NYC-based owner places Fork Food Lab on the chopping block

Pilotworks, the New York City-based owner of Portland’s Fork Food Lab, informed its members on Monday that it was closing the kitchen-incubator space that has been home to several of Maine’s up-and-coming food and beverage startups, including North Spore, Plucked, Fyood, White Cap Coffee, and several others.

In an email sent July 30 to Fork’s members, Pilotworks CEO Zach Ware said that “after careful consideration” he had “made the very hard decision” to close the Portland location. The last day of operation is scheduled to be Sept. 30. He said that existing members would have full use of the space and storage facilities until that time at no cost.

“Over the remaining weeks our team’s primary goal will be to help minimize any disruptions so your business can continue to thrive,” Ware wrote. “Until the kitchen’s closing day, you can continue to use your membership as you do today and we will continue to deliver the member experience and services you expect.”

Pilotworks (formerly known as Foodworks) acquired Fork Food Lab last summer from co-founders Neil Spillane and Eric Holstein, who founded the business in September 2016 to help Portland’s food entrepreneurs scale their companies. Spillane and Holstein both declined to comment on the news of Fork’s impending closure, citing a need to gather more information about the situation before going on the record.

Pilotworks cites lack of sustainable business model

Ware, who took over as Pilotworks’ CEO in April, a few months after the company closed a $13 million Series A funding round, did not say why he was closing the Portland location in his email to members, and a FAQ about the Portland closure posted on Pilotworks’ website also dodged the question.

In response to questions from Maine Startups Insider, Ware said operating Fork Food Lab was not sustainable in the long term “due to the structural layout and market dynamics in this location.”

“Everything we do at Pilotworks is designed to create material value for the independent food companies we serve—in a way that’s sustainable without subsidy,” he wrote. “And due to the structural layout and market dynamics in this location, operating sustainably was not feasible long-term [and] led us to the decision to close it. We realize this action causes challenges for the companies we serve and our teams are dedicated to helping the companies we serve find alternatives in the coming weeks.”

When asked to clarify what’s wrong with the “structural layout and market dynamics,” and whether anything significant had changed since his company acquired the business, Ware said: “I can’t speak for the thinking before I became CEO in April but while Portland is certainly a vibrant market for food companies, the location itself has challenges that make it difficult to build a sustainable business.”

Pilotworks is also closing its kitchen incubator in Providence, R.I., according to the company. It still has kitchen-incubator spaces in Brooklyn; Newark, N.J.; Chicago; and Dallas that will remain open.

“Pilotworks is continuing to invest in our New York Metro, Chicago, and Dallas locations with an aggressive growth plan slated for 2019,” Ware told MSI.

Pilotworks tried to apply New York pricing model to portland

In February, Pilotworks informed members of Fork (referred to as Pilotworks Portland below) that it would change how it charged members, transitioning from a fixed-rate monthly fee to hourly billing for kitchen space, as it does in its Brooklyn kitchen incubator. The switch to a $15-an-hour rate to rent kitchen space was scheduled to take place in June, followed later by an increase to $26-an-hour rate.

The proposal was met with outcry from several Fork members who claimed the increase in rental fees would price many entrepreneurs who were scaling food businesses out of the space. Three members left Fork in the wake of the announced pricing increase, according to one current member who spoke on condition of anonymity because they didn’t want to jeopardize their opportunity to use the kitchen space for the next two months.

In a letter sent to Pilotworks on March 2, and obtained by MSI, a group of Fork members described how the proposed pricing structure would negatively impact some members, and the culture of the space as a whole.

“The proposed rate change would cause full-time members working roughly 40-hour weeks to see their rent triple ($2,400/month) and later quintuple ($4,160/month). Part-time members working roughly 16-hour weeks would see their rent double ($960/month) and later triple ($1664/month).

“Currently, having a fixed monthly rate encourages business growth, while an hourly rate will discourage members from increasing their time spent producing, and therefore will not foster growth. Rather, it will do the opposite, and place an excessive financial burden on fledgling business owners. Furthermore, when every minute of time spent in the kitchen costs $0.25 (later $0.43) the supportive community in which members take time to engage with and help one another will suffer. Many members would not have chosen to rent at this space had such an hourly billing model been in place at the time of joining.

“Not all businesses operate on the same model, and this letter does not serve to address the feelings of every member. Rather, it is to express the fact that the new rate change will force the following members to find other kitchens out of which to operate when the changes take effect in June. None of those who sign wish to leave this facility, as it has thus far allowed our businesses to successfully incubate and grow. We wish to continue this growth at a kitchen that reflects realistic rental rates in the local Maine economy, and we hope that can continue to be Pilotworks Portland. We welcome the opportunity to discuss this further and to find a solution.”

