Joe Fuller: Welcome to the Managing the Future of Work podcast from Harvard Business School. I’m Harvard Business School professor and visiting fellow at the American Enterprise Institute, Joe Fuller. This episode is one of the series of special dispatches on the sweeping effects of Covid-19 on our economy, society, and the future of work. In addition to our regular podcast episodes, we will be bringing you interviews with business leaders, policy makers, and leading scholars on the coronavirus.

Before the emergence of Covid-19, the restaurant business was facing serious challenges. The competitive landscape was undergoing a radical change. Labor was scarce, workforce turnover was high, margins were narrowing. During the pandemic, many restaurants have failed, and still more are on the brink. Restaurant workers have experienced some of the highest levels of unemployment in the economy. As states partially reopen and brace for a possible second wave of the coronavirus, the outlook remains uncertain. John Pepper, CEO of Boston-based fast-casual restaurant chain Boloco, is seeking to beat the odds and build a future for his company. He cofounded the firm in 1997, and after a break, returned to lead it in 2015. Since then, the company has become a Benefit Corporation, integrating its social and environmental goals into its business model. John joins me today to discuss how a company focused on a triple bottom line approaches a crisis like Covid. Welcome to the podcast, John.

John Pepper: Thanks. Thank you. Glad to be here.

Fuller: John, Boloco has a varied history. It’s almost 25 years old. Can you give us a short version of the company’s history and your role in it?

Pepper: It’s hard to do 25 years as a short version, but I’m getting better at it. So there were four of us that cobbled ourselves together, and we opened our first restaurant in February of 1997, again, during my second year in business school. I didn’t realize how hard it was. And I don’t think my partners did, either. But it was grueling work. But the hardest part was we were just fighting for survival. There was no greater purpose. So the thing that hit me about a year into Boloco—and this is the beginning of the path that led me to still be doing this 23 years later—is that basically somebody called out when I was on shift, mopping the floor. I was very, very bad at mopping the floor. It seemed to get dirtier the more I mopped it. And I just started asking questions like, who would do this work? Who would choose to, in their right mind, get paid so little to do this work? And where would it possibly go? Here I was, an owner of the business, a founder. I barely had a sense of the future, let alone those who we brought in to do the work when we weren’t there. And so that led to the purpose and really the mission of Boloco, which is to positively impact the lives and futures of our people. But what I knew was that, as long as I was “stuck in the business,” it became very clear to me that it was much easier to be a consumer of burritos than a purveyor of burritos. I should have just stuck with my passion and gone off. There’s certainly easier ways to make money, if that’s what your goal was. But with this purpose in mind, and looking at the people coming to work for us, and starting to help them learn skills—forcing higher wages and forcing our model to adapt to those higher wages—teaching people English, which is the single best way to A) go get a better job and B) earn more money, starting to really focus in on those things in those early years gave me a sense of purpose that kept me going. Frankly, if I had not done that, I probably would’ve gotten out of the business three years in, as soon as I could have. That’s where my role really was. I was CEO for almost all the time during this 23-year period. We were a private company, family and friends, for about 10 years. We raised private equity money in 2007, and we were private equity owned and controlled for about eight years. That’s a whole story in and of itself. And then I repurchased the business myself in 2015 with the help of one good friend based in Boston from the private equity group. And we’ve been operating almost as a mission-driven—almost like a nonprofit—for the last five years. Not intentionally, it just turned out it was pretty unprofitable. But still a very deep sense of purpose and doing a lot of important work and taking care of a lot of people.

Fuller: John, Boloco is a Benefit Corporation, also known as a B Corp. How do your priorities differ from other businesses, and how does it affect your ability to weather a crisis like this and your management style?

