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The business side of charity

Let's get cold-hearted here for a minute: Charitable work is all well and good, but what exactly is it doing for your bottom line? You're giving a lot, but what are you getting in return? A warm feeling inside doesn't count. 

Chances are you could—and should—be getting back a lot more than you are.

"Restaurants need to think of charitable involvement as a partnership rather than a sponsorship," says Alyssa Prince, community relations director for the National Restaurant Association. "Hardly anyone just writes checks anymore. Successful partnerships can benefit both the charity and the restaurant."

For a lot of restaurants, community involvement has always been important; get involved in the community in a positive way, the thinking goes, and the community will support you in turn. These days, savvy operators are taking that involvement one step further. Instead of limiting their activity to donations, restaurants are expanding the depth and breadth of their involvement by partnering with charities and using that involvement as a broad marketing tool.

Gregg Smith, along with his brother, Bob, runs Smith Brothers Restaurants in Pasadena, California. They throw an annual bash for the local hospital that last year raised $260,000 in a single night.

"It's hard to put a number on what this kind of involvement is worth to us, but I can tell you that being a part of the community is only going to help you," Smith says. "There's so much goodwill generated by getting involved in charitable causes. It pays off in spades."

So how does your charity work stack up? We polled experts, consultants and restaurateurs to create a list of how-to tips to help you get the most out of your good deeds.

How to choose a charity

Start with your heart, but let your head have the final say. Experts agree, pick a cause you're passionate about. But Andrew Freeman, a consultant in San Francisco, also advises restaurants to pick a charity that offers a natural overlap with their client profile. "If you're a four-star restaurant, you probably don't want to pick a little-known grassroots charity with limited support," he says. "Matching the charity to your customers means you'll get better buy-in from the people who form your core business."

Freeman and others also advise creating a hierarchy of charitable involvement, such as identifying one primary cause and one or two secondary causes that you're willing to commit time and effort to.

Picking the right charities means asking the right questions up front—of yourself as well as the charity. GuideStar.org, an online clearinghouse of nonprofit information, offers these tips:

Identify your preferences. If you want to contribute to disaster relief, for example, ask yourself what area you want to work in: shelter, food, clothing, medical assistance and so on. There's no right answer—it just helps to be specific.

Focus on the mission. Look at the charity's description on its Website, in its literature and on GuideStar. The charity should be able to clearly state its mission. Look at the charity's goals and performance. The charity should have specific, measurable goals and concrete criteria to describe its results ("provided shelter to 1,000 hurricane victims" as opposed to "helped hurricane victims").

Avoid charities that won't share information. Reputable nonprofits will openly discuss programs and finances, including how your contribution will be used.

Trust your gut. If you've done your homework and still have concerns about a charity, avoid it.

A common mistake when researching a charity is to focus exclusively on the money—how much it raises and how much goes toward programs—since that only tells part of the story. "Nonprofits have multiple bottom lines, and looking just at the overhead can be misleading," says Jocelyn Harmon, director of development and communications at the National Council of Nonprofit Associations. "The overhead might be very high, but the organization might also be doing a great job of accomplishing its mission."

Or start your own charity 

Stephen Palmer did what might be the most charitable thing of all: he started his own foundation.

When breast cancer claimed the life of a close friend, Palmer decided to donate to cancer research efforts through his restaurant, Palmer Place, a 500-seat casual-dining restaurant in La Grange, Illinois. He wanted 100 percent of the money he raised to go toward research, but the foundations he investigated all had administrative costs that took a bite out of his donation. So Palmer, along with ten other business owners in town, set up the H Foundation in 2000.

Over five years, the foundation's signature event, the Goombay Bash, has raised $1.1 million, all of which has gone to the Robert H. Lurie Comprehensive Cancer Center of Northwestern University. Want to follow Palmer's example? Here's how:

  1. Contact a business attorney. "It's essentially like setting up a corporation," Palmer says. "The biggest part is applying for your 501c3 tax-exempt status, which takes months. You need that before you can do anything."
  2. Set up an executive board that will manage the foundation's details. "Make sure everyone knows what their responsibilities will be," Palmer advises. "And make sure everyone's in it for the long haul."
  3. Organize the foundation so you know exactly where the money is going.
  4. Hire an outside accounting firm to review your books annually. "You want to be 110 percent above board," he says.

