, agricultural economists and analysts suggested that the renewable diesel industry’s ever-expanding appetite for various fats and oils is indeed ratcheting up competition for vegetable oil, particularly soy in the United States. That increased demand threatens food processors’ supplies while also raising their costs. And when suppliers face higher costs, those of us closer to the dinner table typically do, too. 

A 2021 report published by the U.S. Energy Information Administration (EIA) estimated that renewable diesel production capacity would more than quadruple by 2024. But some analysts predict that the expected supply of raw materials like animal tallow and used cooking oil won’t be enough to meet production demands, leaving soybean oil—and, likely in the near future, other vegetable oils—to do the heavy lifting of filling in the gap in available feedstocks, or the raw materials used to produce the biofuel. That’s fine in theory: vegetable oils are substitutable goods, meaning that if prices for soybean oil suddenly shoot up or if there is a shortage, it can easily be swapped with other vegetable oils like canola or sunflower. But shutting down or tightening a pipeline for one type of oil, as has been the case with Russia and Ukraine, which export 75 percent of the world’s sunflower oil, will not only crank up the pressure on whatever supply is still available, but will also shoot up demand for similarly substitutable goods. In other words, increased demand for various substitutable edible oils is simultaneously driving up prices for all of them. 

That brings us back to soybean oil. “It’s the industrial demand that’s certainly the growing [use],” said Will Osnato, a senior research analyst at the agriculture data firm Gro-Intelligence, adding that food consumption for soybean oil over the past 10 years has risen only 5 percent, compared to a whopping 126 percent growth in industrial use. Commodity analysts say they are worried that domestic soybean oil demand may outpace supply in the near future, which could mean we’ll face an impossible choice between cheaper food costs and greener energy—and not just in years of great global unrest.  

This industrial demand surge in the United States can be traced back at least 17 years, to the creation of the RFS. First established by Congress as part of the Energy Policy Act of 2005 and expanded in 2007 through the Energy Independence and Security Act, the program sought to boost renewable fuel production while reducing both greenhouse gas emissions and the nation’s dependence on foreign oil. Following the expansion, RFS required that a minimum amount of renewable fuel be blended into the overall fuel supply, with the total level rising each year to reach a targeted goal of 36 billion gallons in 2022. (The nation is currently on track to produce far below that historic goal.) 

Over the past 15 years, much of the fuel requirement has been fulfilled by corn ethanol, which currently makes up roughly 10 percent of the nation’s motor fuel supply. But RFS stipulated that as the mandated level of renewable fuel production increased, so too would the proportion of renewable fuels be composed of “advanced biofuels,” which are defined as any renewable fuel besides corn-based ethanol that provide comparably low fuel emission rates. But because advanced biofuels are expensive to produce compared to petroleum diesel, federal and state governments have enacted additional policies that provide subsidies and incentives to make their manufacturing commercially viable. 

These incentives have attracted droves of energy companies to the production of renewable diesel, looking to reap the benefits. In the past three years alone, Marathon Petroleum Corp., CVR Energy, HollyFrontier, and Phillips 66 have all announced plans to convert oil refineries for renewable diesel production with soybean oil as one of the feedstocks. This past July, EIA reported that if all renewable diesel projects that had been announced or were in development were to come online, domestic production capacity would increase to over 5 billion gallons in 2024, up from just short of 0.6 billion gallons in 2020.

But not all incentives were created equal, and one in particular has been seen by the agriculture and energy industries as chiefly responsible for the green diesel rush. “Why are all these renewable diesel plants being built?” asked Scott Irwin, an agricultural economist at the University of Illinois Urbana-Champaign. “A straightforward explanation is it’s California.”

In 2011, the state first implemented its low-carbon fuel standard, which requires a steady, yearly decrease of the carbon intensity (CI) of transportation fuels sold in the state. Irwin explained, however, that it’s not the LCFS alone that is driving so many large multinational energy companies to set up renewable diesel production sites. “They are betting that basically renewable diesel and sustainable aviation fuel, which is very closely related, will have a major role to play in any climate mitigation policies,” Irwin said. “In essence, they’re betting that the LCFS will spread state by state across the United States.”

