The Failure Report Case Study: Lessons learned from the demise of Pilotworks

Andrea Carbine, a former General Manager of Pilotworks, details lessons learned from the swift shutdown of the company whose original mission was to fuel the growth of independent food companies with flexible kitchen spaces, services and learning programs. Their goal was to be the "WeWork for food entrepreneurs."

1. Food, like any other industry, needs leaders with expertise!

Pilotworks was led to its close by a management team with very little actual food industry experience. CEO Zach Ware, a VTF Capital fund lead, liked to comment that he was well cut out for the job of leading a food company into a new space because of his personal “love” of tacos and “enthusiasm” for all things food.

The food industry – whether we are discussing hospitality, service, product, or manufacturing – is at its core an industry founded, run, and full of staff operating from a passion story or personal connection with food. It is the narrative that we all are drawn to and happy to cheer and support. These stories are impactful, they make for good marketing, and they are the basis of why we, as CONSUMERS, are drawn to products and services. But while that passion might lead someone into the food industry, the reality is that success is built upon those who can combine that passion with a willingness to work, a cultivation of expertise, and a development of business acumen to make their products and services successful.

As an industry, we need to stop excusing poor ideas, poor execution, and poor leadership. We need to stop allowing our industry to be led and steered by people who think that money and outside skills or expertise they have will translate into the industry because “it’s just food.”

The food industry is complicated. The issues, problems, and faults of the industry need real change inspired by experienced leadership. We need innovation, ideas, and change driven by strong leaders with a genuine knowledge of how this industry can and should run, not just those with capital and skills they think can translate to food. The food industry needs to start taking responsibility for itself and making its own changes. We can’t just rely on tech bros and VCs to save us.

During my time at Pilotworks, I had to routinely explain the business back to the senior leadership that was setting our course – defining what equipment was and how it would be used, what culinary processes were and how those processes would impact spaces, and what the regulatory guidelines of the industry would require or allows.

A startup or company in the medical, legal, or industrial space would not allow itself to be steered and led by an individual with no expertise, length of service, or practiced knowledge of subject matter. But, in food, we do – whether because we doubt our expertise, we question the legitimacy of our industry and professions in comparison to others, or simply because we accept the myth that it’s about passion and willingness over all else.

2. Diversity is not a marketing platform, it is about what you do!

Pilotworks’ first marketing campaign focused on “democratizing the food industry.” My first day on the job, I was introduced to an array of people from all backgrounds working in the kitchens in Brooklyn. The makers of Pilotworks were a diverse and inclusive group – with women and minorities making up a majority of the tenants at a majority of the facilities. It is these very groups that need the access and the foundational tools to build and develop their businesses – and making a commitment to this work and progress is important. Despite the diversity of the populations they were working with, however, Pilotworks’ own leadership was all white, and all male.

It is this imbalance which can no longer be taken for granted. If, as a company, you preach a policy of diversity and inclusive practice, then the leadership, workers, and backers (and board) of your business should align and be reflective of that policy. Without including diversity in the positions who make decisions and influence the policies and path of your venture, you are failing in the execution of actual inclusion.

The consumer is better educated today and wants to see that they are better represented in the companies that their dollars are going to support and grow. Similarly, the average employee is better informed and better educated, they deserve a seat at the table to provide meaningful insight into the companies that they are investing their time and talents into. Companies need to adjust their course to be reflective of the markets they want to engage the employees and constituencies they want to represent.

The problems facing the food industry – that companies like Pilotworks are designed to solve – will not be solved by boards and c-suites of white men. The change, innovation, systemic industry knowledge, and cumulative experience that we need to demand of our leadership and companies, as they attempt to tackle these problems, will need the input of people from a diversity of backgrounds and genders to make it an honest and reflective reality.

3. Accountability to your employees, customers, and community is key in business.

Pilotworks’ final decisions in regard to its members, employees, and investors in its last 6 months of operation clearly lacked accountability or an emphasis on serving these communities.

Pilotworks marketed claims of a strong commitment to its members (the maker community) and its staff (the “team” that supported that community). The responsibility inherent in those claims is the foresight of ensuring that, even in failure, there is a demonstration of the partnerships and investments that those communities made in return in Pilotworks.

There is certainly no assumption that Pilotworks, its CEO Zach Ware, or its board took the decision to close the business lightly. But there is clearly a demonstration that in executing that closure they lacked any planning or commitment to protecting and promoting the very employees and businesses that were their lifeblood. There were obvious signs in the company over the course of the last six months that the company was in trouble – the change of executive leadership, the lack of completion of funding rounds, the scale back of project development, the closure of units, and the dismissal of employees en mass.

But where was the planning for this eventuality – no matter how hard the company was fighting to avoid it? The creation of a severance pool for employees, the proper notification of members for planning and relocation, the payment of vendor debts, the discontinuation of active solicitation of memberships and forward billing – any of these actions, even if undertaken in isolation, would have demonstrated some accountability to the populations the company claimed to serve. We have to start expecting companies to be accountable – in the food industry and beyond – and ask them to prepare for that in their execution and long-term planning.

4. The numbers have to add up.

There is a general belief amongst a lot of startups, in the food industry and beyond, that creative math is a necessary part of the equation to success. And it is true in a sense – entrepreneurs have to be willing to take risks, spend money, and sometimes push past the normal bounds of +/- to deliver.

Yet in time, if your business lives in brick and mortar, delivers a defined product, or quantifies a service for a customer, then there has to be a budget and the math needs to move from “creative” to “clear.” In time, all of the real math can’t be hidden behind the spreadsheet cells without anyone able to explain it. And in time, if you are going to judge performance, livelihood, commission, and value for real people, employees, and customers, then those metrics have to be real numbers that intelligent people can explain – and explain all the way down.

Pilotworks had a real problem with creative math – with a majority of its units, save one, effectively operating without budgets or transparency of numbers and metrics. With no budgets, units and the central office that attempts to run them, have no foundation for performance, growth metrics, balance of spending, understanding of loss, or ability to account for change either positive or negative.

As a small business owner, we are all placed in a continuous loop of numbers – we need strong numbers to get capital, we need real numbers to grow and secure investment, and we need clear numbers to understand our failures or successes and judge our path forward. Whether large or small, a company with a lack of transparency in understanding, building or upholding clear numbers and budgets amongst its teams is handicapping, if not committing itself to failure.

Transparency, especially financial transparency, is a larger topic that is a pervasive problem in the food and hospitality industry. There are so many buried layers and so much stigma attached to the numbers associated with wages, revenues, and pricing, that the industry acts under-the-table more than it should. Putting those numbers on the table, educating the members of our industry and communities about how to use and operate within these frameworks, and encouraging clear lines of communication amongst companies and employees will help us all to operate better. And hopefully, will help us to avoid failures like the one seen with Pilotworks – whose lack of budgets and numbers will now have a substantial impact on the bottom lines of many smaller companies and makers beyond.

Andrea J. Carbine is an industry advocate, entrepreneur, chef, and consultant working in food for over twenty years. For her work in the kitchen, she was recognized with two James Beard nominations, a Local Hero award, and a Women of Excellence Award for Entrepreneurship. Her work advocating for change in the restaurant industry and food industries at large, has transitioned her into a second career helping establish people, systems, and culture among start-ups and young entrepreneurs.

Note: an earlier version of this piece appeared in Food + Tech Connect.