My Nonprofit Did So Much Right, But We Still Couldn't Raise Enough Money to Survive

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When asked why I came back to the community where I was a kid to open L.A. Kitchen (LAK), I always replied, “L.A. is the city where the future comes to happen.”  

It still is. I just got there too early when I opened LAK in 2013.

The organization was built on a nonprofit/for-profit, two-income-stream model, similar to what we developed during my 24-year tenure at the D.C. Central Kitchen, a social venture targeting hunger and poverty. LAK aimed to take advantage of L.A.’s wealth of existing resources, which included some of the very things most Angelenos thought were part of the problem: a rapidly aging population, thousands of emancipating foster care youth and returning citizens, tons of precious, yet wasted food, and poorly managed city contracts.

All the stars seemed aligned for LAK’s success. Yet late last year, we were forced to close our doors.

At the time, I talked about our closing in this video. In it, I tried to be both informative and upbeat, while highlighting the impact we had in our five-and-a-half-year run. But I am constantly asked for more details, so this is my attempt to give you solid basics.

To begin, and to echo my admission in the video, LAK’s closing was my responsibility. Foundations, businesses and people trusted me with grants and loans. While I’m going to talk about those great partners, as well as the maddening barriers we faced, in the end, it was my job to hire a team, build the board, learn to navigate the city, and adapt the business model to meet new circumstances. Simply put, try as I might, it didn’t work. That’s on me.

That said, my vision was both socially daring and economically sound. And, if I may be so bold, after decades of purposeful work evolving the model, it was fucking brilliant.

A Tested Model and a (Seemingly) Solid Plan

The “charitable” side of the business would run on philanthropic donations raised from foundations, businesses and citizens. The other side was a social enterprise business we called Strong Food, which would generate income via food service contracts. We planned on securing an anchor contract with the city’s Department of Aging to produce healthy meals for congregate meal sites serving elders throughout the city. They really only had one company servicing that contract: Morrison’s, a branch of the multinational Compass Group, which served a routine, six-week-cycle menu, made mostly with processed food. This should have been an easy contract to win.

But we’ll get to that in a minute. First, let’s look at the nonprofit side.

LAK focused on securing donated “imperfect,” ripe-that-day fruits and produce from farmers and wholesalers, which would be used to fuel a culinary job training program designed to empower two distinct groups: young people emancipating from foster care, and older men and women returning home after decades of incarceration. The idea was to go upstream and show that you could prevent homelessness by merging the two groups that had the highest probability of becoming homeless, and to show how an intergenerational model could help individuals thrive, while inspiring each class to support each other and avoid the predictable trap of the streets, or the pit of recidivism.

While they were learning new skills, they’d then pass on that knowledge to an army of volunteers, and working side-by-side, they would produce thousands of super-healthy, gloriously diverse snacks, meals, juices and broths, which we would provide free of charge to nonprofit partners serving a wide variety of Angelenos, but with an emphasis on elders.

Now, this next part is important.

My focus on elders wasn’t because “I heart old people.” It’s because I’m a fucking pro. It’s not rocket science to see that the 70 million strong baby boomers will live longer than any previous generation while dealing with long-term chronic illnesses that will savage our economy. Nor is it hard to see that they don’t have enough money saved for those extra, costly years. In fact, less that 50 percent of them have $25,000 saved for retirement. And readily available census data clearly shows that greater L.A. is an epicenter of aging in America, with over 1.25 million people over 65—a number that will double by 2030. That’s why I went back to L.A.; it’s ground zero for the issue, so it should be an epicenter of innovation.

Empirical evidence aside, even before I left D.C., I knew that building senior-focused programming would be tough from the get-go.

A Calculated Leap of Faith

Before leaving, I met with many generous supporters to talk about my new project. Many were enthusiastic, given my successes locally and nationally, with numerous cities having adapted our community kitchen model. We had also launched the Campus Kitchen Project, which had helped students in dozens of schools access underutilized cafeterias in their off hours to process excess foods into meals. All were excited to hear my new idea, until I mentioned serving seniors. Literally, to a person, they looked at me and said, “Oh, that’s too bad, seniors aren’t in our interest area.”

