Sweet Charity
Family Business Magazine - Summer 2004

BY PATRICIA OLSEN

Most successful business owners want to give something back to their community. And many entrepreneurial families have found that their charitable giving has benefited their business. Here's how.

When Ellen and Todd Gray opened the Equinox Restaurant in Washington, D.C., five years ago, they made it a point to con tribute food, gift certificates and use of their facilities to as many charitable events as they could. Their generosity didn't just benefit the hunger relief and aid to small family farms. The couple's efforts also helped create buzz for their restaurant, which has been praised by critics as one of the premier fine dining estab lishments in the nation's capital and last year had revenues of $3 million.

While the Grays can't say exactly how much business has been generated as a result of their philanthropy, they're sure the effect has been substantial. "Donations most certainly can drive up business, if you are within the right market," says Ellen Gray, 39. Restaurant patrons often say they decided to visit Equinox after sampling the food at a benefit, she adds.

Yet the increased visibility has had its drawbacks, the Grays note. Today Ellen, who is Equinox's general manager, and head chef Todd, also 39, say they must take time from their busy schedules to field some 25 requests for donations per week. They estimate that they say yes to about one charitable event per month. For the last four years, Ellen has served as chairperson of Share Our Strength, an annual Washington gala that supports hunger relief efforts. In 2002 she started "A Sugar and Champagne Affair," a gala dessert tasting to fund the local Humane Society's animal welfare guardians, the "Animal Cops." Over the years the Grays have also donated cooking classes to charitable organizations and other non-profit groups.

In their meteoric rise, the Grays have found that when it comes to philanthropy, high visibility can be a mixed blessing. "It's a Catch 22," says Ellen. "if you become extremely successful, the requests to give back can be overwhelming. Once I contribute a cooking class to one elementary school's silent auction, everyone starts calling."

Kay Plantes, a corporate strategy consultant in Madison, Wis., notes that family businesses like the Grays' enjoy two advantages over other companies when it comes to giving back. First, they generally have more control over their level of charitable investment. Publicly held companies are under enormous pressure from their shareholders to grow profits quarterly, Plantes notes, which may affect the amount they're able to give. Second, Plantes has found that family business owners have a deeper understanding of the issues affecting their community than a corporate manager hired from outside the area. Thus, business families are better able than national chains to choose charities that truly benefit the community - and in turn, their business.

Family business owners say that managing their charitable giving is as challenging as it is rewarding. A company's philanthropy can yield considerable retums - monetary as well as spiritual. At the same time, entrepreneurial families say, such efforts can drain precious time and funds and can force agonizing decisions when more fundraisers come knocking than can be realistically accommodated.

Ellen Gray of Equinox says she has learned a thing or two since the early days. While she tries never to refuse a request for a charitable contribution that originates from a customer, she's choosier about requests from organizations. When appropriate, she asks for business in return for her contributions. Last year, when a planning board member requested a donation, Ellen asked her to support her restaurant. The board member eneded up bringing 12 people to Equinox for lunch. Another of Ellen's tactics is to donate dinner-for-two gift certificates that are redeemable on Sundays. This policy generates drink profits and staff tips on a night when business at the restaurant is normally slow. The extra diners bring in additional traffic through word of mouth, she says. Finally, she's not shy about using her name recognition to call on other businesses to participate in events. This strategy helps to offset her costs as well as to increase support for the charities.

Consultant Plantes warns that if a company's motive for giving is only to improve its reputation, community members will perceive its activities as a blatant ploy for publicity and an effort to manipulate them. The Internet has made business practices readily transparent, she notes. "If you say you're interested in improving the environment but your record shows otherwise, your contribution can work against you."

Plantes recommends that companies assess how the mission of their business relates to the community as a whole, rather than just to customers and shareholders. "Ask yourself what difference you're making to the communities in which you operate," she says. "Then consider what difference you could make if you defined your purpose in broader terms than making money and meeting customer needs."