Pepper: When we first heard about what’s called a Certified B Corporation—so there’s a legal entity that’s a Benefit Corp, which we are. We’re a Delaware Benefit Corporation. We’re also a Certified B Corporation, which is the group known as B Lab that certifies companies. When I first heard about them in 2012, I said to myself, “That’s us. We are that.” It took me leaving the company for a couple of years, while it was still owned by the private equity group, and then coming back to actually go out and apply and do the certification. For us, what it mostly is, is honestly, it’s cover for the nontraditional business practices that we choose to execute. So instead of falling back on everything we do that has to, first and foremost, provide and maximize our return to the shareholders, it allows us the freedom and the legal ability, frankly, to take a multi-bottom-line approach to everything we need to do on our business to balance the different requirements. I will say this: For a long time, it seemed like it was a good business strategy. We were going to invest in the community. We were going to invest in the environment, in better practices, and, of course, really invest in people. And we thought, if we really invest in people—if we pay them more, we give them a line of sight to a better future—sales will rise, profits will rise. And for a long time, that’s exactly what happened. And that was great. That’s actually how we raised private equity money, because we were doing well. I will say this: Why does this matter today during the pandemic? Because the question you have to ask yourself is, what do you do when things stop working so well? Do you stay as a B Corporation? Do you still call yourself a Benefit? Do you walk the walk that you did when things were good and you became this company that aspires to a higher purpose? Or do you start backing off of those very things that sounded so great when things were good? I’ve learned a lot about ourselves in the last, really, seven years since we’re no longer the coolest kids in town. There was a time when we were. But because the business wasn’t working as well as it did, it still works, but it just isn’t, it wasn’t on fire. And do we keep doing the things we do? Do we back off? We actually accelerated into them, A) because if not now, when? There’s never a better time to do what’s right for the people who are doing so much hard work. But also, we thought maybe there’s a chance that this will lead to better outcomes. I mean, we all profess that. Do the right thing, do the right thing to your environment, profits will go up. Take care of people, profits will go up. And that is true in many cases, but it’s also not true in many cases. And that’s something that I always make sure people know is, just because you’re doing the right thing, and you’ve got a B Corporation, and it’s a Benefit Corp, doesn’t guarantee success. You could still fail. In fact, you might even fail because of some of those things that you didn’t couple with sound execution and sound operations and amazing team members. Sales have stayed approximately the same. Some of them increased, and some have decreased approximately the same over the last five years on average. And the reason that’s so difficult is because our goal is to actually increase wages and to pay people a livable wage, which we do do today. It’s technically a livable wage. It doesn’t feel that livable to me, to be honest. But what I will say is that, in order to do that, you have to have something to give, you have to have other costs go down. And in addition to sales not going up—so you’ve got a capped situation there—our real estate prices have been going through the roof. I mean, our rents continue to go up. Competition keeps coming in. The hardest part about competition, in addition to sales pressure, is that they will pay higher rents, which means the market rents do go up, in part because they pay people less. They take advantage of the legal right to underpay people, as I always say. Minimum wage—which is getting better by the way—is simply too low. In order to get the points and the certification to become a B Corp, during certification, you have to, your lowest paid person had to be, at least at the time we last did it, 10 percent. Your lowest-paid person, even if it’s just one person, has to be 10 percent above the minimum wage. So in Massachusetts, we actually have reasonably high—relative to other states—minimum wages. So what that means today is, because minimum wage just went up a few months ago, we’ve got about, I think, six people out of 120 making $13.00 an hour, which is the minimum wage. And the average is about $15.50 to $16.00. During Covid we’ve been paying hazard pay, so we’re at around $17.00. But, yeah. So the lowest-paid person has got to be about 10 percent higher than minimum wage. In most companies now, especially in the restaurant business in Massachusetts, most people are just pegged at minimum wage, because it’s become so high, compared to what it was three, four years ago.

Fuller: What level of business have you been able to maintain during the pandemic?

