Panzanella: Fresh Ideas at Weaver Street Market

Panzanella, Weaver Street Market's sixteen-month-old restaurant, is a kaleidoscope of food, people, and expectations. This award-winning restaurant has become the favorite place to eat for many in the community. The menu turns with the calendar as ingredients come in season. The dining room changes color as the sun moves higher in the sky; the patio fills and empties with changes in the weather.

It's a myriad of challenges and adventures for Weaver Street as we deal with an ever-changing staff and an industry new to us. But Panzanella is a community institution that's here to stay, and we're enormously proud that the best restaurant in Carrboro, North Carolina is part of our co-op.

"Panzanella" is an Italian salad made from tomatoes, crusty bread, and whatever else is fresh from the garden. The name Panzanella symbolizes our restaurant's food offerings -- seasonal, made from fresh ingredients, and featuring crusty bread from Weaver Street's popular European style bakery. Panzanella aspires to fill the niche of the neighborhood trattoria in Italy, where the food is good, the price is affordable, and the service is familiar.

Panzanella is located in the building next to Weaver Street Market. The restaurant anchors one end of an old textile mill that's been converted into a small mall of independent shops. The dining room has an airy, authentic ambiance -- tall ceilings, large oak beams, thick brick walls, arching 10-foot tall windows, and the original maple floor. The restaurant can seat up to 80 diners indoors with 10 at the bar, and an additional 30 on our outdoor patio. The dining room features a large "community" table for large groups and for small groups who prefer to eat "family" style with other diners.

Why a restaurant?

The decision to start a restaurant arose from Weaver Street's strategy to grow by expanding our services to our existing customer base. Our town of Carrboro/Chapel Hill (pop. 50,000) is growing rapidly and being "discovered" by the national chains. Our goal is to develop new cooperatives in the central business district as an alternative to the chains that will inevitably populate the strip malls.

We realize that our strategy is different from the growth strategy of replicating successful stores in markets with similar demographic characteristics. In our case, with Whole Foods already thriving in two neighboring cities, we weren't comfortable with that strategy. Moreover, we feel that working from our established base of membership and community recognition we have a good chance of making co-ops a major force in our town's future. In addition to Panzanella, our expansion plans include opening two 5,000 sq. ft. 'satellite stores' in neighborhood commercial districts that aren't large enough to support a full-sized store.

Worker and Consumer Ownership at Weaver Street

Weaver Street Market is a hybrid consumer and worker co-op. Half of the board is elected by the worker members and half is elected by the consumer members. The general manager is also on the board. The consumers owners receive a discount in the grocery store and periodic coupons for Panzanella. The worker owners receive patronage dividends based on hours worked. We have 4,000 consumer owners and 60 worker owners. About half our sales are to members and about half of eligible workers are owners.

Having workers and the general manager on the board has almost always worked well over our 10-year history. The key to the success of the structure is having board members act in their role as board members, rather than in the narrow interest of their position. Implementing policy governance has helped us make this distinction more fully.

Although having workers and the general manager on the board is often frowned upon in consumer co-ops, it's a matter of course in worker-owned businesses. It adds stability and expertise, and it reduces many of the problems associated with a lay board. For Weaver Street Market, giving workers a share of ownership creates a more dynamic and entrepreneurial organization.

One advantage of having a restaurant is the opportunity to invite members to dinner. We have weekly "Owner Talks" over dinner, where groups of 25 owners discuss co-op plans for the future. We also have bi-weekly focus groups where we query owners about specific operational issues. The offer of a free dinner creates a ready pool of participants. We also serve pizza from the restaurant at monthly worker owner meetings and serve dinner for board meetings.
--R.S.

The process

Once we decided to pursue other businesses at Weaver Street, we charged a team of interested staff members with developing business plans. A team that included then bakery manager Rob Nichols, who became Panzanella's general manager, developed a restaurant plan. Rob had worked in several restaurants and owned a catering business before coming to Weaver Street to develop our European-style bread program.

As we completed the restaurant business plan, the restaurant next door to us vacated its space. We immediately saw advantages to taking over this space. It had a successful track record as a restaurant, it was in an historic building, and also had enough space to fit our bakery and administrative offices.

By co-locating the bread bakery and offices with Panzanella, we not only shared the cost of the new building but also freed up desperately needed space for the grocery store. About two-thirds of the 4800 sq-ft space was used for the restaurant, and the rest for the expanded bread bakery. We also built a 1000 sq. ft. mezzanine for the offices.

Renovation

Although our restaurant location had lots of advantages, the facility was in poor condition, including a badly deteriorated floor. The only good solution was to completely gut the space down to the dirt floor and brick walls and build it right.