Research tools

The most powerful research tool is GuideStar (www.guidestar.org), which provides comprehensive information on more than 1.5 million nonprofits nationwide. Users can register for a free basic service that offers searchable data from a charity's IRS Form 990—the non- profit version of a 1040—that includes breakdowns of revenue and expenditures and accomplishments. More detailed information is available through a subscription.

Charity Navigator (www.charitynavigator.org) rates more than 5,000 charities based on their performance. The Website also maintains a "tips" section, including best practices, how to stop solicitations by mail, tips for giving in times of crisis, a volunteering guide and more.

The Better Business Bureau's Wise Giving Alliance (www.give.org) publishes reports evaluating charities that solicit nationally. You can also search by category, such as "Hurricane Katrina relief organizations" and find financial and mission information on charities that fit that description.

How to make a plan 

When you've decided whom you want to support, the next step is to determine how much involvement you can handle.

Talk to your managers and employees about how ambitious you want to be, given your resources and experience with events. There are no rules about how much you should give, but on average, according to a recent survey from Princeton Survey Research Associates, small businesses—with up to 99 employees—donate less than $5,000 a year.

A key part of your early discussions should be identifying an employee who will be the point person for your primary charitable involvement. "It's the general manager, usually, who ends up making a lot of the early moves," says consultant Andrew Freeman. "But it can be anyone who's committed to your cause."

But one employee can't power the entire enterprise; for the commitment to really work, you need buy-in from your entire staff (see sidebar). "That part is huge," says Gregg Smith, the restaurateur in Pasadena. "We couldn't have done what we have with our hospital fundraiser if we didn't have all of our people behind us."

Talking with the charity's development director can help you decide on your involvement, too. "Work out a plan so you both know what to expect," Freeman says. "Shooting from the hip is not the way to go."

A side benefit to planning your charity work in advance is that it makes it easier to say no to the legions of other causes that come knocking. "The average restaurant probably gets 100 solicitations a month, but if you can tell them right up front who you're supporting this year, you can make it a lot easier on yourself," says Freeman.

Regardless of what level of involvement you choose, the best way to integrate your charity plan into the mission of your restaurant is to build it into your yearly business plan.

Squeeze Fresh Smoothies, an 11-unit chain based in Colorado, expects franchisees to get involved with local schools. "We set the expectation for that involvement, and the value of it, right up front," says Bo Gascoigne, director of marketing and brand development. "Being active in the community is a big way for us to get our name out there."

Tips for getting buy-in from employees

  1. Make sure there's a charity champion. "The reality is that you just can't expect it to work by committee," says Freeman. "You need one person in-house who can answer employees' questions and act as the primary liaison with the nonprofit."
  2. Make sure all employees are informed. "We talk about our hospital involvement all the time with employees," says Smith. "Our people are passionate about spreading the word." Says operator Stephen Palmer of Palmer Place, "When your servers are excited about the cause, they're going to help generate more interest among customers."
  3. Give employees charity-related tasks. Smith says his employees welcome tasks related to planning and putting on charity events. "Because they value the cause and the event, they see the value of being involved," he says. "They're part of actually making it work, rather than just being told what to do."
  4. Give every manager a charity job. "Anyone at the management level should have some kind of community service expectation," says Freeman. "The participation can be built into their quarterly goals and measured just like any other result."

Philanthropy is the new black 

It helps to keep the big picture in mind when planning your charity efforts. Giving USA, which tracks philanthropic trends, estimates Americans gave more than $260 billion in 2005, a 6.1 percent increase over the previous year. About half of the $15 billion increase over 2004 levels was attributed to the philanthropic response to natural disasters, including Hurricane Katrina and the Asian tsunami that struck in December 2004.