Pepper: It’s been very, very challenging. I remember the day that I felt like the pandemic really hit us. We had a very good year going. We needed to have a good year. We were excited about the year. Our sales were up 7 percent, year over year, which is very strong in the restaurant business. And things dropped off a cliff almost immediately. Like there was a Thursday and a Friday, mid March-ish, and sales dropped. And then the restaurants … We tried to keep the Financial District restaurants open. We tried to keep every restaurant open for as long as we could. We could only keep the Financial District restaurants open for three days. We literally got down to 20 customers on the last day at one of the restaurants. So that was it. They were down 90, 95 percent. More. More than that. And then we started limping along. And the reason we kept restaurants open for as long as we could and others didn’t—and I don’t have all the stories behind others—but we were coming out of a challenging winter. Every winter in New England is tough. So you’re always low on cash. We had no reserves. And this is before the PPP funds were understood. This is before we knew our people would have access to expanded unemployment benefits. So the PPP is, yeah, the funds available for small businesses, which a lot of it is forgivable if you use a certain amount of it on payroll. It also covers partial rent, utilities, and things like that. So PPP, when that came out, that was definitely a nice, thick bandage on what I’ll call a gunshot wound. But I’ll tell you. The thing that really helped us was, I actually thought we were going to have to close in Massachusetts and close possibly for good. I did not see a path to reopening, as things were unfolding in late March. And I shared a video that I put out to our entire database of customers. And they are the ones that suggested we raise money to feed the front line, which is an initiative that we were in the very beginning part of. And that raised, I think it raised $60,000, kept two of our restaurants going almost throughout the entire pandemic, with a 10-day closure period just to restart, focus on safety protocols. But what really made a big difference for us was that was customers from all over the country—and even countries around the world—putting money into Boloco so that we could turn around and feed hospital workers the food. And this is right when that was all beginning. So that felt very innovative at the time. Now it’s a dime a dozen, which is great. The front line is being fed, that is for sure. But sales have continued to be depressed. So we have “the closer you are to the tallest building in a downtown area, the worse it is.” So our three Financial District restaurants continue to be closed. We’ve reopened five others. And as you leave the city, things get better. But the best restaurant we have right now is still down 20 to 25 percent. On average, we’re down about 50 percent on those open restaurants. It’s very challenging.

Fuller: What are the main challenges facing your employee base, and what do you see as their long-term prospects, particularly after the pandemic?

Pepper: Our employees at Boloco aren’t unique in this. Even though they make more money than others, it’s not an amount of money that covers dramatic situations like we’re in today, right? I mean, I think it’s 40 percent of the population can’t handle a surprise bill of $400. And I think everybody has had to figure that one out for the last couple of months. Like, how do we handle surprise bills of all kinds of different dollars? But I think the biggest challenge for all employees in hourly-wage, lower-income positions is the fact that they have no capital. They have no savings, and, therefore, they have no room for error. And once they’re put on their heels—once pressure is applied to their lives, i.e., they lose their job—their only focus really is on survival and how do you pay the bills. And what that means for many of our employees—and this is happening every day in normal times, but especially now—is they’re just fighting for day-to-day survival. And that means that they have lost any chance of having the mindset or time to look forward and really look at this as maybe even an opportunity for training and education, maybe even networking—which most of our employees don’t do a lot of new learning—that would prepare them for the, I think, jobs that are going to be necessary to be ready for in the coming years, pandemic or no pandemic. That’s what worries me most is that, while we try to provide all these different training opportunities for our people in leadership courses—and we’re doing an unconscious bias training for everybody this coming week, as an example—but the problem is, is when you’re really struggling to make ends meet, it’s hard to digest as much. It’s hard to internalize it and put it into practice. You’re just mostly are like, “Why am I doing this? I’ve got to get ahead,” without being able to see that a lot of these things are the way ahead, but it’s a longer path. And a lot of people don’t feel they have the luxury of time. And in many cases, they don’t. I worry about that a lot. Stores that were closed, we definitely had to furlough. And what we did before we furloughed is, we just made sure we were in contact with each individual to find out, “Will you be able to take advantage of this, frankly, incredible opportunity to make, in some cases, more money than we pay through the extra $600, the federal unemployment piece?” And if they couldn’t, for any reason, qualify for that or they got stuck in the paperwork, we started paying them for staying at home. So we’ve had a number of people on payroll, I think, actually until about this week. Last payroll was the last time we paid people who were staying at home. But we made sure that we were absolutely focusing individually on their particular circumstance. Trying not to bucket everybody into, “Hey, it’s fine. You’ve got unemployment. Go and be free, and we’ll talk to you later.” It wasn’t like that. So we’ve brought a lot of people back. We’ve had a few people choose not to come back because of the expanded benefits that they have. But out of 120 people, I think it’s 11 people who have so far chosen not to.