You don’t have to look far to find confirmation of Irwin’s assessment. Oregon and Washington have both passed laws enacting their own low-carbon or clean fuel standards, while New York, Colorado, and Minnesota  are exploring enacting their own standards. Biofuel companies and their trade representatives are also pushing for a national low-carbon fuel standard. 

But the looming concern among agriculture and energy analysts remains: whether current and future feedstock supplies will be able to keep up with refineries’ demand. While the ideal raw materials for this outgrowth of renewable diesel facilities are used cooking oil, tallow, and corn oil byproducts, the available supply for these feedstocks is quite limited compared to expected production capacity. Energy companies are therefore expecting soybean oil—currently the only vegetable oil accepted under the RFS for transportation biofuel production—to fill the renewable diesel production gap in the meantime. According to Irwin, this has led to the spike in domestic demand for soybean oil while contributing significantly to the record-high prices we see today.

“Before the renewable diesel boom hit, soybean oil prices were about 30 cents [per pound], and I’d say the renewable diesel boom has doubled them,” Irwin said, adding that other global issues like droughts and the ongoing conflict in Ukraine added an extra 20 cents per pound by mid-March.  

Some food industry groups pin higher prices to proposed updates to the RFS mandates for 2022, which will increase mandated biofuel use this year to a historic high of 20.77 billion gallons. Last year, in an odd moment of unity between the bread and oil industries, the American Bakers Association (ABA) vociferously opposed the Environmental Protection Agency’s (EPA) proposed updates. The ABA warned that its processors were already struggling with tight supplies, which could translate to product shortages and price hikes for consumers. 

Earlier this month, Reuters reported that the Biden administration has considered waiving biofuel blending quotas for refiners in an effort to free up soy and corn supplies for cooking and fend off consumer inflation. According to BLS, between February 2021 and February 2022, the fats and oils component of the Consumer Price Index for urban consumers, which includes butter and peanut butter in its makeup, increased 11.7 percent, compared to 7.9 percent for all foods. 

Joe Glauber, senior research fellow at the International Food Policy Research Institute, said that government incentives like the dollar-per-gallon federal tax credit enjoyed by biodiesel producers and importers means that consumers end up paying twice.

“We’re essentially paying taxpayer dollars to a product that is raising the prices of vegetable oil for consumers,” Glauber said. “From a policy standpoint, if the concern is about food inflation, I think the administration should think very, very much about suspending the Renewable Fuel Standard.”  

Others, however, are skeptical about how much of an impact soaring vegetable oil prices are actually having on household expenditures. John Jansen, vice president of strategic partnerships at the United Soybean Board, which represents roughly half-a-million soybean farmers, said that food conglomerates like Kellogg Company and General Mills have already locked in manageable prices for their supply of vegetable oils through the futures market, which promises ownership at a later date. But, he added, many small- and mid-sized bakeries and companies that are relying on the spot market for their edible oils, which has seen drastic acceleration over the past two years, are going to feel the pain of these exorbitant costs.

Irwin noted that factors like transportation fuel and labor costs are more likely to have a noticeable impact on grocery store bills than even a 100-percent price increase in a commodity like soybean oil. But he did caution that vegetable oils are used in small amounts in just about everything—from bread to oat milk to corn chips. By incentivizing a new industrial use for these commodities, he said, it’s likely that there will be a “small and persistent impact on retail prices” in the long-run. 

“It’s not like a one-time shock like we’re going through now with the Ukrainian crisis—at some point, that will end and we will go back,” Irwin said. “This happens year after year after year, as long as we continue the kinds of policies that are incentivizing the use of vegetable oils in renewable diesel.” Jansen of the United Soybean Board, however, said that as new facilities that crush soybeans into oil and meal are being constructed alongside new renewable diesel refineries in the next two to three years, they expect domestic soybean oil production will be better equipped to meet increasing demand. This, according to Jansen, will help balance out the vegetable oils market. But he said that for food processors looking to avoid high prices for soybean oil, “until then, it’s going to be difficult.”