Other 2005 highlights, according to Giving USA:

Individual giving, always the largest source of donations, rose by 6.4 percent, to slightly more than $199 billion, or 76.5 percent of all estimated giving.

Corporate donations grew by an un- precedented 22.5 percent, to an estimated $13.77 billion, or 5.3 percent of all giving. Among nonprofits, 59 percent reported an increase in charitable receipts in 2005, the highest level since 2000.

The human-services sector reported a 15 percent increase in giving; with disaster relief added, human-services giving rose by more than 32 percent, to $25.36 billion.

Environmental organizations and groups working for animal welfare saw giving rise 16.4 percent. Including disaster relief, this area received $8.86 billion in contributions.

How to plan events 

When it comes to fundraisers you'll get the most bang for your buck by hosting an event yourself. "Always ask the charity what you can do for them at your own place," advises Andrew Freeman, the San Francisco-based restaurant consultant. "The events you hold will be the ones that will link you most directly to the charity in the minds of your customers and the public, and they're the events that will do the most to build traffic and give you a public relations boost."

A few possibilities to consider:

Raffle nights: Customers can participate in a raffle contest with prizes including your own gift certificates or items donated by participating businesses. Money raised from ticket sales goes to the charity.

Percentage of sales night: A percentage (usually 10 to 20 percent) of after-cost proceeds is donated to the charity. Split the pre-event marketing and publicity costs with the charity.

Hosted event: You provide the venue and the know-how, the charity covers the cost of a fundraising dinner and takes home the after-cost proceeds.

Donated event: You provide everything—venue, food, service, entertainment—and the charity keeps the proceeds. Enlist other businesses to donate some services to help lower your costs.

Wine benefit: A novel way to raise money for a charity is to sell wine that has been custom bottled, with the charity featured on the label. Special wine events can be marketed as charity benefits.

Theme dinners: Host theme events—St. Patrick's Day or Cinco de Mayo, for instance—where a portion of the after-cost proceeds benefit a charity.

Chef auctions: Hold a benefit dinner that includes an auction where the high bid gets the chef to cook a meal for eight at the winner's home. "It's good money for the charity, and cheap for you," says Joshua Hollinger, executive chef at the Harbor View Hotel on Martha's Vineyard. "All it is is a donation of labor by the chef."

A word of caution: Don't make the mistake of thinking you need to give away the entire night if you hold a benefit for your charity partner. "You need to remember to look at an event like this as a business deal between you and the charity," Freeman adds.

If you're part of an off-premises fundraising event, make sure you're prepared (see sidebar). Freeman urges participants to treat these events as prime marketing opportunities. Your display should feature a banner, flowers, giveaway versions of your menu, matchbooks and cards for complimentary drinks and appetizers.

How to negotiate an event's costs

Tips on negotiating with a charity, from Gregg Smith, co-founder of Smith Brothers Restaurant Corp., Pasadena, California.

  1. It's OK to negotiate: Believe it.
  2. Be prepared: Know how much labor you'll need and how much the food will cost. Then you're ready to negotiate.
  3. What's in it for you: How much can you afford to give away and what do you get in return? Some places will let themselves be bought for $5,000 on what would normally be a $10,000 night. For that, you need something: Will the restaurant be mentioned in the charity's newsletter? Will there be media coverage?
  4. The charity can pay for it: For a big annual fundraiser for a local hospital, sponsored by two of our restaurants, the charity pays for everything up front, from tents to cooking gear to invitations.
  5. It's OK to make money: For other events, we serve as a venue for the charity's party, so we make money while they raise money.
  6. Know the charity's psychology: Every new chairperson or nonprofit president wants their fundraising event to be bigger and better than last year's. They'll try to negotiate a better deal with us.

Checklist

Tips from Joshua Hollinger, executive chef at the Harbor View Hotel on Martha's Vineyard.