Fuller: John, in addition to Boloco, you’ve started the nonprofit called Worthee. Can you tell us a little about that?

Pepper: During my hiatus period when I left Boloco for two years, between 2013 and 2015, I did a research project for a private equity firm, a different one. And one of the things I came away with: There is no technology that the average worker in a low-wage industry can look at and say, “This technology is my support system. This is my life-support system. My credentials are in here. My voice can be heard through this in a safe, no-fear-of-retribution way. Where is my resume? Well, I don’t even have a resume, most likely, but my track record is going to be put in here, and it won’t depend on where I work. It will be something that I carry with me to advocate for myself to get better jobs, to have a better future.” And how does technology support that? And so that’s what Worthee really is. It’s an effort to amplify the voice of the underserved to rise and thrive in the workplace. But for me, it’s an extension of Boloco. Like I’m addicted to my burritos still—I really am. I eat two of these things a day. It’s problematic—I’m addicted also to talking about Boloco, because that’s what I get asked about. But Worthee, in many ways, is far more important and has far more reach if we actually allow it to reach its own potential. So Worthee begins as an app. It’s an app where you, as a worker … it’s worker focused, people first. It starts and almost ends with them right now. They go in, and they begin to build their profile through a series of very simple questions. They also provide feedback to each other in an anonymous way, but we don’t allow unconstructive feedback to make its way. It’s got to be helpful to other people. It’s meant to help people, not hurt people. But it also provides very detailed feedback to the workplaces where they work in a localized way and allows others, therefore, to see what’s it really like to work here and empowers people to see “What would it be like if I get a job at this place. What’s it actually like?” Because there’s nothing really out there. Glassdoor is very brand focused, but there’s nothing that localizes by workplace. We also view Worthee as a way to allow workers to chime in on—especially right now with reopening procedures—as an example, what are the safety protocols the companies are saying they have in place, and what’s actually happening out there? So we have conversations with even unions right now who don’t have any real technology supporting their efforts to figure out, are companies who commit to certain safety protocols, reopening training, are they actually doing those things? And right now there’s not a great way to figure that stuff out. Worthee allows the workers to be that voice. The biggest barrier is lack of trust. The group that we work with—which is the same group that I’ve worked with shoulder-to-shoulder at Boloco for 23 years—when they join Boloco or they sign onto something like Worthee, they have very little trust that they are not about to be exploited in some way yet again. Right? It’s just, that’s been the track record. And they’re going to get underpaid. They’re going to get screwed in some manner. They don’t know, but they’re pretty sure it’s going to happen, because that’s the norm. And so I think the biggest barrier—and the one that we’re still working on—is Worthee really is working for you. It’s trying to help you capture the best of yourself, start to even see the best attributes of yourself, start to help you advocate for yourself in your current job or in a future job. And it’s all right in your own hands. You control it. Nobody else has access to it if you don’t allow them to. What is shown to the outside world about you is up to you. And that’s the thing. I just don’t think people trust that. They’re like, “How do we know? How can we trust? Who are you?” It’s just a very ... It’s new and it’s difficult and it hasn’t existed yet in this particular form. We have 5,000 members since we launched about a year ago. I would tell you that I wish that was 100,000. I mean, you always wonder, have we built something that’s a rocket ship, and everybody’s going to love it? And the answer is, well, 5,000 people signed on. And of those, I can’t imagine more than 50 percent really like it, let alone love it, right? And I do think that it’s such an early product. I always equate it to, if you were to build a burrito, and you only got to the tortilla and the rice, but the beans were sort of undercooked, that’s what Worthee is today versus the vision, right? It’s just, it’s not even half-baked. It’s a beta product. So I don’t expect people to be jumping all over it. That being said, in the next two months, we will be fully baked within our capabilities of the angel round that we raised last year. And so we better find some traction that is compelling value to the user, which is the worker. If the workers don’t find this to be of value to them, Worthee won’t work. But something else will. And I’m looking for those companies, too, because you can bet I’m going to try to invest in them if I can’t start them myself.

