McMurphy's Grill—It's Successful As a Social Program, It Struggles As a Business

April 01, 2005
By  Linda D Fischer
Waiter Don Shields takes lunch orders at McMurphy's Grill in downtown St. Louis. Shown are, from left: Kristina Alnajjar of Spokane, Wash.; Nunzio Lama, restaurant manager; and Maggie Brown, also of Spokane. (Photo by Dennis Caldwell)

Each weekday around noon, customers come to McMurphy's Grill in downtown St. Louis to enjoy lunch—a bowl of Irish stew, a corned beef sandwich or other flavorful dishes. Waiters and waitresses hustle to get the crowd fed and back to work in a reasonable amount of time. From all appearances, McMurphy's is a typical cozy eatery.

The truth is, McMurphy's is anything but typical. The restaurant is a job-training program run by St. Patrick Center, a nonprofit provider of services for the homeless or those at risk of becoming homeless. The waiters and waitresses are homeless, as are the cooks and busboys. They are trying to get back on their feet by working for minimum wage while learning the general skills needed for restaurant employment.

One of the waiters, Don Shields, has been in training at McMurphy's for eight months now. A big smile crosses his face as he describes his work there. "Sometimes it gets hectic," he says. "But I love it!"

As nonprofit organizations search for ways to raise money—other than through the traditional grants, donations and public subsidies that sometimes come and sometimes don't—many are turning to social enterprises. And for many, it's a venture into uncharted waters: the world of business.

According to the Social Enterprise Alliance, a social enterprise is any earned-income business or strategy undertaken by a nonprofit to generate revenue in support of its charitable mission. Earned income consists of payments received in exchange for a product, service or privilege.

Greg Vogelweid, chief operating officer of St. Patrick Center, says nonprofit organizations wanting to start a social enterprise need to think like a business rather than a nonprofit.

"The first step in setting up a social entrepreneurship venture is to write a business plan," Vogelweid says. "You also need a finance person who knows how to run a business.

"Then you have to decide whether you want a nonprofit, mission-related program that makes money versus a for-profit enterprise that just makes money for the nonprofit. They are very different things," he says.

McMurphy's Grill is the former. Well, not quite. After 15 years in business, it is not making money.

"We run this as a business, just not a very profitable one," Vogelweid says.

At this point, funding for the restaurant generally comes from three sources: grants, the public and government contracts.

One of the biggest challenges to making the restaurant profitable is the mission of the program. The very nature of it conflicts with good business models for restaurants. For example, once an employee is trained, he or she is gently pushed out the door and into a new job, and an untrained worker comes on board. Hardly a smart business practice.

"We don't want them to be comfortable. We want them to move on and get a better job," Vogelweid says.

Another disadvantage is that, in deference to many of its workers who are alcoholics, McMurphy's does not push the sale of alcoholic beverages. This is one factor that keeps the restaurant from making a profit, Vogelweid says.

The restaurant also pays three full-time employees to run the program: a chef, a jobs coach and a manager.

The upside is that last year business increased 14 percent over the previous year. And, despite its lack of financial success, the restaurant remains true to its mission of getting the homeless job training, jobs and housing, Vogelweid says. At any one time, 11 homeless people are in training. About 50 find jobs each year in local restaurants. Follow-up surveys show that, of those who have completed the program and been placed in restaurants, 60 percent to 70 percent still have their jobs after a year.

In addition, McMurphy's Grill is an excellent public relations tool for St. Patrick Center, Vogelweid says.

As for the future, his vision is for the restaurant to become a profitable, full-service restaurant that is open for lunch and dinner and on weekends.

Bridges is a regular review of regional community and economic development issues. Views expressed are not necessarily those of the St. Louis Fed or Federal Reserve System.

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