So I already knew I was heading way beyond the imagination and probability curve for most program officers, but that’s what leaders do. They take risks. They don’t cower and complain. They march out to meet the future and forge a path so that others can follow.

Simply put, I took a calculated leap of faith with the confidence that once established and working, people would come to understand both the need and the opportunity, and support us.

And that faith proved well-placed. I generated powerful philanthropic alliances in California, particularly with the deeply generous California Community Foundation, the visionary Eisner Foundation, and our great colleagues at the California Wellness and Angell foundations, which funded our first training cohorts. Much praise is also due to our lead partners at the AARP Foundation and AARP CEO Jo Ann Jenkins, who helped launch LAK with their first million-dollar grant. But we couldn’t have done this without the support of the Nonprofit Finance Fund, which gave us a program-related investment loan of $2 million to build our 20,000-square-foot processing kitchen in Lincoln Heights, right outside downtown and close to the wholesale markets where we’d secure donated food.

This was an admittedly big project, with a large facility and a huge annual nut to make. I could have built smaller and grown slowly, but L.A.’s problems aren’t small problems. I went big because we had to produce big, so I built a kitchen that could pump out 15,000 to 20,000 healthy meals a day, and safely and efficiently process tractor-trailer-sized donations, while offering multiple shifts for training and 24-seven operating hours to create jobs for graduates.

Our rent and loan repayment schedules were big, but with strong philanthropic and community support covering half our initial $2.4 million budget, all we needed was to secure a significant meal contract from the Department of Aging and we’d be on our way. This is where our troubles began.

A Public-Private Partnership That Wasn’t

People have suggested that my attempt to partner with city government was my Achilles heel, but I disagree. We had already proven it works in D.C., where D.C. Central Kitchen still provides 6,000 locally sourced, scratch-cooked meals a day for D.C. public schools (made by graduates of the training program, earning well above the minimum wage). Not only that, they had proven that if approached respectfully, and asked to participate, kids will eat healthier food.

More importantly, I believe that social enterprise is the best partner government can have. We pay good wages, buy local and reinvest profits. We’re like the ace in the deck that government needs to draw a winning hand. Hard as it might have seemed, proving that point was a huge part of the LAK mission. If we could show that power of a modest senior meal contract to support local food systems, keep people out of jail or off the streets, while producing superior meals at a competitive price, we might influence countless mayors, who could mandate that all city contracts prioritize similar models over corporate-owned, low-bid competitors that routinely pay low wages and export profits.

But I wasn’t going in on blind faith. I had my own ace in the deck: L.A.’s Good Food Purchasing Act (GFPA), which mandated that any city agency that spends more than $10,000 on food annually should buy local, and support local food businesses. Big food companies like Morrisons, Aramark or Sodexo don’t do that; they get most of their food delivered by either U.S. Foods or Sysco. Their power is in aggregating contracts to get better purchasing power. Buying fresh, local foods at a reasonable, yet reduced price (because it was “imperfect”) and cooking from scratch was our advantage.

So I walked into L.A. confidently, excitedly saying to Department of Aging leadership, “LAK is here to serve. We want to help you be fully compliant with the GFPA, and we’ll work with you to pioneer a senior-approved, plant-forward menu (meat as part of the meal, not the main course) that will be healthier and more affordable, so you can be ready when the predictable number of poor seniors spikes. On top of that, we’ll specifically hire older people and create senior-friendly volunteer programs to show how we can keep elders productive and engaged. Oh, and we’ll bring in some of the best chefs in the world, including José Andrés, Barton Seaver, Erik Oberholtzer and Kajsa Alger, who were on our board, to help develop dynamic, internationally flavored menus that will appeal to L.A.’s diverse citizenry. And while our contract with you will produce thousands of meals a day, we’ll reinvest any profits we make into the nonprofit side, where we’ll produce an equal, if not greater number of meals for free—literally doubling the meals you get for the same amount of money you’re currently spending.”