Whether or not increased renewable diesel production affects overall consumer food costs, there is another worry underlying the renewable diesel surge: increased reliance on vegetable oil feedstocks for use in “green” energy initiatives could ultimately have net negative impacts on the environment. A February study published in the Proceedings of the National Academy of Sciences, which covered eight years following the expansion of the RFS in 2007, found that rather than mitigating carbon emissions that stem from transportation, ethanol mandates had in fact increased net carbon emissions. 

Much of the increase is due to a phenomenon known as land-use change. The RFS mandate drove up the price for corn, which then incentivized U.S. farmers to clear forests and grasslands that act as carbon sinks for agricultural use. Together with increased fertilizer use and water pollution, corn-based ethanol produced to meet the RFS has a carbon intensity that could be at least 24 percent higher than gasoline, the study’s authors estimated. 

“These tradeoffs must be weighed alongside the benefits of biofuels as decision-makers consider the future of renewable energy policies and the potential for fuels like corn ethanol to meet climate mitigation goals,” the study’s authors wrote. 

Jeremy Martin, director of fuels policy for the Union of Concerned Scientists, sees parallels between the environmental issues that plagued corn ethanol and what could unfold as demand for vegetable oil continues to grow.  

“It’s shaping up to be a sequel on the soybean side, but intensifying,” Martin said. 

Mac Marshall, vice president of market intelligence from the United Soybean Board and U.S. Soybean Export Council, said in a statement that there are physical constraints on the total land acreage that crops like corn and soybeans can be grown, and that the land most optimal for soybean cultivation is already being farmed. This means that any land that farmers would expand to for further crop production would be marginally productive at best, which combined with rising input costs like fertilizer and fuel is likely to disincentivize expansion. “Ultimately, farmers balance agronomic and economic factors when making planting decisions,” Marshall said. 

Returning then to the question we started with: Is there a connection between chef Melenchuk’s higher fryer oil prices and the renewable diesel boom? Well, yes, however indirect. But there’s a bigger, more existential question prompted by this surge in demand and prices, and it may mean that we do have to make an impossible choice between affordable food and greener fuel—and far sooner than we’d like.

“The issues causing tightness in the vegetable oil markets aren’t all caused by renewable diesel by any means, but this doesn’t seem like the time to demand tens of millions of pounds of more vegetable oil,” Martin said. “Looking at the comparisons with corn ethanol, this looks like a bad idea, bad timing, and ignoring those lessons is gonna do long term harm for the [industry’s] prospects.”

The post How war, weather, and Covid-19 are rekindling the food vs. fuel debate appeared first on The Counter.

“[Ocean aquaculture] is nutritious and low-impact,” said Paul Dobbins, who helps lead the aquaculture team at the World Wildlife Fund and has operated both shellfish and kelp farms. “You’re creating food without using arable land, freshwater, fertilizer or pesticides.”

Seaweed also has potential as a fertilizer, animal feed, a packaging replacement for plastics and biofuel.

Supporters say ocean farming can offer economic opportunity to coastal communities that have lost jobs due to declining commercial offshore fisheries. 

“We need to figure out how to transition all these people who have these ocean-based skills and culture and traditions of blue-collar innovation to this really important work of climate solutions,” said Bren Smith, a former fisher who now farms seaweed and shellfish in Connecticut. 

Smith is a co-founder of GreenWave, a nonprofit that supports aspiring ocean farmers. The group has trained 900 farmers and hatchery technicians, and it has a waiting list of 8,000 prospective farmers who want to join its training program. 

Cutting red tape

Some state leaders are seeking to reduce the regulatory roadblocks aquaculture faces. 

“The core reason aquaculture is not occurring in our state in any meaningful way is the broken permitting process,” said California Assemblymember Robert Rivas, a Democrat who chairs the Committee on Agriculture.

Rivas has proposed a pilot program that would task state agencies with identifying sites to lease for seaweed and shellfish operations. While the bill stalled last year, Rivas said he remains committed to changing regulations.

