Cafe Gratitude Closes Under Employee Lawsuits

On Tuesday, SFist reported that Cafe Gratitude -- a small, beloved local restaurant chain that serves only organic vegan fare -- will be closing all of its Northern California locations due to "aggressive lawsuits" brought about by former and current employees. The closure will affect all eight of its Northern California outposts, including Gracias Madre, the company's vegan Mexican restaurant in the Mission.

According to SFGate, one of the lawsuits targets allegedly illegal tip pooling, while the other, brought forth by a former bookkeeper, claims the company illegally paid the plaintiff a salary wage instead of hourly to avoid paying him overtime, and he is seeking damages.

In a letter posted to the company's Facebook account, Cafe Gratitude denied any wrongdoing and announced that the company is being forced to close beneath the financial weight of the suits:

"Although we believe that we have done nothing wrong and our policies are completely legal, it will cost us too much money to defend them in court. [...] We were happy to tolerate low margins and sustain ourselves on the transformation and personal growth of our people, while providing local organic vegan food to our community in an atmosphere of unconditional love. That commitment is under attack and we are not able to weather this storm."

However, on Tuesday afternoon, SFGate reported that "the lawsuit number is under $200,000 and this is not a class-action suit (yet)," suggesting that the company should not need to close all locations to "weather this storm."

"These are not huge cases," said Stephen Sommers, the attorney representing the wage and hour claims, to SFGate. "There's no reason, financially, for them to close eight locations. They are not closing because of these lawsuits. There's something else."

But Cafe Gratitude owners insist that the suits are both devastating and debilitating.

"For seven-and-a-half years we've been willing to work and tolerate low margins because our real wealth was the transformation of our people," said co-owner Terces Engelhart to SFGate. "And now that's being threatened by the lawsuits. October was the best month we ever had in the history of business."

In recent years, Cafe Gratitude has suffered from several tense encounters with employees. In 2009, East Bay Express published an expose on the company's tight relationship with the Landmark Forum self-help philosophy, and claimed that the company forced the philosophy upon employees and assigned mandatory Landmark seminars, compromising the personal beliefs of employees.

Adding to the already strained internal relationship, Vegansaurus reported that many employees, including those high up in the company, did not know about the closure until reading about it on SFist on Tuesday morning.

The restaurants will remain open for several months while the details are settled. And while the alleged internal struggles are shady at best, we are already mourning our tahini-spiked sea veggies and hazelnut-fig-date smoothies. Sigh.

Read the entire letter about the closures by owners Matthew and Terces Engelhart below:

With great sadness we are announcing the upcoming closing/sale of all Northern California Cafe Gratitudes.

A series of aggressive lawsuits has brought us to this unfortunate choice. Although we believe that we have done nothing wrong and our policies are completely legal, it will cost us too much money to defend them in court. Despite telling the attorneys that brought the lawsuits that the current structure and resources of Cafe Gratitude are insufficient to sustain and defend our community, they have refused to give up and are forcing us to close.

We appreciate the loyalty of our employees and customers over these past 8 years and are grateful for having had the opportunity to serve each of you. We were happy to tolerate low margins and sustain ourselves on the transformation and personal growth of our people, while providing local organic vegan food to our community in an atmosphere of unconditional love. That commitment is under attack and we are not able to weather this storm.

This process will take a few months so please keep coming in and let's celebrate our 8 years of success together, we are grateful for you!

We have come to realize that it isn’t how we serve that is most important but rather that we serve.

Our mission will survive this, as love cannot be threatened.

CORRECTION: An earlier version of this article stated that the suits were filed by former employees, and that the bookkeeper is female. The bookkeeper is male and is currently working for Cafe Gratitude.

UPDATE: Cafe Gratitude co-owner Terces Engelhart posted a call to help on the company's Facebook page. In the post, Engelhart asked patrons to continue visiting the restaurant locations, purchase retail items and join the company workshops if they wish to show support. Engelhart also called on those who had attended workshops to share their experiences.