Fuller: John, we’ve all been reading about all the various challenges in reopening restaurant businesses, food service businesses, as the pandemic unfolds. You’ve been working with various agencies and I’m sure other restaurateurs to get to a new stage of operation, get through this reopening period. How has that been?

Pepper: I’ll tell you what, this needs to not be political, right? It’s like a third rail—to either support or be against what the government has done—because it sort of puts you on one side or the other of the aisle. But I would say that related to businesses like ours, the response has been kind of miraculous in a way. The Paycheck Protection Program, the PPP, it really isn’t adequate, but at the same time, who would have expected the government to come in—especially under the current administration—and be saving businesses and be paying the workers, who are laid off, all the money? I often joke Bernie Sanders dropped out because he’s like, “My work is done. They’ve done everything I thought should happen.” But I think that it’s been pretty amazing in some ways to see, despite all the grumbling you read about online and in the news cycle, that they were able to pull it together and distribute and actually execute the kind of money that would at least give people breathing room, at least give business owners breathing room, to sort of figure out what could next steps be. How might I survive this if things pick up again? Because we’ve got this gap period of multiple months, where there is no survival available to most of us. And the PPP actually saved so many businesses that I don’t want to try quantify. But it saved us. We would be done in Massachusetts. And frankly, again, I wrote a blog post that actually was widely read, which was surprising, but it was on the adjustments to the PPP program that needed to be made. And one of the big ones was, if it’s eight weeks, we’re dead. It’ll end on the eighth week, the last day of the eighth week, and that’s it. And it would have been. Our D-day was last week, and they extended it three days prior to that. And our last day of business would have been this past Sunday, had they not extended the useful period of time that you could expend the PPP monies. So, I mean, they didn’t land this plane on the numbers, but it’s been pretty good.

Fuller: John, how have you been thinking about balancing long-term considerations with the need to react to developments quickly in this pandemic?

Pepper: Well, first of all, you have to react, right? You have to evaluate what’s happening every day, and you’ve got to figure out what you’re going to do the next day. I like that a lot of us—who aren’t always in reactive mode, aren’t in a survival one-day-at-a-time mode—are joining the legions of people who live that way in normal times, because I think it gives a little bit of perspective, right? So, yeah, we’re reacting, and we have to. And maybe it gives us a glimpse as to the kinds of things that we’re ... the lives that we’re allowing people to lead, who we employ, when we don’t take care of them well enough. But that being said, this is also an opportunity to step back at different times and try to be proactive and figure out where will things go and what could we do differently today that might help us survive—and maybe even thrive and change the equation. So there’s a couple of things, right? I mean, you’re reading all about delivery and take-out for restaurants. And so that’s become kind of a standard innovation that’s not even innovative, it’s a reaction at this point. It seems like innovation. But we’re doing all that stuff. You’ve got to have different safety protocols. I wouldn’t call that innovation. That’s also sort of reactive, but within that you can find proactive measures. The thing that we’re doing a little bit differently is, we decided we’ve got 120 people on our team, and we decided we better hire 120 sales and marketing people to go along with those 120 people. And that comes in the form of training those people to become those sales and marketing people. How can we, instead of having two people doing all the messaging and all the communicating for our brand, how can we ever compete with all the larger brands? And so what we’ve turned to during this time is saying, “Let’s train everybody on how to do social media, on how to do messaging—not corporate messaging, but authentic messaging. Their own.” So if you go and look up Boloco right now, there’s TikTok accounts going, people are trying everything. A lot of them are in Spanish. And I’ve had some complaints from some of my older investors like, “This doesn’t seem professional.” And I was like, “No, it’s personal, and it’s authentic. And this is our strategy right now. This is all we got.” I’ll tell you: communications, weekly all-company calls? We’ve never done that. And that’s what’s happening right now. And then the final thing I’ll say—which it’s in reaction, but I guess it’s ... I don’t want to say it’s taking advantage of the situation, but we have to take advantage of the situation if we’re going to actually ever accomplish anything close to our mission. And so that goes under the “landlord negotiation” category. If I just go and I negotiate with landlords for our own business survival, that’s not enough. I don’t want to survive, have the business struggle, and at the same time, have all our people still struggling. I don’t mind if the business struggles, based on my negotiation, but I don’t want any longer our people to have to struggle at the same time. So our goal right now is to get our average up to $17 an hour. And part of that comes through pretty aggressive negotiations with the landlords. They’ve been enjoying nosebleed way-above-actual market. I know the market is ... I think it’s time for them to participate in our efforts to do the right thing for the people that are employed in their buildings every day. And so that’s what I’m really working on, is making sure that my negotiations don’t just help the business survive, but help our people thrive. We’ve gotten some really important considerations from some of our landlords, and it helps that we’ve been around a long time.