Florida created an Aquaculture Use Zone system in the 1990s, with 26 coastal regions in which shellfish farmers can apply for leases with a streamlined permitting process. In Alaska, legislators passed a law last year to speed up the lease renewal process for ocean farmers. The measure’s sponsor, Democratic state Rep. Andi Story, also has worked with regulators to make more staffers available to clear a backlog in lease appeals.

“We’re serious about trying to grow this industry,” she said. “We’re trying to clear regulatory hurdles, because it’s got so much potential.”

Alaska leaders are aiming to grow mariculture into a $100 million industry by 2040. The state’s nascent industry totaled $1.4 million in sales in 2019. They’re hoping to enable more entrepreneurs like Lia Heifetz, who co-founded Barnacle Foods in Juneau in 2016. Her company uses kelp to make products such as salsa and hot sauce. 

“We really were motivated to grow a business that could provide a market for kelp farmers and harvesters,” Heifetz said. “It’s not a cultural norm to have seaweed on our plates in America, but there would be a big upside if that were to happen here.”

Lawmakers in New York passed a law last year to allow commercial kelp farming in two Long Island bays, in waters that already had been designated for shellfish operations. Officials are likely to expand ocean farming to more state waters.

“This is an industry that’s in its infant stages, but it has the potential to really transform the marine economies here,” said Assemblymember Fred Thiele, the Democrat who sponsored the measure. Thiele said state leaders likely will need to streamline the permitting process as well.

Many aquaculture leaders cite Maine, which created the nation’s first leasing system for farming in state waters in 1974, as having a well-developed industry and reasonable regulations. The 190 commercial farms in Maine generate $80 million to $100 million annually in sales, led by salmon, mussels and oysters. Many of the state’s new ocean farmers come from commercial fishing or other maritime backgrounds.

The state offers a special limited-purpose permit for new seaweed and shellfish farmers, a one-year lease for a 400-square-foot site. About 750 of those sites are in operation.

“It allows people to start small, to experiment … and limit risks,” said Sebastian Belle, executive director of the Maine Aquaculture Association. “That’s what’s fueling the growth in the state, this lower barrier to entry.”

Several aquaculture advocates said they hope more states will offer a similar small-scale permit for beginning farmers. Ocean farmers also would like to access the benefits available to their land-based counterparts, such as crop insurance and loan programs.

Competition for waters

Unlike farmers on land, who are limited to private property zoned for agriculture, ocean farmers see vast areas of unclaimed waters with robust growing potential. But because their prospective farm sites are in public waters, they must contend with other ocean users, including the military, shipping companies, recreational boaters, commercial and recreational fishers and shorefront property owners.

“The ocean is actually a very busy place,” said Dobbins, with the World Wildlife Fund. “Permitting is never efficient or fast, and there’s good reason for that, because these farms operate in the commons.”

Ocean farmers say their biggest task is building public acceptance. In some areas, wealthy property owners have tried to block farms that alter their views. Farmers and conservationists will have to work out whether aquaculture can coexist in protected marine habitats.

Aquaculture also faces some environmental opposition to the farming of net-penned fish. Opponents point to cases where nonnative fish species have escaped from fish farms, leading to concerns that they could out-compete native fish, spread disease or weaken the gene pool of wild stocks. They also point out the waste from penned-up fish increases nutrient loads in coastal waters.

“If you have regular escapes or large escapes, you’re changing the ecosystem, and we don’t know if that’s repairable,” said Marianne Cufone, founder of the Recirculating Farms Coalition, which promotes the use of recycled water to grow food. Cufone’s land-based farm in Louisiana produces catfish and other species on an aquaponic system, which she said is a more sustainable model.

Supporters of ocean-based fish farming acknowledge there have been some poorly run operations, but they say that better species awareness, improved gear, sustainable feed and smart siting locations can reduce the risk of environmental harm.

