...Colors struggled as a business. Yes, it operated for 15 years, longer than most businesses, but it required regular subsidizing. Colors, in short, was never (or at best, rarely) profitable. It operated as long as it did thanks to the cost-cutting measures and creativity of ROC’s management team. After a time, it stopped running as a fully functioning restaurant, reducing operating costs. The payroll was reduced to one individual, an events manager. Colors had two non-restaurant sources of revenue: a restaurant workers’ training center for ROC and other organizations, supported by workforce development funding, and an event space for upcoming chefs of color and diverse celebratory activities.
As it happens, Colors shut down just prior to COVID-19, which turned out to be fortuitous timing for ROC. Amid the COVID-19 shutdown, neither in-person trainings nor large public events would have remained viable revenue generation options.
Like many failed businesses, Colors management made mistakes related to business model design, management, core competency, concept creation, capitalization, location, and overall business operations. Colors, like any business, was supposed to be profitable. However, a cooperative business’ success requires cooperative member-owners to share not just ownership, but also financial commitment and responsibility. Sweat equity (volunteer time before the opening of Colors) was the main member-owner equity investment. This approach, commendable in terms of inclusion as it allowed low-income individuals to be co-owners, resulted in low capitalization.
Read the rest at Nonprofit Quarterly
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