Cause “Philanthropub” Lost Nearly $9,000 the First Quarter, But Still Gave to Charity
Cause, the Shaw bar and restaurant whose goal is to give all its profits to charity, initially planned to release information about its income and expenses every quarter. The unprecedented level of disclosure was meant to satisfy critics who might think the founders are taking big salaries or using charity as a gimmick. While Cause is not a non-profit, it aimed to be as transparent as one.
But only now, a little more than nine months after its opening, has Cause made its numbers public—and only for the first quarter of the year. The financial summary reveals that the restaurant incurred a loss of $8,745.95 in the first quarter of 2013. Nonetheless, it gave $8,445 to four charities—Agora Partnerships, Common Good Farm City, Higher Achievement, Martha's Table—through small direct donations and sponsored events to directly benefit them.
Cause provided Y&H with a copy of its financial summary (see below), which will go on its website and be posted in the restaurant in the coming week. Co-founder Raj Ratwani says slightly reduced losses continued in the second and into the third quarter. Cause plans to release financial summaries for those quarters together in October. Before it opened, Cause projected profits of 10 to 20 percent and hoped to give $100,000 to charity in its first year.
As to why it's taken this long to release the financial information, Ratwani says, "To be honest, we were spread unbelievably thin. And I think that's something we did not anticipate early on." Ratwani, who has a full-time job as a senior research scientist for MedStar Health, points out that he and co-founders Nick Vilelle, John Jarecki, and Dave Pressley (the latter two also run The Light Horse in Alexandria) don't take salaries and have received no compensation in any form for their work on the restaurant. (The highest salary on staff is $50,000.) "A lot of things we try to prioritize, and some things just fall by the wayside or get delayed," Ratwani says. He adds that they've had the Q1 financial documents ready for release for "quite some time" but hadn't gotten around to disseminating them.
The bigger question: Why is Cause still giving money to charity even though it's not turning a profit? "What we've really been trying to do is stick with the spirit of Cause," Ratwani says. "The only reason we started this bar and restaurant was to get money to the organizations and to give them exposure."
Ratwani says roughly 80 percent of the money given to charity during the first quarter came from sponsored events. For example, Cause held a ticketed cocktail mixer for D.C. non-profit Life Pieces to Masterpieces (featured in the second and third quarters) where 100 percent of ticket sales from that specific event went to the organization. Outside companies often sponsor the events and match the ticket sales in donations, and food vendors have provided lower costs and donated items. "That wasn't the intent of the model," Ratwani admits. "What we're striving to get to is that the profits directly go to the organizations. But because we don't have the profits, we wanted to really stick with the spirit and intent of what we set out to do."
Ratwani says he's perfectly willing to acknowledge that his team miscalculated how much profit they'd be able to bring in right off the bat. He says there have been a lot of unanticipated costs, particularly with the maintenance of the building (which Cause investors own). The building had some electrical problems, which have since been resolved, as well as air-conditioning issues. The Cause team started a campaign on crowd-funding site Indiegogo to try to raise money for an air-conditioning system overhaul, but only raised $1,238 of its $11,000 goal. (There is air-conditioning in the short term, but they will eventually need something beyond temporary repairs.)
Despite the setbacks, Ratwani says they're not giving up on the model; they're in this for the long haul. "It's way too early to determine whether the model as we originally intended is working or not," he says. "If you look at how other bars and restaurants are doing in year one and how do we compare to those, I would say we're on par with that."
Ratwani admits that it's still a learning process, and the Cause team has said from the beginning that the restaurant is a bit of an experiment. As for his projections going forward? Ratwani has learned his lesson and won't say. "We've learned early on that it can be extremely difficult to get these projections right."
Photo by Darrow Montgomery