‘Let us be the stewards’

Ocean farmers note that many Indigenous peoples have cultivated and harvested coastal resources for millennia. In Hawaii, islanders built distinctive rock-walled fishponds in tidal areas that contributed greatly to local food supplies. 

In more recent years, Hawaiians seeking to restore historic ponds found that their cultural practice was now blocked by an overwhelming regulatory system. Locals working to restore one pond site spent 20 years trying to obtain the 17 different permits they needed. 

“They had the community support, they had the grants, they had everything, and they just couldn’t get through the process,” said Michael Cain, acting administrator of the state Office of Conservation and Coastal Lands.

In 2011, Cain joined a team of state regulators tasked with streamlining that process, creating a single statewide permit to encompass much of the previous paperwork. Permits now are issued in about 17 days, he said.

“The permitting process was so onerous and expensive that many folks just didn’t want to start,” said Brenda Asuncion, who leads fishpond restoration efforts with Kuaʻāina Ulu ‘Auamo, a community group focused on island ecosystems and culture. “[The changes] have really helped to facilitate people doing restoration work.”

Asuncion’s group has about 60 fishponds in its network in various stages of restoration. 

In Alaska, tribal peoples have long used kelp to harvest herring spawn, supplement meals and make nutrient cakes. The Native Conservancy, a Cordova-based, Indigenous-led land conservancy, is aiming to foster 100 Native-owned kelp farms over 2,000 acres of ocean within 10 years. 

“A lot of people have left the villages because they just can’t make a living,” said Dune Lankard, the group’s president and founder. “We hope this industry will help relocalize individuals that were lost to the seafood industry.”

The Native Conservancy has helped seven private kelp farmers procure permits, and it’s also set up a commercial farm and nine test sites of its own. The group is supporting another 10 farmers who are seeking permits. 

Lankard said state officials should give priority to tribes and Native people seeking to restore traditional cultural practices. He cautioned that the fast-growing industry could create another “land rush,” in which large corporations from out of state build massive farms in the waters surrounding Native villages. 

“Honor the Indigenous people’s right to the land and ocean near them,” he said. “Let us be the stewards and guardians that we’re capable of being.”

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The Independent Restaurant Coalition (IRC) campaigned hard for $48 billion in next-wave aid, but executive director Erika Polmar liked to break it down to a more palatable ask: $283,000 each for restaurants that have been left out in the cold so far. That was the average first-round amount for aid recipients who brought in $1 million or less in annual revenues, like the neighborhood place you might be heading to for dinner tonight.

“In real life, to me, it trickles down to this: You can save a business for $283,000,” she said, before she found out it wouldn’t happen.

That’s the heartbreaker, because it dovetails with a sad hunch that’s nagged at me, of late: The pandemic may be the proximate cause of restaurants’ woes, but they were wobbly on their pins before anyone heard of Covid, and the challenges they faced back then haven’t gone away. More aid might keep more places on their feet, for a while, but it isn’t a panacea for tough competition, which turns out to have survived even the shutdowns of the last two years. 

We ran some numbers of our own to see just how hard restaurants have to fight for customers, looking at restaurant and population growth in five urban areas over a span of 20 years—Los Angeles, Seattle, Chicago, New Orleans, and New York City. When we were done, we confronted a painful and unavoidable follow-up question:

Are there too many restaurants?

Looks that way.

Our data came from the U.S. Census and the Bureau of Labor Statistics (BLS), which makes an annual count of “eating establishments.” We divided the population in a given location by the number of restaurants, year after year, to figure out the ratio of customers to places to eat.

All five samples tell the same story. Since 2001, restaurants have grown at a faster rate than the population they serve, which means fewer potential customers per restaurant today than in 2001. Back then, there were 671 customers for every restaurant in Cook County, Illinois, which includes Chicago. In 2020, the number was down to 468, which makes the competition that much stiffer. Nobody can quantify exactly how many restaurants are too many to sustain, but we seem to have passed the saturation mile marker without noticing it.