If the event is held at your own place:

  1. Communicate: Be in constant contact with someone from the charity. Make sure there's a single staffer from the restaurant who's the primary point person.
  2. Know the crowd: Will children, elderly people or people with special needs attend?
  3. Plan to budget: Make sure the menu is based on the charity's budget.
  4. Keep your staff informed: Make sure they know what the event is for, what the menu is and if there are any special considerations, such as between-courses speakers or presentations.
  5. Plan for contingencies: If you're hosting an event outdoors, do you have a backup power supply?
  6. Check your checklist twice: Does the event require audio-visual gear, a lectern, or extra tables and chairs? Will you need security? Some charities aren't familiar with putting on an event, which is where you come in.

If the event is off site:

  1. See the space: How big is your work area, where do you set up, do you have to rent equipment—know all that before you say yes.
  2. Inventory your gear: Make a list of every item you'll need, from spatulas to grills. Do you need to bring your own water? What about towels?
  3. Choose ingredients wisely: Use foods that can hold well, especially if you're using hot boxes to transport food or keep it warm on site.

How to market your work

Having put so much effort into finding the right charity and setting up a plan, now you have to talk about it.  "It's perfectly ok to talk about what you're doing because society now expects to hear those kinds of messages coming from all different kinds of businesses," says the NRA's Alyssa Prince.

A 2004 survey by Cone, Inc., a Boston-based marketing firm, found 86 percent of Americans want businesses to publicize their efforts, but only 40 percent believe companies do that well. If you cater to a younger crowd, communicating your charitable partnership is even more important; surveys have found that Americans ages 18 to 25 believe cause relationships are especially vital.

Experts say restaurants should market their charitable involvement through customer outreach tools such as newsletters, email updates and Websites. In house, restaurants should include "proud sponsor of" messages on their menus, and staffers should be kept updated on the charity partnership so they can pass along news, including word of upcoming fundraising events, to customers. Restaurants should also negotiate to have charities include mention of their restaurant partnerships in as many of their public communications as possible, such as newsletters, fundraising materials and annual reports. "These are the kinds of things that can help build traffic in a really direct way," says Prince.

Those societal expectations are largely due to the prevalence of "cause marketing," where businesses organize their marketing messages around a charitable cause. "Restaurants provide a powerful venue for cause marketing because they serve local communities and can engage customers on a grassroots level," says Tamara Backer, managing director of the corporate philanthropy group for Changing Our World, a national fundraising and philanthropic consulting firm. "Market research has demonstrated that consumers have come to expect businesses to support causes, and that cause marketing can help a business increase customer and employee loyalty."

That's right, your charitable work can help with employee retention."If your employees are passionate about the cause, and if they're involved from the ground up with planning your work with a charity, it can become a powerful recruitment and retention tool," Prince says.

Letting everybody know

If you're bashful about spreading the news of your good deeds, Pat Connors has a few words of advice: Get over it.

"We wear our charitable involvement on our shirtsleeves," says Connors, owner of Pastiche, a Tucson restaurant that helps raise hundreds of thousands of dollars each year for charity. "Our staff is proud of our involvement, and we make sure customers know what we're doing. We're part of the community—we're not just taking the money and running."

Upcoming charity events (and the results of recently held events) are highlighted in Pastiche's monthly e-newsletter and quarterly mailed newsletter; Connors makes sure participating charities acknowledge Pastiche in their communications to members, as well. In the restaurant, Connors maintains what he calls a "wall of fame," which includes photos and memorabilia from events as well as plaques of thanks from charities.

On the restaurant's Website a prominent "what's happening" link features updates on the restaurant's charitable activities and includes a detailed statement, written and signed by Connors, outlining his philosophy and involvement with community philanthropy. "Marketing charitable events is a lot easier than just marketing your restaurant," he says of his various outreach efforts. "Your message is much better received when it's tied to a cause. It sends a very clear message to consumers, and they get it."

An especially potent marketing tool for Connors is his involvement in Tucson Originals, the local chapter of the national DineOriginals independent operator association. As a promotion for an annual Humane Society fundraiser, Tucson Originals partnered with a local television station. Chefs did three-minute cooking demos on a popular daytime show, pumping up the event and also the restaurants.

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