"If you have participated in any of our workshops, please take what you learned, that had value to you, and give it away!" she wrote.

Comments

[RealMarriage]

04:03 PM on 03/10/2012

It's unfortunate that the stores are being forced to close, and that so many people are ignorant as to the healing/helpful concept.

Running an organic food operation is expensive. Doing business in NorCal is expensive. Trying to give people a good product and your employees the support to be their best selves shouldn't be so expensive that you go broke through litigation.

I'm an attorney, and anyone who thinks litigation can't kill a small business knows nothing about the law. A simple defense - even for silly claims like the ones that are being presented against Cafe Gratitude - is expensive. You go can through 2-3 years of hearing, never go trial and settle with a bill in the the hundreds of thousands. Law firms were set up for Oligarchies, not small business men.

And the Landmark Forum is a "course" on how to live without all the crap of your past affecting decisions. If I can run a background check or check your pee, I can ask you to take the course as a pre-requirement. Those who consider it a cult probably have a problem ascribing to anything.

The Engleharts are fantastic people who have overcome great past adversities and who take an active daily interest in their employees. It's unfortunate that some self-entitled employees and band wagoneers have punished another good intention.

[ece421]

03:57 PM on 01/08/2012

I eat a lot of raw organic vegan dishes I prepare from scratch at home. When I had just moved to the area and had heard such great things about this restaurant that I just had to try it out for myself. First thing I was struck by when I walked in the restaurant was how cozy and casual it was. I ordered a soup, sandwich, salad, and a smoothie. It was over $50 for the bill. It was obvious that the employees were unhappy, and they managers seemed to be a part of some cult-like phenomena. I love vegan organic food but food is not a religion, food is FOOD.

This restaurant is poorly managed and over-priced. I know because I've made, myself, nearly all the dishes on their menu in the past and they are not difficult to prepare and the total cost for the ingredients is less than half. A sandwich whether it is vegan organic or not should not cost more than $10. The target market that Cafe Gratitude was attracting was not a clientele with deep pockets.

If they had stuck to the casual atmosphere offering organic vegan food at a reasonable price, they would have been a lot more successful. The restaurant closures are about more than just the lawsuits - it's about poor business management. Feel good self entitled hippies who were in over their heads and failed to plan. Happens all the time.

[Andre Darling]

04:36 PM on 12/19/2011

I have participated in different Landmark courses and Landmark is actually vocal against people being pressured by their employer to participate - they give people their money back and say they shouldn’t do the course if they don’t want to. I have seen this first hand. As for personal beliefs, there is absolutely nothing about Landmark programs that could compromise that. Give me a break. In all the seminars they make it clear you should use what you like and drop what you don’t. They explicitly tell everyone the courses are not about beliefs but rather about ideas to consider and only use if they work for you. Anyone who seriously talks about coercion or compromised personal beliefs cannot possibly have any first-hand experience of Landmark.

[jlandd]

09:37 PM on 12/31/2011

I took the Forum (same thing, before it resurfaced Landmark) and have first hand experience of having attended seminars. As far as what you are describing here they definitely talked that talk and did not walk that walk. I found it to consistently contradict what you describe and consider it to have been quite a hypocritical experience.

[Andre Darling]

04:26 PM on 01/18/2012

If you are did it when you said, that was at least 20 years ago. I don't think it is an apples to apples comparison

[Gadgetman]

04:10 PM on 12/13/2011

I don't care how "enlightened" they owners think they are. Forcing others to take culty Landmark trainings, and even pay for some of it out of their own pockets is culty and invasive. It isn't any different than forcing employees to believe what the owners believe - i.e. "be a good Christian if you want to work here" or "you must become a Scientologist to work here."

[thegrrrr8est]

03:52 PM on 04/28/2012

When the entire basis of a business is the spiritual beliefs of its owners, I hardly think it unreasonable that they would want their employees to embrace and reflect that belief system. I'd feel the same if it were a Baptist shoe store or a Muslim taco stand.

I guess this is just proof that "no good deed goes unpunished".