The BLS numbers don’t even include the food trucks, corner carts, and pop-ups that make dining a moveable feast—and dilute a restaurant’s customer base even further. And they don’t reflect churn; the numbers look more stable than they really are, because new places aren’t added on top of an existing total each year. The tally doesn’t say who took over a lease from a failed restaurant, or how many chain outlets colonized a block that used to be full of local businesses.

Numbers don’t lie, but they are hard-pressed to convey context.

If this were the stock market, we’d be anticipating a correction, according to Stephen Zagor, a restaurant consultant who teaches a graduate-level class on food entrepreneurship at Columbia Business School. “Even before the pandemic, businesses were suffering from incredible competition, hanging on by life support,” he said. “What was evolutionary has become revolutionary, as trends that were rolling along put on afterburners and went into high gear.”

Beth Wagner knows it. She and her husband run Chicago’s Honky Tonk BBQ, which has a head start on success: Two appearances on the television show Diners, Drive-Ins and Dives made a neighborhood place into a tourist destination; Beth owns the building, which eliminates landlord hassles; they have a existing catering program they can expand. Even with those advantages, they’re down to three nights a week instead of six, had to reduce their staff, and took a $300,000 Small Business Administration loan on top of the aid they received.

Wagner is a staunch supporter of OFW’s campaign for $25 an hour, but said she can’t pay it, not yet, nor can she afford to abandon the tipped minimum wage, though she tops off wages for employees who don’t make enough in tips to reach a $16 hourly threshold.

Polmar worries about owners who go into debt to stay afloat, to say nothing of the ones who sell possessions to do so; she also worries about what will happen on a larger scale if they fail, and operations with bigger pockets step in to feed us. Polmar can’t stand the idea of “a very cookie-cutter, homogenized restaurant landscape,” she said, dominated by replicable national chains, where dining out becomes a transaction rather than a neighborhood experience. She can’t stand the idea that we’d turn our backs on the next generation of small businesses and the diversity they represent.

She knows how much work restaurants have to do to improve their own culture, but they can’t do it if they go out of business. “Let’s save the businesses and then make them work in ways that are more equitable, sustainable and resilient,” she said. “If we don’t save them first, we have nothing to work with.”

Congress didn’t step up this time, despite all the lobbying and celebrity testimonials and individual elected officials’ support. Which leaves survivors where, exactly? Food costs, wages, and rent are going up, which means higher menu prices, and that, in turn, increases the risk that a diner will decamp for a burger that’s just a bit cheaper, down the street. If anything, competition for an already shrunken customer base is about to get even tougher.

The old model—think of it as eat, pay, leave—may not be up to the task. Zagor believes that restaurants need to be more elastic, to incorporate some of the pandemic’s greatest hits, including a curated market component or wine shop, meal kits, catering, stepped-up take-out and delivery. At the same time, they need to get lean: Austerity is essential, whether the cutbacks involve the size of the staff, the cost of ingredients, or even the decision to close an hour early because there aren’t enough late-night customers to justify the cost of staying open any later.

And yet nobody seems ready to give up, despite a daunting and unsubsidized future. Three hundred students signed up for the 75 seats in Zagor’s food entrepreneurship course, and when most of them didn’t get a spot they appealed to the dean for more sections, which they got, rather than sign up for another class. And preliminary BLS data for the first two quarters of 2021 shows a slight uptick in eating establishments in four of our samples—people continuing to open restaurants even as existing ones struggled to stay afloat. Among the five cities analyzed by The Counter, only New York City saw an overall decline in restaurants, a net loss of 881 places.

We all bear some responsibility for this. Chefs have entered the lexicon alongside other celebrity-fueled pipe dreams—Oscar-winning actor, basketball star, songbird—elevated to that rarified status, over 20 years, by food television, and social media, and restaurant-chasing as a competitive urban sport. We’ve become more demanding, more fickle, expecting an array of choices right this minute, which makes it easy for an aspiring restaurateur to mistake our restlessness for reliable demand. 

Drive dies hard, even in the face of sobering numbers. Surely bad news is meant to happen to someone else.