Fuller: John, we’re recording this during a period of some uproar in the country, and certainly a lot of issues surrounding economic equality and economic justice. I was intrigued by a blog post you made about Black Lives Matter. You said, in part, “If we can show up to support the front line workers for the Covid-19 crisis, a most invisible disease, we sure as hell can do the same for racism, that other mostly invisible disease that’s plagued our country since its founding.” Tell me about your thoughts behind that and how you’re viewing this sudden turmoil in the country and these profound questions that are being raised, both as someone who works to enhance the economic prospects of people of lower income and also for your own workforce at Boloco.

Pepper: Thanks, Joe. Yeah, that’s a good question. We’re all having to take inventory—and I say “all” knowing that not everybody is doing that—but take inventory of our own complicity in what’s happening and what’s being said. And I think the most important thing has been, can we listen differently than we have in the past? Can we look at things with a different lens? And can we see things that haven’t been visible to many of us, because we simply haven’t put in the consistent effort over time? Covid-19 is obviously something that many, many of us don’t see. Many of us, we read about it. And then, in many cases, it’s just not about us. It’s not in our neighborhood. It’s not affecting a lot of people we know. We know that could change, but we don’t have any hard evidence. And so a lot of actions stay the same. And I think racism has a lot of parallels there. And so what we’re trying to do at Boloco—but also I think a lot of people I know personally, and I know myself personally—we’re just trying to stay on it. How do we not let the fires that were burning two weeks ago, three weeks ago, how do we not let those flames disappear? And then also have the desire and the sense of urgency to see things differently and to see our own complicity in how we’ve gotten to where we are. And I just equate it to … one of the first things that I heard a piece of advice from somebody recently was, can you admit that you are racist? Can you say “I’m racist” as a beginning point? Not as a, “Okay, mea culpa, now I’m free.” But can you admit that and then start the real work with that new lens and that new sort of sense of reality? Because I think it sits in all of us to some extent, maybe all of us.

Fuller: One thing that I think is very much on people’s minds, certainly some of my colleagues and friends, is how do you allow the topic to be discussable? How do you engage in a discussion with your coworkers, with your neighbors, with your friends in a way that’s both comfortable and respectful and doesn’t cause you to fall into a trap of somehow misstating your feelings or attitudes? Do you have any observations on that?

Pepper: Like many, we’ve struggled with this. In our case, we got lucky. We had someone who had had enough on our team—and this is a Boloco employee up in Lynnfield, Massachusetts. She’d had enough. And she went public on Instagram about Boloco’s lack of ability to educate customers on the way that customers were treating Black employees and brown employees at Boloco. And that led to an intervention, which amazingly, she thought she was going to be fired for having spoken up. And it turned into a very powerful set of conversations. We’ve even taken some action. But it’s hard. And a lot of listening has to take place, a lot of patience and trying to figure out, can you try your best to put yourself in the shoes of others as they speak, and as they share their concerns, and as they ask you to take action that is very uncomfortable? Boloco being asked to educate customers is something that a lot of companies—and even I was scratching my head at first saying, how can we take on such a responsibility? But I think we’ve taken a footstep in that direction in a way that we hope is on brand, but also very important and really made this person’s voice feel heard. That’s how we’re taking it one step at a time.

Fuller: John, thanks for joining us on this Covid dispatch for the Managing the Future of Work podcast.

Pepper: Thanks, Joe.

Fuller: Thank you for listening to this special episode of the Managing the Future of Work podcast. To find out more about our project on the future of work and for more information on the coronavirus’s impact, visit our website at hbs.edu/managing-the-future-of-work and sign up for our newsletter.