Rebecca Scott is the co-founder and chief executive of STREAT, a social enterprise that operates cafés, coffee carts and a coffee roastery in Melbourne.
Since its first small food cart was rolled out in 2010, STREAT has sold 140,000 meals and coffees and provided 10,000 hours of paid employment to young people, along with completing what is believed to be the first acquisition of a social enterprise by another social enterprise in Australia.
Scott tells us how STREAT handles its “enormous” extra overheads and her focus on ensuring the $2 million enterprise remains profitable and viable.
Get business news first
Sign up to SmartCompany’s daily newsletter
How did you come up with the idea for STREAT?
I’m a long way from hospitality in my background. I started in government and non-profit work and I was doing some volunteer work for an organisation called Know One Teach One (KOTO) in Vietnam. I had a light bulb moment and decided this is what I want to do. I realised you could solve social issues through business. I had worked for years in business or on not-for-profit boards but some of the continuous frustration was trying to get funding. Business is a way to solve that because you can generate your own income.
KOTO was the place where I first saw social enterprise at work and realised that you could address a social problem by using the marketplace. It was really thinking about what kind of business you could be in with really low barriers to entry, if you were taking the most disadvantaged young people in our society. It also had to be really accessible for males and females and, once you got into the industry, it had to offer a huge amount of opportunities. Hospitality is a very broad sector and we needed a business which was flexible enough for our young people to discover their skills.
In a lot of sectors your customers are a long way from where the work happens, but in hospitality our young people get to interact with the customers and the customers get to directly see the change they are bringing about. When you buy a coffee from the person who has just made it for you, you are eyeballing another person. For me, that is one of the critical parts of our model and the power of that transaction should not be underestimated. If you are a regular customer, which 83% of our customers are, you are seeing the impact of your transactions every day. Across six months you are seeing the tangible differences in their skills.
What prompted you to set up STREAT?
It still frustrated me that there were so many young Australian people who were homeless. So what was I going to do in my own country? That was one big thing. The other issue was thinking about how do you scale such enterprises? I couldn’t see an example of any enterprises that could be built to scale. That scaling bit is the tricky bit. We bring an enormous amount of extra overheads to our business that our café competitors don’t have: They don’t have clinical psychologists; they don’t have youth workers; they don’t have all of that intensive support that we give our young people to work in our organisation.
If we ran one café and loaded all those overheads on top of that it would not be making enough profit to make it work. The only way to make the whole enterprise financially sustainable was by scaling it. The driver for scaling was two-fold: one, the more sites you have then the more training you can give young people; two, you can amortise that extra overhead across more businesses.
Scaling made sense but there were no precedents for hospitality enterprises in Australia that had scaled.
How did you get the funding?
Me and Kate Barrelle, the co-founder of STREAT, spent a year and a half conceptualising how it would work. Then we did a feasibility study here in Melbourne and, based on that study, we went out looking for funds. We conceptualised the organisation in Canberra, but Canberra was too small to build something that could scale, we knew it had to be Melbourne or Sydney. Melbourne won for a couple of reasons. There is far more philanthropy here. Half of Australian philanthropy is here because much of the Gold Rush money ended up in Melbourne and so Melbourne has a longer history of philanthropy than Sydney. The other is that it is a city that loves hospitality and is always trying new things.
During this time we were self-supporting. Kate, who is also my partner, was still working full-time and supported both of us while I researched and found out the process of building the organisation. We then pitched the idea to some Danish philanthropists in mid-2008 and they grilled us for six hours in a board meeting in Copenhagen. Two months later we got a phone call from them saying they were funding us to start-up to the order of $700,000.