That kind of denial seems essential, in the face of Wednesday’s disappointing news. The alternative is pre-emptive surrender, restaurant people turning away from work that was never the safe choice in the first place. Why would anyone suddenly become logical about an illogical commitment? If you regard restaurants as an essential third place—not home, not work, but a gathering place that celebrates friendship, family and a sense of community—you can’t really afford to see the glass as half empty, even though it likely is, for some places, for who knows how long.

F. Scott Fitzgerald never wrote about restaurants, as far as I know, but he had the current dilemma down cold. In “The Crack-Up,” a 1936 essay for Esquire magazine, he wrote, “. . .the test of a first-rate intelligence is the ability to hold two opposed ideas in the mind at the same time, and still retain the ability to function. One should, for example, be able to see that things are hopeless and yet be determined to make them otherwise.”

Data reporting and visualization by Karthika Namboothiri.

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For lead prep cook Alek Hermon, who has worked in Kachka’s kitchen for nearly three years, the change is monumental, the end of the traditional wage gap between front and back of house.

“My whole career, I’ve seen the front of house living a different lifestyle,” Hermon said. “They’re paying mortgages, and we’re paying rent.”

Under the old model, Kachka’s lead prep cooks made $19-21 per hour, for a maximum yearly salary of $41,000. With the new wage model, prep leads will now make $55-$60,000 annually.

“It means a lot to have the experience and the hours put in finally reflected in my earnings,” Hermon said. “It makes me feel like I have a career as opposed to a job.”

The commitment to transparency stems from the combined experience of Bonnie, Kachka’s chef, and Israel, who has spent most of his career in the front of the house. They’ve both worked in restaurants since the late ‘90s, and have a successful and well-regarded restaurant, in pre-pandemic terms, appearing four times in a row on Eater’s annual list of the best restaurants in America.

But before opening Kachka, Bonnie worked at New Seasons, a Portland-based natural foods store that offered profit-sharing and revealed to its employees how company money was spent. It was a revelatory experience to see how such a large business was run, especially for someone who hoped to open her own restaurant.

“I loved understanding the guts of the business,” Bonnie said. “I remember those meetings being really eye-opening to me as an employee, and I want to be able to share that with other people.”

As part of the new order, the Moraleses will formally sit down with their staff, twice each year, to give a presentation about the restaurant’s finances. Bonnie has always welcomed employees’ questions about the business, but this will provide an official forum for looking at concrete numbers.

Such transparency provides helpful insight for those who may want to start their own businesses one day, said Bonnie. It’s also an essential first step for making the two other changes, which are more structural.

The couple is covering more of employees’ healthcare costs and has lowered the threshold to qualify. As of 2022, Kachka covers full health insurance premiums, rather than half. They lowered the eligibility threshold to 17.5 hours per week from 27, and cut the waiting period after being hired from 90 days to 30.

Bonnie said that she has seen back-of-house staff members go without health insurance because they couldn’t afford even half the cost of the premiums.

“With the cost of living, they couldn’t afford to pay health insurance,” Bonnie said. “And that just seems crazy to me.”

To make these changes, she had to dismantle the front-of-house tip model, replacing it with a 22 percent surcharge on the customer’s bill, which allows Kachka to bump up their lowest wage to $25 an hour. Under the old model, dishwashers who made $18 per hour will see a wage increase of $7 per hour. A full-time employee working for $25 an hour will make a yearly wage of approximately $50,000.

Bonnie has wanted to do something to address the front- and back-of-house inequity for years. The pandemic, for all of its significant hurdles, offered Bonnie an opportunity to restructure, with transparency as the key.

“I do think for a model like this to be successful, at this point in time where it is so uncommon, I think that it does go hand in hand,” Bonnie said.

Kachka server Caitlin Midkiff has worked in the restaurant industry for 16 years, both in the front and back of house, and has experienced the inequity firsthand.

“I never knew why we never made that much money in kitchens,” Midkiff said. “I couldn’t buy a car—I barely could pay rent. You have to have like four roommates when you’re working in kitchens. And then I made the switch to bartending.” The income added by tips meant a more livable wage.