Starting from scratch allowed us to take advantage of the natural features of the building. We moved the dining room to the front of the space and restored the original windows, which provide lots of natural light. We salvaged enough of the original maple floor to reuse in the dining room. We put windows from the bread bakery into both the dining room and the shopping mall so that diners and shoppers could see the bread being baked. The result is a beautiful interior space that takes full advantage of its historic characteristics.

But the renovation was very expensive, costing over $500,000. We assumed the entire cost of the renovation in return for a rent reduction on our long-term lease. The trade-off makes sense financially over the long term, but only if the restaurant is successful over that time frame.

Panzanella

Weaver Street Market
Carrboro, North Carolina

Open: Dinner six nights a week (closed Monday)
Lunch five days a week (closed Sunday and Monday) Number of seats 80 inside, 30 outside Average dinner count 140 Average dinner check $18 Average lunch count 60 Average lunch check $8 Alcoholic beverage sales 20% (mostly wine) Gross Margin 68% Labor cost 33% Labor cost w/benefits 38% Earnings before int., taxes, deprec., amort. 10% Net profit 0%

Positioning and marketing

Weaver Street Market already had a large cafe in the grocery store, with 60 seats inside and 100 seats outside, so it was important to carefully position Panzanella as a distinct offering from our cafe. The cafe is self-service, cafeteria-style with a natural food focus, whereas Panzanella is a full service sit down restaurant with food made to order and a Mediterranean style menu. Giving the restaurant a distinctive name helped clarify Panzanella's difference from the existing cafe.

The opening advertising budget was used to serve a free dinner to the first 500 members who signed up the week before Panzanella opened. The dinners provided the practice we needed to fine-tune our service and menu and served as a great source of word-of-mouth advertising. After dinner, members were given a tour of the kitchen, bread bakery, and administrative offices. Members who couldn't be scheduled for a dinner were given a coupon to use during the first three months the restaurant was open. The member dinners and coupons along with newspaper articles generated sufficient business so that no other advertising was needed.

First year milestones

With the size of our investment in Panzanella, we had made a commitment to be in the restaurant business for the long term, and we knew that satisfied customers who returned on a regular basis were the key to our long-term success. So, rather than setting up financial goals for year one, our success milestones focused on the number of guests and the level of guest satisfaction. We were able to meet both of these goals. The restaurant stayed busy: we turned the tables almost two times on weeknights and almost three times on weekends. Our customer surveys consistently rated our food, service, and atmosphere over 4 on a scale of 5. Panzanella received very positive reviews in all the local papers and in its first year was named one of the top ten restaurants of the year in the Raleigh/Durham/Chapel Hill area by our region's major newspaper.

Challenges: management retention

The biggest challenge operating the restaurant has been hiring and keeping management. Our general manager Rob Nichols has been the only stable manager. Our initial executive chef left after two months, lured away by higher pay from a nearby restaurant. Rob assumed the executive chef position, and we promoted the assistant kitchen manager. But the kitchen manager will be leaving this summer, so we're once again advertising for an executive chef to both develop the menu and run the kitchen.

We've had three different dining room managers in 16 months and are now hiring again for that position. We've relied on Rob to fill in the gaps as dining room manager, except for three months when financial manager Kate Sumberg filled in. Although other administrative managers have pitched in, the burden of management turnover has left Rob worn out and somewhat demoralized.

Our lack of organizational experience in restaurants has made it much harder to compensate for management vacancies in the restaurant than in the grocery store. Whereas many of our managers can fill in around the grocery store, they aren't much use in the restaurant.

It has also been a challenge integrating a new kind of business into our company culture. Although the restaurant is reasonably priced, it is still expensive enough that most employees can't eat there regularly, which has created a certain amount of employee resentment toward the restaurant. We have tried to use the same personnel practices and policies in the restaurant as the grocery store, but have been stymied in some areas. For example, the dynamic of tips makes the waits more like independent contractors than employees, and we've been unable to find a way to replicate our gainsharing plan in Panzanella.

Current and future plans

Our major goal over the next year is to stabilize management and institutionalize better operational systems. We need to put in place a reliable management team to help Rob, and we need to develop strong systems that aren't so reliant on management intervention.

Once we stabilize operations, we plan to open for brunch on the weekends. We also want to add live music to Panzanella on some nights.

Our goal for year two is to break even financially. Half way into the year, we're slightly above that goal. Earnings before interest, taxes, and depreciation (EBITD) is about 10%, which signals strong profit potential in the long run as interest and depreciation expenses decrease.

We're fortunate that Panzanella is a success in the ways that count most to the customer -- the food and service are consistently good. The behind the scenes personnel and operational challenges will ease over time as we become more savvy in the restaurant industry.