Are Co-Ops a Solution to the Industry's Instability?

A man holding a drink behind a bar.
Andrew Friedman needed a new business plan for his 10-year-old bar, Liberty, and he didn't want to sell to the highest bidder. Instead, he turned his bar into a co-op. Photo by Gabi Porter.

As everyone who works in the industry knows, bars are a hard business to be in. Margins are razor-thin. Competition, especially in big cities, is brutal. Rising minimum wages are good for workers, but can be an insurmountable obstacle for some owners. And at the core of it all is instability, whether you’re a bartender trying to pay your rent or an owner trying to keep the lights on.

But what if there way to circumvent that instability? One bar in Seattle thinks they’ve got the solution: becoming a co-op. In about a month, ten-year-old Liberty will officially become a cooperative business, making them the nation’s first co-op cocktail bar. The move will transform the bar from the typical model — where a bar is owned by one person or a group of investors — to one where the workers are the owners.

“I’ve had Liberty for about ten years, and after ten years you start to look around at other opportunities. I didn’t want to sell it to the highest bidder,” said current owner Andrew Friedman. “A lot of bars, especially cocktail bars, have a tough time making the kind of profits we see around the rest of the industry. And often the recourse of the owner is to close the bar, walk away or sell it. But in this case, here’s the opportunity for the staff — who do not necessarily have the same profit directives — to be able to take over and operate the bar.”

A co-op can mean different things. You can be an employee-owned company — like New Belgium or the Publix grocery chain — and not be a co-op (that’s technically an ESOP, an Employee Stock Ownership Plan). There are credit unions, which are cooperative banks, and consumer co-ops where shoppers own the store and work in exchange for lower prices. The U.S. Small Business Administration defines a cooperative as “a business or organization owned by and operated for the benefit of those using its services.” Profits go to the the employees, instead of an owner. Employees own and run the business, and each person has equal representation when voting on issues. Proponents of co-ops — which include famous brands like Land O’Lakes, Welch’s and REI — say that such systems empower workers by making them more connected to their job, and that money ends up staying longer within a community.

While you don’t have to be a crunchy vegan restaurant or a card-carrying communist to become a co-op, working at one requires a slight adjustment from working at a traditional business. It’s a model that requires faith: faith in your co-workers, faith in your ability to compromise and faith in an involved decision-making process. Say you need a new ice machine. Previously, the owner could just buy one, but depending on how the co-op is set up, each step of that process might require meeting, voting and agreeing on what kind of ice machine, who’s buying it, and who’s setting it up. Some co-ops are even consensus-based, requiring everyone to agree on a decision before moving forward. On the flip side, the democracy of a co-op means everyone gets a say — if you’re debating a switch in how tips are distributed, every person in the bar, from busser to head bartender, has an equal say in how things should be.

To Friedman, the co-op model is a perfect fit for the bar world. “Our industry — especially cocktail bars — is not terrifically profitable,” he said. “It’s a great way for bartenders to continue to do what they love doing, but not have to worry about the profit pressures when you take on investors or have to raise money. A co-op allows people to work together, which we do already with the cocktail spirits culture.”

The employee reaction has been extremely positive, said bartender Laura Bishop. “Everybody’s incredibly enthusiastic,” she said. “We are a very close knit, family-style staff. That close knit community makes it work. [The co-op] seems like a natural model for cocktail bars because the whole U.S. craft cocktail scene is such a community — everybody knows about this bartender or that bartender, everybody has bars and friends to visit no matter which city they’re in. There’s already this fostered sense of community that really applies well to the same concept.” The employees plan to maintain Liberty as approachable craft cocktail bar, but plan to intensify their successful barbacking program.

Liberty is still figuring out the details of how their model will work, but they’ve set up a board of four employees to lead the process. They’re being helped by Seattle’s Central Co-op, who is assisting with the nuts and bolts of transferring the business to the workers, and setting up an effective decision-making process.

There are several challenges ahead. For one, the state of Washington bans owners from accepting tips, which obviously won’t fly in a bar where everyone's an owner. But Friedman, who plans to informally advise the bar (“There’s a lot of creaks in the floors and a lot of drips that only I know how to fix”), isn't worried.

“We're just moving from one question to the next, solving it and then finding another question,” he said. “Liberty was my first bar, a decade of my life. It’s a place where I met my wife, it’s led to a lot of wonderful things to me. I’m really looking forward to seeing the next ten years of Liberty.”

Shelby Pope is a writer in Berkeley.

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