Social enterprise: making money and a difference

Hospitality and social enterprise could be a match made in heaven. As cliché as it might be, food has a habit of bringing people together. Melbourne’s Charcoal Lane and Sydney’s The Bread & Butter Project are just two examples of successful social enterprise models in action.

Founded in 2009, Charcoal Lane operates under the umbrella of Mission Australia, a Christian charity. The one-hatted restaurant’s raison d’etre is to reduce labour force exclusion among young Aboriginal and Torres Strait Islander people while providing a platform to share their culture through food.

The Bread & Butter Project was set up by Bourke Street Bakery co-founders Paul Allam and David McGuinness in 2013, and the business simultaneously empowers refugees with employment pathways while tackling an industry-wide skills shortage.

Commercial strategies are implemented with a dual goal: maximising surplus and social impact. Unlike a charity, a social enterprise aims to cover most of its costs by generating a surplus through commerce. And unlike a typical corporation, 100 per cent of the surplus is reinvested into the business’ pursuit of its social goals.

According to The Bread & Butter Project general manager Philip Hoban, launching a social enterprise is similar to opening a normal business. “The only difference is you need to go through an approval process with the government [to register as a social enterprise],” he says. “It entitles you to a range of subsidies and grants from the government and other industries as well.”

While The Bread & Butter Project officially launched in 2013, the business model took two years to develop. Allam, his wife Jessica Grynberg and McGuinness drew on their network of contacts to form a board, which provides direction and advice. Hiring the right mix of commercially and socially oriented people is crucial, says Hoban. “You really need to be set up properly. The biggest risk the business has taken is bringing me in because I have no social background. But I’m here to manage costs.” In his first five months as GM, Hoban has attended conferences for ‘changemakers’ and has recognised an important trend. “People have all these great ideas but they don’t realise how important the commercial side is.”

A period of consulting with other organisations was crucial when developing Charcoal Lane. “It was really developed by the Victorian Aboriginal Health Service and Mission Australia,” says Troy Crellin, program manager social enterprise at Mission Australia. “From a health services point of view, work plays a big role in terms of our wellbeing and health. We have a student board that advises us on our programs and what we run and how we run them.”

Surplus isn’t a given, even when operating within a tight business plan. “Because we fund so much of the trainee wages ourselves, we tend to have a gap in our cash flow in our end of year results,” says Hoban. “We have a gap at the moment of about $365,000 per annum. It sounds like a lot, but we sell around $5.4 million worth of bread per annum, so, it’s only about six to seven per cent.”

The gap is unsurprising when the business’ costs are taken into account. Trainees are paid slightly above the award rate while receiving training that covers the technical and theoretical aspects of baking as well English language classes. All up, Hoban says the business equates the cost of putting one refugee through the program to about $50,000 per annum.

Charcoal Lane’s training program is just as rigorous. Feedback from students has emphasised the importance of connecting young people with culture, so Mission Australia’s program has been designed to encompass more than technical hospitality skills. “We do a four-week pre-employment program for anyone from the age of 16 to upwards of 30 years of age,” says Crellin. Trainees are encouraged to develop pride in culture and a sense of self. “There’s pride in our food, what we do and how we act in the workplace,” says Crellin. “It’s about unpacking what training is about and what to expect — it’s not like high school.”

After the four-week stint, trainees undertake a six-month traineeship with Charcoal Lane. “At the end of that six months, it’s time to go into mainstream employment,” says Crellin. “We’re probably the only employer that gets rid of our skilled staff.”

There are three intakes a year with around 30 students graduating. While the students move on, there are permanent trainers on-site, working alongside chefs and front of house staff. “The role of the trainers is to inform staff where the skills of that young person are at,” says Crellin. “If we didn’t do that, people would just be washing dishes and polishing glassware. We don’t want that. We want to provide a pathway to employment.”

Mission Australia is a charitable organisation, and while the restaurant sustains itself, the organisation seeks financial support through charitable means to cover other costs. “Training young people is a cost to Mission Australia,” says Crellin. “It’s something we have to raise capital for, but we’re on a pathway to becoming self-sustaining.”

Individual stories will pull at heart strings, but data trumps anecdote when it comes to obtaining funding. Charcoal Lane and The Bread & Butter Project are currently in the process of completing their first social return on investment (SROI), working with third parties that specialise in impact measurement to develop a framework. So far, The Bread & Butter Project has had two studies on its outcomes conducted, with almost all 26 graduate trainees interviewed. “[The auditors] confirmed all 26 are in employment,” says Hoban. “All of their children are in full-time education and their families are completely off government subsidies.” The next stage will require The Bread & Butter Project to work with auditors to develop measures for the SROI so substantive and quantitative data can be attached to it.

Charcoal Lane has also commenced the process of conducting an SROI. “We’ve got enough data from 10 years to get strong answers,” says Crellin. “Internally, we have a process we call impact measurement that helps us meet our goals. We evaluate young people when they enter the program and then at two, four and six months so we can record the impact on the individual. We need a third party to extrapolate the data to show what we’re doing financially for the state and the community.”

Obtaining substantive quantitative data has a number of benefits. “The first is in terms of our sales,” says Hoban. “We have some phenomenal customers who are with us because of our story.” The story is what gives The Bread & Butter Project an edge when competing in Sydney’s artisan bread market. “Then, there are the corporations who have their own corporate social responsibility,” says Hoban. “When we give them this information, it encourages them to stay in partnership with us.”

The same goes for government. While being registered as a social enterprise entitles a business to government funding through subsidies, grants and tax breaks, none of these windfalls are guaranteed. “There are grants, but there isn’t an endless pot,” says Hoban.

Maintaining a profitable business in the current climate is no mean feat, but The Bread & Butter Project and Charcoal Lane are well on their way to becoming self-sustaining while achieving their social goals.

This article originally appeared in the May issue of Hospitality under the heading ‘Social Surplus’.