[CW DESIGNS]

12:55 PM on 12/13/2011

Big deal. I bet the restaurants are just being sold to someone else hence the words "closing/sale" The current owners are just cashing out. November and December will be their biggest months with all this hype circulating. I have been meaning to try Gracia's Madre for some time now. Now, maybe I will.

[elijahdaniel]

03:46 PM on 12/08/2011

Finally did the research on California tip pooling. Just type it into google browser, "Tip pooling laws in California." It is 100% legal. As someone who moved from server to manager and at one point even delivered tips the Central Kitchen where we shared with the people who prepped ALL the food from scratch, I can attest (yes, its just my word) to all tip sharing being completely legal. It was never shared with managers or salary paid employees.

[jlandd]

01:31 PM on 12/07/2011

What a laugher. Do the Cafe Gratitude workers realize that while pleading the finances of the suits would break them the Engleharts had already hired Littler Mendelssohn, which is one of THE most aggressive law firms in the U.S., specializing in such labor cases? They don't take cases of less than twenty times the $200k figure, which is no figure anyway, just what is asked for. If it is baseless, as they claim, the judge throws it out and they lose nothing, don't even need a lawyer for that, though obviously a pro bono Landmark supporter would be cheaper than a jug of frying oil. Clearly they would NOT lose the case if it went to court, judging by their statements and their legal team. So why sell everything off? Hmmmmm?

Also, according to the plaintiffs' lawyer Sommers, "We should clarify that neither the older claims regarding employees forced to take Landmark Forum seminars, nor any rumored ADA lawsuits, are a factor currently. And the primary beef from employees has to do not just with tip pooling, but with having to financially support a remote kitchen operation, and covering any daily losses from the restaurant's take. Also, employees were allegedly given the choice to "either share your tips with managers, or lose your health insurance."
I wish I could run my business by my own rules and thumb my nose at the law, but alas, no can do.

[elijahdaniel]

03:41 PM on 12/08/2011

Your last comment is completely untrue. Tips were never shared with managers. And our health insurance was never at risk, because it was money that came from customers. At the bottom of every bill it is printed that a percentage of their bill was going to the employees health insurance. I really wish people would stop saying whatever they felt like making up about this company. These rumors are unfounded. Thanks, a former two and a half year employee.

[jlandd]

10:47 PM on 12/09/2011

elijahdaniel, I was only quoting the official statement from the lawyer. I have no knowledge of the Cafe inner workings and don't pretend to. But this only makes my point: if it's so baseless and can so easily be proven false, why are they claiming to be so victimized by "aggressive" legal tactics, because they are clearly the ones taking the usually aggressive (under the guise of defensive) action. I'm willing to assume every claim against them is completely false, which is what they are stating. I am not willing to accept that their act of selling all of the restaurants is due to the hardship of these two cases. (Littler Mendelssoh­n (their legal team) is like 1,000 Goliaths to Kumin Sommers (plaintiffs) one David! but that's another story).

I don't doubt your sincerity and appreciate it. But the Engleharts are clearly misrepresenting the cases' scenario with regard to the Cafes destiny, and it doesn't speak well to other aspects of their enterprise.

[random citizen]

09:07 PM on 12/20/2011

You are saying the owners are being represented by a firm that does not take cases worth less than four million dollars. While that may be true, as a generalization, they may make exceptions. It is also possible that they have taken the case pro bono, or at a discounted rate. Even attorneys can be grateful from time to time.

[japansa]

04:49 PM on 12/05/2011

I've enjoyed dining at the San Rafael, Berkeley, and Healdsburg Cafe Gratitude locations. I chose to accept the parts of the business that were positive (the beautiful, healthy food, and the very unique people who worked there) and set aside those things that I did not quite feel comfortable about (being asked kind of cult-ish philosophical questions of the day, or paying dearly for the food). It is a loss to see those locations go. Every time I entered Cafe Gratitude, I couldn't help but smile. I always knew I had a great place to eat the healthiest food possible while traveling. It did my heart and soul good to be in a place that was the antithesis of the politically and spiritually conservative/oppressive region of California that I call home. I appreciated the hard work of so many people who helped to bring the food to me. Experiencing wonderful raw/vegan food at Cafe Gratitude, and learning more about creating this kind of food for myself and my family, is something I will remember with gratitude. Perhaps there will be entrepreneurs who have the means to continue the legacy in the closing locations.

