October 13, 2018

Zesto: Building Community Or Developing A Fast Food Franchise?

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“I’m always glad when we can have public-private partnerships.”                  -D.D. Adams, 8/14/2017

 

Back in May, a new Zesto restaurant opened at 2600 New Walkertown Road. The community excitement that I witnessed over Zesto’s opening made this blogger feel a little sheepish for harshly criticizing the project. So I shelved this article for a few months.

Now, after Zesto has been open for a while, and the excitement has faded, it’s time to take a critical look at Zesto.

The Winston-Salem City Council has a history of supporting projects with dubious merits. Under Mayor Joines and mayor pro tempore Vivian Burke, Winston has forgiven more than its share of bad loans (often to the friends of Allen and Vivian). Earlier in the year, the city forgave a sizable debt to Jose Issai, whose Lake Park housing development failed.

A short distance from the new Zesto on New Walkertown sits Premier Park, a failed business park that opened in the early 2000s but never took off.

The city’s subsidy of other restaurants has been questionable. Taste of the Triad restaurant (formerly Malone’s) has been criticized on several occasions by the Journal’s Scott Sexton. Taste of the Triad appears to be on the right track, but it’s highly doubtful that they will be able to pay back loans taken out from the city.

I went back and reviewed how the Zesto on New Walkertown Road got funding from the City. The entire public process was surprisingly brief and certainly less than through.

In August of last year, the Finance Committee approved RUCA funding for the Zesto in less than five minutes. Very little debate or discussion occurred. Representatives from Zesto weren’t even required to speak before the Finance Committee.

Evan Raleigh, then the Director of Business Inclusion and Advancement for the City of Winston-Salem, briefed the Finance Committee on the matter before it. “The owners are looking to attract a Zesto,” Raleigh said.

We weren’t told that local investors lead by Goler CDC and Algenon Cash were planning on relaunching a failed burger franchise, that the Zesto on New Walkertown was designed to be a stepping stone in Goler’s ambitious growth plans.

Months later, the full picture of what the City of Winston-Salem was investing in would emerge in a must-read editorial in the Chronicle by Algenon Cash.

Cash’s editorial explained, among other things that private investors had refused to fund his Zesto venture. That he, along with other investors had purchased the rights to the Zesto name and that he had ambitious plans to open up many more Zestos in the next ten years

About a year and half ago, I organized an investor group to acquire the licensing rights for Zesto, so that we could expand the iconic concept through franchising. Our growth plan calls for 50 new locations in North Carolina with additional stores opening throughout the mid-Atlantic region within 10 years.

-Winston-Salem Chronicle, May 24, 2018

Why is the City Council funding the resurrection of Zesto? Zesto lost out to Dairy Queen and McDonalds decades ago.

RUCA funds are supposed to be for revitalizing economically depressed portions of the city’s urban core. RUCA funds were never intended to launch fast-food franchises. (The entire RUCA program needs to be scrutinized. RUCA has put a fresh coat of paint on East Winston, without fundamentally improving it.)

If the City of Winston-Salem wanted a restaurant at 2600 New Walkertown, they could have used other funds. Between 2000 and 2008, the city gave out $1,061,608 in loans to 13 restaurants (Winston-Salem Journal). The Resturant Row program is a substantial reason why Trade Street is thriving to this day. The city could have revived their Restaurant Row loan program and used it to fund a restaurant on the other side of 52.

I would have begged the owners of Miss Ora’s Kitchen to open a second location on New Walkertown, or the owners of Kermit’s to open a second location there.

I hate to say it, but the Zesto on New Walkertown seems bound to fail.

If the City of Winston-Salem wanted to provide the maximum benefit to the East Ward, they would have funded a food co-operative, like Greensboro’s Renaissance Co-op. Food deserts are a more serious issue for East Winston than a lack of fast food options.

Besides, a worker-owned co-op is a much better use of city tax dollars. A co-op’s funds go to its workers, who in turn, reinvest them in the community.

If Zesto succeeds, its profits are going to be invested in other Zestos. If it fails, its loans will be forgiven.

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