Good deal, right? How could they not be excited? How many businesses do you think walk into the average Department of Aging in any city with a deal like that?

I’ll tell you: none.

A Cold Shoulder

Yet, it was decidedly hard to open that door. Over the first three years of building our kitchen, opening our doors and securing pilot contracts, we spent huge money and countless hours trying to prove our ability, dedication and flexibility to leaders of the department—until we realized that some of their employees were simply hostile to our model.

Imagine my shock when a senior manager there compared me to chef and healthy school food advocate Jamie Oliver, suggesting, “You’re just like him, and he got run out of town.” Others were openly running interference in support of the long-term, corporate contractor, throwing ludicrous nutritional barriers up, spreading rumors of senior discontent with our meals (even after we proved a 90 percent approval from the 3,000+ meal rating cards we independently collected from senior diners), or extending contract deadlines in multiple three-month intervals, which made the competition stronger, while we bled money.

This is when I went to every leader I could meet with, including deputy mayors, the city administrator and city council members. All listened, but not one fought for us. Oh, they’d call the department, and be assured that LAK was getting a fair shot, yet even when we produced ample evidence of collusion and lack of any effort to comply with the GFPA, not one leader stepped up to fight for a nonprofit that had brought in $4 million from outside L.A., was creating good jobs for at-risk citizens and was demonstrating a deep commitment to the future of the city. I even wrote to Steve Lopez, the Los Angeles Times columnist who has been lambasting city leaders over the recent homeless count, to see if he’d investigate. I never heard back.

So, we sadly decided that we had to let go of our vision of securing senior meal contracts, and we pivoted in search of new income streams. Contracts to provide thousands of meals don’t just fall off of trees, but with full board engagement, we spend months looking for business opportunities and partnerships. We embraced small, yet impactful projects like producing organic baby food, or soul food sides for local entrepreneurs. Finally, we secured a good contract to provide sandwiches and snacks for LAX airport.

Making sandwiches wasn’t what I came to LA to do, but entrepreneurs don’t whine, they get to work. We developed a solid model we called “Seed to Sky.” We took the 50,000 lbs of organic food waste we produced annually processing fruits and produce, and paid nonprofit partners at L.A. Compost to turn it into soil. They’d then deliver it to a series of local farms and South Central food programs, which we contracted with to grow greens, cucumbers, tomatoes and the like, which we’d buy (along with other California-grown products) to put into our sandwiches and salads. We wanted to use LAX to send a glorious example of social enterprise home with travelers from around the world. And it was working. After months of trial runs, we were producing good volume for three outlets in the airport, with enthusiastic response for the products and excitement for our close-loop impact model, but we needed more time and money to get it up to speed and producing the volume we needed to profit. At every board meeting, we showed committed members that, If we could just secure enough philanthropic support to cover our bases in the interim, while more LAX outlets came online, we’d survive, thrive and create more impact.

Another million dollars and eight months would have got us over that hump.

A Tough Town for Fundraising

Which brings me back to L.A.’s philanthropic community.

It’s a tough town to raise money in. Most people think celebrities give. They are cool and fun and beautiful, but they don’t give. There are no fortune 500 businesses based there. And while San Francisco has many foundations that adore social enterprise, the “warring Italian city-state” relationship between L.A. and San Francisco ensures that little of the Silicon Valley loot trickles down to their southern neighbors.

That said, while I was trying desperately to keep LAK afloat, I was making annual pilgrimages to two deep-pocket L.A. foundations that could have saved us.

The first was the California Endowment. I went to them every year, ritually pointing to their focus on access to healthy food, and the rights of returning citizens. Like many big foundations, they would tell me that while they appreciated my work, they wanted to focus on big policy achievements. This is one of the reasons that I find the recent homeless count in L.A. so demoralizing, and the concern of some philanthropic leaders so hypocritical. The endowment rightly points to the success of early-release legislation as an achievement of their funding, but without a job or an opportunity, most returning citizens end up on the streets, or back in prison.