More than anything, she appreciates Kachka’s new transparency.

“They’re communicating to each and every one of us and sitting down and helping us plan and make sure that this is going to be beneficial for us,” Midkiff said. “I can see myself working for them for a long time.”

The no-tip model has been tried before, most visibly by New York restaurateur Danny Meyer of Union Square Hospitality Group, who eliminated tipping at one restaurant after another, starting in 2015, only to bring it back in 2020, citing the uncertain future of restaurants in a pandemic world.

While getting rid of tips is generally good news for back-of-house employees, it can constitute a pay decrease for front-of-house workers. Bartenders and servers at high-end restaurants can make much more from tips than from an hourly wage increase. Meyer reported losing 30 to 40 percent of long-time front-of-house staffers in the years after making the change. And an accompanying service charge means sticker shock for customers, even if their total bill is similar to what it was when they tipped.

The pandemic has opened the conversation again, though, as mass defections—resignations in the food service industry have risen from 4.8 percent to 6.9 percent in the last year—led owners to reconsider their business model. “I think the tipping question is the question of our generation, for our businesses,” said David Nayfeld, executive chef and co-owner of San Francisco’s 4-year-old Che Fico, as well as a member of the Independent Restaurant Coalition’s Board of Directors. “I have serious doubts that it’s just going to remain the same. I think everybody is going to try and address it in some way or another. I’m just curious to see which ways end up becoming the norm.”

Nayfeld said there’s no one-size-fits-all solution for restaurants. Smaller businesses, like his, have a thin margin for error. “We need so many things to go right for one month to be a positive generating month in an independent restaurant,” Nayfeld said. “Whereas we need one thing to go wrong for the entire month to go awry.”

After 18 months of discussion with his staff, Nayfeld opted to keep the tip line, but include a 10 percent surcharge on the bill and raise menu prices. This allowed him to raise the hourly wage, still cover restaurant costs, and then split tips among the hourly staff based on position and tenure.

Sharing tips—splitting them among front and back of house—is a common way to address inequity, but to Bonnie it didn’t seem like enough. 

She wanted to get rid of what she calls “the dance,” when servers feel that they have to behave in a certain way to make good tips, which can make them vulnerable to harassment if they aren’t deemed to be friendly enough. Ending that dynamic required a complete abolition of the tip model.

“If I have to make tipping available in any way,” Bonnie said. “That would mean we have failed.”

Kachka’s front of house staff faced a wage reduction of approximately 25 percent. To combat this, Bonnie has restructured the front of house schedule to more closely mirror the back of house: the shifts are longer, without staggered ins and outs, which means that wages are about 15-20 percent less than before.

“What used to be a five-hour shift is now a seven-hour shift, as an example,” Bonnie said. “If you just compare before and after, it’s like ‘you’re asking me to work more and make less money,’ and that is true. However, compared to a kitchen employee, you’re now working a similar number of hours and making the same amount of money. And that’s appropriate.”

In this first month of the change, a handful of negative online reviews have cropped up, which tend to revolve around the premise that tipping is the only way to ensure good service.

“Personally, with the added service charge, I feel more pressure to give really great service,” said bar manager Jamie Cecchine. “I don’t want to drop that check and for anyone to feel like they are paying for something that they didn’t get.”

When it comes to customer reactions, Bonnie has found that communication is key, which is why the couple includes literature on the switch with their menus, as well as a QR code that will take customers to their website, which has more information.

Rachel Drushella, who was born and raised in Portland, has dined at Kachka about 10 times over the years. She first heard of the restaurant through a food blog she follows, and has been a fan ever since. Drushella likes having the ability to tip, but says she is open to learning more about this alternative approach.

“I’m very much a context person,” Drushella said. “So I always appreciate learning the background of why decisions are made.”

Bonnie’s started to receive enthusiastic emails. Curious diners, upon learning more about the change, usually respond with positive comments.

“That says to me that this is something that, not only am I happy that we’re doing,” Bonnie said, “but that the world is ready for—at least Portland [is].”

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