For-profit ventures help nonprofits shore up the funding they need to maintain and expand their programs

By Abny Santicola

A Different Route: FareStart

For Seattle-based FareStart, the path to its current existence as a nonprofit with revenue-generating programs was slightly more organic. It originally was started in 1988 with the moniker Common Meals by local chef and entrepreneur David Lee as a for-profit business with a mission of serving meals to Seattle’s homeless shelters and disadvantaged populations. Around 1992, Lee saw the opportunity to train the homeless population he was serving, so he transformed FareStart into a 501(c)(3) job training program for the homeless and disadvantaged, but the former business never lost touch with its for-profit roots.

The organization produces and delivers meals to local shelters serving homeless men and women for about $1 a meal, and breakfast and lunch to childcare facilities and daycare programs in the area for about $2 a meal. It also operates a public restaurant in downtown Seattle that's open for lunch on weekdays, special catering events in the evenings and dinner on Thursday nights, when it holds its Guest Chef Night, where chefs from restaurants in the Seattle community volunteer their time and expertise to work with FareStart trainees to create a three-course gourmet meal for clientele. All meals served at the restaurant are sold at market rates.

Dan Johnson, FareStart's development director, says all of those programs combined generate about 50 percent of the organization's $5 million operating revenue every year. The rest of the funds are raised from federal grants and private fundraising. Johnson says that even in a good year there's only about a 5 percent profit margin from the organization's profit-generators. That's some huge overhead compared to the expense, say, of the organization writing a $50,000 grant to a foundation.

Johnson says that while the restaurant is an essential training ground for FareStart students, 80 percent of whom are employed in the food industry within 90 days of graduation, it also is an amazing introduction for people in the community to the organization's mission.

"Even if they don't support us in the kind of traditional nonprofit way by making a $100 donation, the people who come in and buy a $12 lunch feel, and rightly so, that they're supporting our mission," Johnson says. "And all along the way they're getting a nice lunch out of it, and it's kind of this amazing way to connect with our mission and support our mission."

Johnson sees the restaurant as a community opportunity to demystify the idea of what a homeless person is. Eating a flatiron steak cooked by someone who was recently homeless or someone who four months ago was behind bars finishing out a prison sentence breaks down those barriers, he says. "It humanizes, as it obviously should, the folks who are in the training program, taking advantage of this opportunity to improve their lives, and FareStart and the food service training and all of that is simply the vehicle for them to transform their lives," Johnson adds.

In its first few years, the nonprofit would take newer or luxury donated vehicles to auction to try to turn a profit. But it quickly realized it wasn’t getting the best bang for its buck, and President Martin Schwartz and his team saw a unique opportunity to generate more funds. Though a little off the beaten nonprofit path, the solution was a no-brainer: set up a for-profit used-car lot.