Donations Are Saving Small & Big Biz

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NEW YORK (TheStreet) — During a deep recession and credit crisis in which bailouts come from the top down, pockets of American commerce are being bolstered from the bottom up as everyday people are saving bars, brewers and even Wikipedia with private donations.

When times were tough for Citigroup (Stock Quote: C) and Bank of America (Stock Quote: BAC), the Obama administration's Troubled Asset Relief Program helped them out with about $45 billion apiece. The two commercial banks, employing several hundred thousand people across the country, were deemed by the government as "too big to fail."

That wasn't the case with small businesses such as the Pink Tea Cup, a soul-food restaurant in the West Village neighborhood of New York, the Court Tavern in New Brunswick, N.J., online encyclopedia Wikipedia of California, Milwaukee-based beer brewer Pabst Blue Ribbon and the Green Bay Packers of the NFL.

Even relatively little Discover Financial (Stock Quote: DFS), the credit-card company, received $1.2 billion from the U.S. That could have saved 12,000 outlets of the Pink Tea Cup, which faced closure in mid-December when owner Lisa Ford said operating expenses grew too heavy a burden.

The Pink Tea Cup was saved after an online fundraising effort by a group of the restaurant's fans took in $100,000 and allowed restaurant manager Vincent Pinkney, and local filmmaker and theater owner Lawrence Page to purchase the eatery. Meanwhile, similar efforts have kept bands onstage at the Court Tavern in New Jersey — where $20,000 in donations saved the venue from closure last month — and have generated more than $160 million in pledges for a community bid to buy Pabst Brewing Co., the all-American beer company founded by German immigrant Jacob Best in 1844.

Are such actions signs that socialism will save capitalism, as Ralph Nader and other anti-business critics have suggested? No, but as bailed-out institutions like Wells Fargo (Stock Quote: WFC), Bank of America and JPMorgan (Stock Quote: JPM) reduce small-business lending — by $12.5 billion since April and $1 billion in November alone, according to the Treasury — communities and social networks are increasingly deciding for themselves which institutions are too big to fail.

In the Pink Tea Cup's case, the only thing "big" about it are its portions of chicken and waffles. Tucked away in a residential section a block and a half from boisterous Sheridan Square in Manhattan, the Pink Tea Cup first dished out its pork chops, barbecued ribs and collard greens in 1954. When Ford put a sign on the door Dec. 3 saying debt would force the Tea Cup to close, it caught the attention of bloggers and, eventually, patrons Ebonie Johnson Cooper, Ezinne Kwubiri and Robert Harmon Jr. With a mix of legal, political and financial backgrounds, the three sent out a press release; set up a blog, Facebook page and PayPal account for donations; and began their "Save Your Soul for $5" campaign.

"I have a fundraising background, so I knew that if you asked people for less, they'll give you more," said Cooper, who is on the junior committee for volunteer group New York Cares and worked with President Barack Obama's campaign during the 2008 election. "In this economy, everyone understands the pain of having to lose something — be it your house, your car, your education — because finances won't allow you to do that."

The first donation came in Dec. 16, with $5 to $200 donations following at a steady clip. Celebrities including Susan Sarandon and The Roots' drummer, Questlove, pitched in, while local businesses contributed thousands. Not long after the group made $2,000 from a fundraiser at the nearby Actors' Playhouse, the theater's owner, Lawrence Page, kicked in the rest to save the restaurant and formed a partnership with the owner. Fifteen jobs were saved. That's 15 that would have been added to the more than 7 million people who lost their jobs during the recession.

"It speaks volumes to the community in general, because people are just fed up," Kwubiri said. "Though we're coming out of the recession, people are still thinking 'If I can help someone else out, maybe someone can help me.' "

Though the Tea Cup's supporters followed the public television/National Public Radio model — the same one Wikipedia used to take in more than $8 million during the most recent fund drive — not all community financing is couched in altruism or benevolence. When the Kalmanovitz Charitable Foundation announced in November that it intended to sell Pabst and holdings that include the Schlitz, Old Style, Lone Star, Olympia, Stroh's, Ballantine, Piels and other labels for $300 million, two ad men saw the opportunity for a grand social experiment.

Brian Flatow, president of New York firm The Ad Store, and Michael Migliozzi of Forza Migliozzi devised a plan to purchase Pabst through a "crowd-sourcing" initiative that solicits $5 to $250,000 online donations through social-networking sites and its own modest Web site. Donors are promised shares in the company as well as either a bottle, case, quarter keg or half keg, depending on their donation. That Pabst's brewing is currently contracted out to the SABMiller/MolsonCoors (Stock Quote: SAB) joint venture MillerCoors is of seemingly little concern, as beer lovers' enthusiasm has pushed the effort to more than $131 million, or more than halfway, to its goal.

"People had already taken ownership of the Pabst brand emotionally," said Brian Flatow, president of The Ad Store. "We saw an opportunity for ourselves and people like us to take ownership in more than just a metaphorical way, but to actually own the company."

For evidence that such a plan could actually work, a potential donor wouldn't have to leave Pabst's home state of Wisconsin. In 1923, with the Green Bay Packers $2,500 in debt, Curly Lambeau, Andrew B. Turnbull, attorney Gerald Francis Clifford, Dr. W. Webber Kelly and Leland H. Joannes incorporated the team as a non-profit company and sold 1,000 shares at $5 apiece. Shares were sold three more times — from a bid to bail the team out of receivership in 1935 to a push for money to renovate Lambeau Field in 1997 and 1998 — until the team amassed 112,120 shareholders with 4,750,937 shares.

The Packers have an executive board and chief executive much like other public companies, with football operations left to team management as with any other franchise. However, unlike most companies and franchises, stakeholders are capped at 200,000 shares to ensure no one has control of the team and the shareholders have a direct voice in capital projects like stadium investment. Each July, tens of thousands of shareholders meet at Lambeau Field, with some wearing suits beneath baseball caps reading "NFL Owner." Though NFL ownership rules changed in the 1980s to limit teams to a maximum of 32 owners, the Packers' model was exempted through a grandfather clause and has helped keep Green Bay the NFL's smallest market in a city with little more than 100,000 residents — a viable and thriving franchise.

"Everyone here has emotional ties to the team, but some took that a step further and said 'Wow, I'm going to support them financially," Packers spokesman Aaron Popke says. "My wife is a physician here in town, and she's got her share up in her office next to her medical diplomas."

The Packers ownership model is envied by supporters of the Buffalo Bills, where fans hope strong ties to the community can overcome a tough local economic reality. Though a change of heart by league owners seems unlikely as the Bills and the Jacksonville Jaguars are targeted to become the Los Angeles NFL team, public efforts to preserve entities as local as a soul-food restaurant and as broad as an online encyclopedia always start small.

"You don't have to have a lot of money, education or 1,001 different connections," the Pink Tea Cup's Kwubiri says. "If you're passionate about something, other people will follow."

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