BBJ Article - How Boloco came back from the brink of collapse

Click here for link to the story (no paywall) at the Boston Business Journal website or scroll down to the story below my commentary below.

Whenever I agree to interview for an article, I always take a deep breath before and after the discussion hoping that what I said properly captures what I'm really thinking, and that the writer doesn't twist it into a narrative that makes me regret ever having responded. Jessica from the BBJ helped me maintain the faith. It's also important to note that downtown Boston continues to see significantly reduced foot traffic and the battle for survival for many restaurants and retailers is anything but over, including Boloco. Happy to report that Hanover is doing well despite the daily challenges of staffing and supply shortages.

I received a ton of congratulatory emails and private messages from people. And solicitations too, as always! And while I say accurately below that I'm happy to be able to still tell the tale, I am 100% certain its not a forever tale. Nothing is. We all know that. Especially small restaurant businesses.

At the very end, I am quoted as saying "I can let this fail right to the end trying to do what’s right,” Pepper said. “And if I don’t do that, why would anybody?” This is true, but the way its shared isn't clear.

What I meant to say, or maybe did say but didn't fit into the allotted number of words for the article, is that I'm in such an advantaged situation relative to the employees who work at Boloco and so many other foodservice operations that I actually have the ability to push for what's right (higher wages, better benefits, essentially putting people first) right up until the business can't handle it financially and I would still be "ok". If someone in my position in this world doesn't fight for the workforce by actually taking real action to show it can be done, and yes, risking full failure in doing so, who else would take such a risk? Apparently very few. Sometimes I hear "well, yes, its important to make short-term sacrifices for the sake of doing what's right." Short-term? So when things get challenging its time to stop doing the right thing and flip back to the standard less right, or in many cases wrong thing? It would be funny if it weren't so sad.

If we at Boloco don't push for the highest quality jobs possible in a pretty embarrassing industry, very few others will either. Some of us who try will succeed, and some will fail. But that doesn't mean we don't keep pushing to find business models that pay employees what they need first and finding adequate profitability with employee welfare as a non-negotiable. As I do often say when people push me about paying less being better than paying nothing at all, "employees could always find another job that underpays them." Especially today, I know they'll be picked up immediately somewhere else.

Onward.

How Boloco came back from the brink of collapse

By Jessica Bartlett –  Reporter, Boston Business Journal

October 15, 2021

In October 2020, the co-founder and “chief worker advocate” of Boston-based Boloco, John Pepper, had written to shareholders that the company was on the verge of collapse.

Operations were at a breakeven, only two of its once eight locations were even open, he said. Acquisition plans didn’t look promising. 

A year later, Boloco has survived, reopening six locations with renegotiated lease terms thanks in part to funding from the Paycheck Protection Program. It brought on consultants to manage day-to-day operations, and for the first time since the pandemic began, hit profitability at every location. 

“It feels good to still tell the tale,” Pepper said in an interview. “It feels like we’re not in survival mode.”

This isn’t the first time Pepper has ushered a turnaround at the burrito company. After co-founding the business in 1997, Pepper resigned in 2013 only to return two years later when the company was on the brink of bankruptcy.

Things got better, but by 2019, the business was struggling again, due to what Pepper said was not being disciplined operators. Owners put $400,000 into the business at the end of 2019 to manage the storm. 

Things were looking up for a few months, up until the pandemic-related closures and work-from-home mandates gutted business. Cash dwindled. In a memo to shareholders in August 2020, Pepper said he thought he would have to close all locations permanently by Aug. 28. At one point, the business had $7,000 in the bank. 

In early September, Pepper had to let go of employees and reduce all but one of the members of the corporate team. The company lined up two loans — a $150,000 loan from the U.S. Small Business Administration, and a $150,000 loan from Ascentium Capital — but company executives said they wouldn’t take on more debt until it had more landlord agreements in hand.

Despite promises that the business could remain, landlords at the businesses largest and second largest locations — Atlantic Wharf and Lynnfield — terminated the business’s leases in October. To put salt in the wound, Lynnfield’s landlords replaced the business with a Chipotle. 

“I had to walk away from the business (back in 2013) for a few years and watch it crumble and come back and buy it back (in 2015). I’ve seen a lot,” Pepper said. “(This time, when we were facing full closure in 2020), I don't even think I reacted. I was just like, 'Ok, breathe.' Like my wife always says.”

The start of the turnaround

Negotiations with the remaining six landlords were tense but ultimately productive. At several locations, Boloco was able to negotiate rent as a percentage of sales instead of a flat fee. 

Yet restarting the restaurants proved difficult having eliminated all of its corporate staff that managed the day-to-day scheduling and supply chain. Pepper turned to Streetlight Ventures, a restaurant consultancy run by a co-founder of another of Pepper’s businesses, B.Good. (Note: I was, in fact, a co-founder of B.Good, but Anthony Ackil who is referred to here was the real brainchild and CEO along with Jon Olinto)

Finally, in January 2021, a $900,000 PPP loan from the federal government came through, which Pepper says was the lifeline. “Everything ... wouldn't have mattered if the second round of PPP hadn’t come,” he said. “We would have been done.”

In the first week of October, all six stores reached profitability, he said. The chain recorded $129,723 in revenue that week, Pepper said — 25% lower than the same week in 2019, but 146% higher than the week in 2020 when only the Children’s Hospital and Hanover, New Hampshire locations were open. 

While the pandemic brought plenty of turmoil, Pepper speaks of the last year almost with gratitude. The pandemic helped boost employee wages and gave them more rights, causes Pepper had championed for years since he had the company certified as a B Corp and incorporated as a benefit corporation after regaining ownership in 2013.

The labor shortage, however, has made it difficult to staff all of Boloco's locations despite paying a minimum of $15-16 an hour for staff with no experience. The locations still can’t open Sundays, and same-store headcount is down from 120 pre-pandemic to 100 now. 

“It’s a great thing for the workers,” Pepper said. “They finally have leverage. People are talking about labor woes, but it’s a bonanza for the people who do the work. It’s been an interesting time. I’ve enjoyed watching those of us with the power scramble and be in the position we put our employees in. That’s been a silver lining of the pandemic.”

Throughout the past year and a half, Pepper says he never once considered slashing wages. Some questioned whether he was willing to let the business go under instead of asking employees to earn a little less, he said employees could always find another job that underpays them. 

If there’s one takeaway from the experience, he said it’s that if you have to do the wrong thing to survive, you shouldn’t survive. 

“I can let this fail right to the end trying to do what’s right,” Pepper said. “And if I don’t do that, why would anybody?”