Faced with this outcry and threatened exodus, Pilotworks never implemented the proposed changes in membership pricing. Four months later it announced it would close the facility.

While some in the community were surprised by this week’s news, others were not.

“The sudden closing of Fork was not a total surprise to some of us,” said the member who spoke on condition of anonymity for the reasons stated above. “I suspected something was up but thought they would actively try to sell the business to someone local who understands the ‘Maine/Portland way’ before pulling out completely.”

“When the price hike got put on hold due to outcry and departures, I wondered if this might happen,” said another member who spoke on condition of anonymity for the same reasons.

To some members, it was obvious that Pilotworks had tried to take the model it uses in its Brooklyn kitchen incubator and apply it to the Portland business. And when they ran into problems doing so, gave up on the business.

“My guess is they’re experienced at operating kitchens like that in much more populous and business-dense areas and probably didn’t have a good handle on the food environment in Portland,” Eliah Thanhauser, co-founder of North Spore, a mushroom farm in Westbrook that uses Fork to produce value-added products like dried mushrooms and tinctures, told MSI.

Another member said: “New York Pilotworks never made an (obvious) effort to understand how and what Fork Food Lab is and how it operates. Portland is a totally different community than New York; I believe with the right foresight and upper management they could have made Fork a success. They only gave it a year.”

According to this member, the local general manager, Jenn Stein, had got Fork to the point where it was operating at almost break even. Stein, who didn’t respond to a request for comment, has been in the role for seven months.

“Imagine what she could do in the next year!” this member said.

Local impact

Christina Carr, founder of Carr Eats, has been a Fork member since the beginning and said its presence in Portland was integral in helping her scale her prepared-meals business.

“At the time, Fork really saved me, my business was brand-new… too many unknowns to buy or lock into a lease. It was the perfect situation at the perfect time,” Carr said.

Luckily for Carr, she had already put in motion plans to move out of Fork and rent a larger and dedicated space when Pilotworks made its announcement this week. But she knows that if this news had come when she was still in startup mode, it would have hampered her efforts to scale her business. She’s now in the process of building out a shared kitchen space in Biddeford called The Kitchen Company and said she’s accelerating efforts to get it open to help those affected by Fork’s closure.

Sue Hanson, who manages Cultivator, the Maine Center for Entrepreneurs’ food and beverage accelerator, said Fork’s closure would have a negative impact on the local community.

“I do think this is unfortunate as Fork Food Lab offers small Maine food companies the opportunity to create and validate concepts and product demand without the requirement of taking on the huge cost of investing in a commercial-grade kitchen or production facility of their own,” she told MSI. “Fork also offers the opportunity for these companies to network, share learning and resources, which is also beneficial to small companies.”

Tom Marlow, who co-founded White Cap Coffee in 2016 and was an early Fork member, questioned whether he and his partner would have been able to get the business off the ground if it wasn’t for Fork.

“It would have been a lot more difficult to get up and running had we not had Fork,” he told MSI. “It allowed us to go to work on a product before even having revenue coming in.”

As a beverage company that was kegging its cold-brew coffee, White Cap had a six-month licensing process to get through, which Fork Co-founder Neil Spillane helped them with.

“If we were having to pay rent for a dedicated space, plus all the equipment costs, and be down for six months waiting for licensing—that would have been pretty tough to stomach,” he said.

White Cap has since merged with Rwanda Bean Co. and moved into a dedicated space in South Portland.

If there’s any silver lining to Fork closing, Carr said it could give some entrepreneurs the nudge they need to commit to the next step of growing their business.

“Fork is an ‘incubator,’ so in theory it’s a step into something else; a tool for growth, not the end game. It will be a shame if businesses close because of this, but it might be a good nudge for those who have outgrown the space,” she said.

Efforts to keep Fork open

But others are working to make sure Fork doesn’t close at all. A meeting for Fork members held Tuesday afternoon was well attended and by all accounts was a positive meeting that demonstrated there’s a large amount of community support to try to keep the business open past September. I’ve also been told meetings have taken place with organizations such as Creative Portland and CEI in an effort to cobble together more runway for the business.

One detail that helps the chances that a new owner can be found who will keep Fork alive is that Pilotworks does not own the building. Contrary to some assumptions I’ve seen people make, the building was not part of last summer’s acquisition of Fork Food Lab. The building’s owner is Forq LLC, which includes among its owners Spillane, one of the original co-founders of Fork Food Lab, and Justin Alfond, former president of the Maine Senate.

Having local ownership of the real estate, including the kitchen-incubator’s original champion, could bode well for efforts to keep the concept of Fork alive.

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