Updated October 17, 2019 09:55:25

Aussie farmers, tired of seeing profits go to supermarkets, are watching a new US business model very closely.

Key points:

  • US Founding Farmers restaurants were created to cut out supermarkets to give more money to farmers and cheaper prices for customers
  • Founders say it’s designed to ‘disrupt the system’ rewarding the farmer rather than ‘the whole industry in between’
  • Farming lobby groups in Australia are keeping a close eye the concept

The Founding Farmers chain of seven restaurants across Washington DC is collectively owned by 50,000 members of the North Dakota Farmers’ Union.

Its aim is to pay farmers more money for their produce by stripping out the suppliers in the middle and buying direct from small growers and large cooperatives.

It’s a model that’s unique in America and yet to be tried in Australia.

New South Wales Farmers’ Federation president James Jackson says there could be an appetite for it locally, borne out of the same universal concerns.

“I think farmers are frustrated about some of the big gatekeepers [Australia’s big two supermarkets] driving poverty back through the supply chain,” Mr Jackson said.

“The natural reaction to that is to get some disruption going and circumvent those monopolies.”

He says NSW farmers had previously flirted with investing in the now-ubiquitous farmers markets on a similar principle.

“We will be keeping an eye on how it goes,” Mr Jackson says.

Cutting out the middleman as trade war bites

At the Founding Farmers restaurant in Potomac, Maryland, an hour from Washington DC, there are quotes from the Founding Fathers on the door.

The menu boasts inspiration from Thomas Jefferson, the “father of macaroni cheese”. It also touts local beef and bread made on site from scratch. There’s a trendy bar but the meals are big and hearty.

“Food spending goes up, but the farmer’s share of the food dollar just goes down,” restaurateur and the co-owner of the Founding Farmers Restaurant group, Dan Simons, says.

“All the money is not in the beginning of the supply chain with the farmer, and it’s not at the end at the restaurant. It’s in the middle. We’re working to unbundle the supply chain.”

The restaurant chain is a unique model that seems to be showing success at a time when the US trade war with China is affecting large-scale farmers across the country.

North Dakota Farmers’ Union president Mark Watne says president Donald Trump’s aggressive tariff policy, only this week starting to unwind, has pushed prices for commodities like soybeans down by up to 40 per cent.

He fears the tension has lost American farmers the Chinese market — maybe for good.

“We’re really suffering. We’ll lose a bunch of farms,” Mr Watne says, adding they have done already.

“Our suicide rates are up. Even though we’re getting help from the government, it’s not enough … we’re going to congress to ask them to take this over.”

But the unique farmer-owned restaurant model aims to create an alternative to a system where, like in Australia, ‘middlemen’ like processors and supermarkets take the lion’s share of the food dollar.

“We’re trying to disrupt that system by owning it all the way, showing people you can get good quality, good quantity, and you don’t have to pay quite as much,” Mr Watne says.

“And the farmer is more rewarded than the whole industry in between.”

They’ve even taken distribution in-house. Twice a month, a semi-trailer travels from North Dakota to Washington DC picking up goods from local farms and cooperatives, from honey, sugar and grits to bacon, cheese, chickens and barley that goes into the company’s whiskey.

Targeting the everyday American

At the restaurant, most of the diners seem to value the food’s quality over its provenance.

Co-owner Dan Simons says he’s proud of the fact that they’re promoting local produce without being “preachy”, and are targeting the middle market, rather than selling “fancy food, small food on a big plate, and some lofty ethereal story about the farmer that grew the carrot”.

“That’s fine if you can pay $60 a plate but that doesn’t really move markets and it doesn’t really expose the message to mainstream people,” he says.

“We said … let’s create a restaurant and a concept that can be affordable. We pass on value to the customer but we’re still cooking everything from scratch and really knowing where we buy the vast majority of our product from.”

Exceptions to the local rule include products in hot demand year-round, like tomatoes in winter.

Mr Simons says the three newest restaurants, less than 18 months old, are all turning a profit.

‘Conscious capitalism’ called into question

But it’s not clear if that profit has come without cutting corners.

While Mr Simons describes the Founding Farmers’ philosophy as “conscious capitalism”, like numerous big-name Australian restaurants, the chain has faced allegations at odds with its ethos of paying people better.

Farmers Restaurant Company agreed last year to pay nearly US$1.5 million to settle a class action lawsuit brought by restaurant employees over wage theft.

The staff who joined claimed they were variously denied sick leave or overtime wages, or paid a tipping wage — less than US$4 an hour — for work when they weren’t out on the floor.

The settlement did not include an admission of guilt.

Mr Simons says he’s confident Farmers never intentionally or knowingly broke the law, but they opted to settle because it was less costly than a trial.

But he says the company learned a lot from the experience and “continue to strive for the highest standards” when it comes to wages.

Stakeholders, like Kentucky miller Tom Edwards, remain full of praise for the model’s benefits to the grower.

He says the small-scale farmers he works with to supply the Farmers restaurant chain are thrilled to be involved, and are paid more money to produce a better quality product.

“They were so excited they went and got a bunch of varieties of corn and tested their sugar, or starch levels, to see which would be sweetest,” Mr Edwards says.

Mr Edwards wants to change people’s idea of what they should pay for good food.

“It’s like with gas prices — gas prices double and consumer elasticity is pretty strong. Why it hasn’t happened with our food supply, I don’t know,” he says.

“For a strong food economy we’ve got to turn the model upside down.”

Topics: food-and-beverage, hospitality, agricultural-marketing, unions, sustainable-and-alternative-farming, united-states, sydney-2000

First posted October 17, 2019 09:47:49