[The Frisco Ninja]

03:50 PM on 12/14/2011

You're paying dearly for the food only if you're comparing the prices to McDonald's value meals. And the cultic questions are hardly that at all, they were kind of fun and possibly thought-provoking, but never pushed an agenda. It's a great restaurant and about as affordable as they come.

[Michelle Franck]

05:47 AM on 12/23/2011

Ummm having just paid $15 for a salad that amounted to kale, carrots, pea sprouts, with tahini I did feel it was severely over-priced. Not all dishes, but certainly that one!

[Erik Henderson]

01:25 AM on 12/05/2011

Been out of the business for many years. Eight restaurants closing over a 200k bill is silly. At least is would have been 20 years ago.

[Sylvie Nalezny]

03:55 PM on 12/02/2011

I'm pretty shocked by this news...it seemed they were doing so well. Interesting regarding their link to Landmark. I've had friends attend those seminars and love them. I get how it can feel a little "culty" though.

[thegrrrr8est]

03:55 PM on 04/28/2012

I agree. It can feel a little culty. But, then again, so can the Catholic church or many Fortune 500 corporations that require cheerleading, "team building" and other kinds of "growth" exercises.

[Ffffaaa]

01:34 PM on 12/02/2011

nobody on here is mentioning that they are closing these businesses because they want to keep the money and run ! they dont care about you employees sorry to say it but i have worked for different businesses in the restaurant industry for years i am a classically trained chef , restaurants , bars are hit with these lawsuits all the time and like the litigator said there is no reason to close alllll the locations because of one lawsuit that isnt even class action?! come on have you people ever owned a business? 200k is nothing , its even less when you talk lawsuits , if you won a 200k settlemnt from me right now id take you to court two more times have that dropped to aroudn 40k , are you workers there so impressed with your work conditions that you wont acknowledge what they did was and is illegal ? anyone who has taken any national restaurant association course knows what they did is illegal and saves money until your hit with a lawsuit , when the lawsuit comes you can fight it and pay em off ,or you can take the money and run !!!

[brux]

09:02 PM on 12/02/2011

i don't know the people or the restaurant, but these lawsuits take time and money and spirit to fight, and 200 is a lot of money to a small business, plus once one suit wins then every other employee will be suing or threatening to sue. i don't like to see new healthy restaurants close or be driven out of business, but i am sure they will just start up again under a different name so they can do it their own way. people ought to be able to do that. a small business is for the vision and dreams of the owner. if your opinons are not appreciated or you do not like it, do start your own, no need to destroy someone else's dream.

[jlandd]

01:45 AM on 12/28/2011

brux, the $200k figure doesn't mean they have to pony up $200k, and it's crazy that this is being cited as any reason for anything. First, if they are NOT guilty of what the plaintiffs are serving them with, they pay zero except for legal cost. Second, I've been around many legal labor lawsuits over the water cooler, and the first figure is thrown down and then it is expected to be responded to, or countered, or counter offered to, or attempted to settle from. It is incredulous that this suit would have the Engleharts claiming to be the victim of aggression in two baseless cases and they choose to sell off rather than prove they are innocent, which would make them heroic to the little guy and make the 200k fantasy disappear like a puff of smoke. I have never been aware of a labor case where the defendant was so innocent and acted so guilty in their response to the case. Lawsuits take time and money? Sure. But that's not a defense, that's an excuse. They did not cheap out when getting a Goliath of labor firms rather than a local affordable firm. They have the means. There is no financial threat to them here. They are hardly a small business owner. They are playing the system and hiding under rocks. That's OK. That's how they want to play it. But only a fool would take them as the poor, poor victim here.