If you’ve served time, getting a job is tough, but when you’re over 50, it’s nearly impossible. I kept pointing to our impressive placement and retention results for older, returning citizens (we had an 85 percent retention and placement rate, and grads collectively earned millions in annual wages, and generated hundreds of thousands in payroll taxes, versus going back to prison—costing $50,000+ a year—or ending up on the streets). With significant investment, we could have trained and employed more of the beneficiaries of their big-picture initiatives, but they wouldn’t even accept a proposal.

But it gets crazier. When the endowment put out a bid to run the café at their Alameda Street headquarters, they actually stipulated that the winner hire grads from our training program. They even wanted them to wear LAK uniforms to work; yet they wouldn’t offer a dime to us for the cost of training. Getting grads jobs wasn’t the problem for us; we had strong support from L.A.’s generous hospitality industry. Like all nonprofits, what we needed was multi-year, general operating support to help cover our hard costs while we generated consistent job retention rates.

Another top prospect was the Hilton Foundation. Each year, I met for casual conversation where I’d ask for support, pointing to the fact that we merged four of their stated interest areas (homelessness, foster care, disaster relief and hospitality careers) into one powerful model. Just like the endowment, they pointed to higher-level priorities, like building permanent supportive housing, which is highly needed in L.A. But, as I would annually point out, most people survive on the street via the community they create. It might be dysfunctional and co-dependent, but people on the street help each other to cope and survive. You can build housing, and put people in apartments, but then what do they do? Isolation is a horrible situation, and without meaning, work or community (which we provided to many residents of the housing Hilton helped build), they often ended up back out on the streets again. This is a glaring flaw of the permanent supportive housing movement. It’s not just a home that matters, it’s community.

Yet every year, I was told, in so many words, “Don’t bother sending a proposal.”

And get this—months before we had to close, Hilton asked us to host a staff volunteer day for their entire team. Imagine—not one penny of support, yet they wanted us to give them the full LAK experience. Like I did with the endowment, I agreed, but just so I could challenge them, in person, after they met our team and felt our purpose, to at least consider a grant.

I never heard back from them. To be fair, program officers are often stuck between their knowledge of the need and their desire to help, and the all-too-often short-sighted CEO or a board’s lust for big-picture projects.

If either Hilton or the California Endowment had stepped up, or if any of the national foundations I approached saw aging in America as an imperative issue, we might have made it. None did. In fact, even today, few funding sources will consider a grant to support innovation in the way U.S. communities engage, uplift or support our elders.

A Dream Dies

I had made payroll for 30 years, without fail. Until I couldn’t. And thus, my dream of serving L.A. came to an end.

There are no villains in this story, just lots of really bad examples. Yes, LAK closed, but before we did, we opened lots of eyes to a new way of thinking about food, community, our elders and social enterprise.

For example: I’m proud to have worked alongside other social enterprise leaders in L.A. and the Board of Supervisors to help create the Social Enterprise Preference Program, which gives registered social enterprise businesses priority in any L.A. County contract process, based on hiring practices, local sourcing and reinvestment of profits. This is the first example of a community moving away from “low bid” and toward best value when awarding contracts. I hope to spend more time supporting contract and procurement reform, which must include banning under-the-table “rebates,” which is how many multinational food companies tilt the scale in their favor.

Of course, I continue to offer ideas and materials to training programs and senior meal programs that are following our lead, And not just in the U.S. Through the work of my friend and partner José Andrés (and the World Central Kitchen team), the Power of Food model we’ve been partnering for decades to develop continues to change lives and challenge dogmas about emergency relief and economic recovery around the world.

L.A. is still the city where the future comes to happen. I wish I could have stayed longer, but I’m proud of what we accomplished together, working side by side.

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Robert Egger founded the D.C. Central Kitchen, the Campus Kitchen Project, and the L.A. Kitchen, which have collectively produced over 40 million meals and helped over 2,000 individuals attain jobs. Learn more about him here.