[elijahdaniel]

03:22 PM on 12/08/2011

There's no pile of money sitting somewhere, sweety. Cafe Gratitude has one of the highest costs in food production in existence. Everything is bought whole, and organic. The central kitchen doesnt even own a can opener. So think of one Kitchen producing everything from scratch for 8 locations, and Paying its 200+ employees a living wage. There's no extra money laying around, trust me.

[jlandd]

01:52 AM on 12/28/2011

The owners are hardly barely breaking even, even if the cafes themselves are modest in the ways you say. "There's no extra money laying around, trust me"? There's plenty in their pockets, trust me. You don't fold from this hand unless you have something to hide. They're merely bad bluffers. I feel sorry that you would believe the Englehart's lines but that's your business. But it's very misguided faith, IMO, and I'm not talking about restaurants or organic food prices.

[JesslynC]

01:05 PM on 12/02/2011

I'm a regular at the San Rafael location and will be sad to see them close. Their service is always upbeat, albeit sometimes hokey but I still enjoy the experience. Most (not all) of the food I love - just like with any other restaurant. And yes the prices are a bit whack. The price of an entree seems fair enough or I can always order the Grateful Bowl and pay what I want, but why is a lemonade $8? And a milkshake $10? I know organic food is more expensive, but don't they own their own farm? Shouldn't that bring the cost down?
As for the lawsuits bringing down the whole company, I think there is something we're not being told and I don't claim to know what it is. If they can settle for $200k why don't they just sell one location and stay open?

Cafe Gratitude in LA does not use the same tip pooling methods. My guess is because when other people invested in that business, they didn't want to break the law. I think the back of the house SHOULD get paid more, but that is the responsibility of the employers.

In theory, their idea of Sacred Commerce is a good one, but it can't supersede the law on its altruistic ethics. I wish they'd admit they made a mistake (legally), clean it up and stay open. It's sad to see people loose their jobs and I'll miss my regular order hearing, "I Am Cool."

[Trompe loeil]

02:05 PM on 12/02/2011

When the owners choose to close down eight restaurants in response to a $200,000 lawsuit, something doesn't add up. If they feel that they are in the right and can prove it, the suit will be dismissed before it ever comes to trial. And since no attorney would take the suit unless there was a good chance it would win, it seems likely that there more going on here than meets the eye.

My guess is that the Engleharts have been advised by their attorney that their tip sharing practices are in violation of the law and in addition to the lawsuit they will be fined by the state. The kind of bad rep they will get if what's alleged turns out to be true will be especially hard for them to live down.

Remember too that they are accused of not providing proper breaks, that the law requires and that the bookkeeper is suing as well, also for wage violations. In his case, they put him on salary in order to avoid paying him overtime. another big no-no.

[thegrrrr8est]

03:57 PM on 04/28/2012

Or, maybe they just realize that they are casting pearls before swine and don't want to waste any of their life energy on frivolous law suits.

[Anthony J Lee]

11:12 AM on 12/02/2011

The Solution is found in Core Values

What we have here is a failure to understand what each party is truly committed to. When Mr. Sommers states "the lawsuit number is under "$200,000", it indicates that he doesn’t understand how committed Matthew and Terces are to their principles of leadership and community. The community of Cafe Gratitude employees voted to implement Tip Pooling, and the Engelharts are standing in full support of this decision. Settling the lawsuit comes at a cost much greater than $200,000, because you are also asking them to withdraw their support of a decision made by their community of employees, and to abandon their principals and core values.
I do not believe that any of the parties are committed to closing Cafe Gratitude. Ms. Stevens, I’d invite you to share with the Cafe Gratitude community and with the Engelharts, exactly what you are committed to, and allow them to show their support for you. Mr. Sommers, I’d invite you to “craft a solution” that allows both your client and the Cafe Gratitude community to thrive, even if that solution does not come in the form of a legal settlement. Terces and Matthew, I would invite you to continue your love and support for your employees and customers by staying open, literally and figuratively, so that a truly imaginative, inspirational, and collaborative solution can emerge from this crisis.

http://www.facebook.com/note.php?saved&¬e_id=10150388366445677#!/note.php?note_id=10150388366445677

[Trompe loeil]

12:38 PM on 12/02/2011

The Englehearts engaged in illegal wage practices, designed to save them money, period.

No matter how inspirational, they messed with their employees and denied them the money that they were due. BTW, the bookkeeper is also suing for wage violations, as well.

[Trompe loeil]

12:45 PM on 12/02/2011

BTW, are you aware that it is alleged that in one instance, the management at CG took 80% of the plaintiff's tips?

She alleges that in one instance she made $200 in tips and that she was only allowed to keep $40.00. Do you think that's fair?

[Macaniff]

02:49 PM on 12/02/2011

The former suburban kids who are doing all of the this complaining about fairness, are not likely giving much though to the cooks, busboys and dishwashers at other restaurants who ride a tiny BMX bike along a busy highway with no shoulder to and from an apartment they share with 7 other people. Tip pooling is a novel and i say morally progressive approach (that was voted on and chosen by the employees at Cafe Gratitude). The selfishness and narcism of many of these hating comments is shocking and disgusting.

[brux]

09:09 PM on 12/02/2011

Tips are not fair. The whole idea of tips are screwed up, and I would rather go to restaurants where I did not have to leave a tip. If I do .. well, I guess I am just not smart enough to know the fair thing to do. The people doing the waiting are visible and do work, but so do the people in the kitchen and dishwashers etc. Why should they not get something. I also think the way the government calculates taxes on waiters and other people by asuming that they get so much and forcing them to pay taxes on what is surely going to be an incorrect amount, either too much or not enough, it is wrong.

If the employees took a vote and one employee is not happy with it, they should have quit, the law in this case I think is wrong or overbearing and interfering ... but hey, what do I know, it's just my opinion.

[zombywulf]

03:34 AM on 12/02/2011

From all the other posts that the employees have loved these places out of business

[krowe29]

11:13 PM on 12/01/2011

i find it amazing that someone who works in a this type of buisness expects a half hour break for a six hour shift. i have been employed in many different types of bars and restaurants for the past nineteen years, and it is practically unheard of to ever sit down mid-shift for thirty full minutes. also, in my experience, pooling tips happens to work extremely well in the right environment. it promotes a sense of camaraderie amongst staff, which as a result makes the guests feel more at home. too bad about this place. it sounds as though it will be missed by the communtity.

[Trompe loeil]

12:05 PM on 12/02/2011

It's about whether the restaurant owners filled the law. California mandates that tips not be shared with employees who do not have contact with the customers, ie. cooks and dishwashers but in one instance the employers "shared" 80% of her tips!

As to breaks, same thing. The state mandates a certain number of breaks in certain time frames. According to the suit, the owners broke the law on numerous occasions.

[brux]

09:15 PM on 12/02/2011

>> California mandates that tips not be shared with employees

I don't care.

If I go to a place where the food is really good, but the service
is blah ... I leave a tip for the food. Of if it is a really spectacular
location I will leave a good tip, if I had a really good time, or am
in a good mood ... whatever. The point is that the tip is not just
for the person who I interact with ... if it is, that should be stated
in a written note in every restaurant ... I never knew it.

I don't care if the waiter themselves does not get any money.

I sympathize with waiters for their work, dealing with the public,
and having to pay taxes on money they might not even have
made ... and in this case I think the law is wrong, and if the
restaurant workers voted to pool tips, then anyone who
disagreed with that should have left.

I do agree with the bookkeeper's complaint, being put on
salary ... if it was unfair and a substantially lower salary
for the time and work she was doing to save money was
not right. On the other hand the restaurant owners have
the right to get a new bookkeeper any time they want, so
... we do not really know what went on there, do we?

[Barbara Saunders]

09:15 PM on 12/11/2011

The restaurant where I worked, a Pizzeria Uno franchise in San Francisco, carefully enforced breaks. As I remember, managers checked several times per shift to see who had had breaks and who had not.