Under What Circumstances Will A Charity Turn Down Donations? [e216]

August 19, 2015

The guys close out the week by talking about the Houston based restaurant that failed to make a donation to a local food bank and latertried to rectify the situation by running an unapproved fundraiser.

Full Podcast Transcript

NASIR: All right. Welcome to our podcast where we cover business in the news and add our legal twist to the business news. My name is Nasir Pasha and also joining us…

MATT: Is Matt Staub.

NASIR: Very good. We just got done with Restaurant Week a couple of weeks ago in Houston. When’s Restaurant Week in San Diego? I can’t remember.

MATT: There’s a full-blown restaurant week and then there is some sort of half restaurant week or something or a pre-restaurant week but it’s not really… I don’t know. But I never participated because I don’t eat desserts.

NASIR: Oh, yeah, it’s always like a three-course. I’m sure everyone’s aware. I usually go to restaurants during Restaurant Week but never order the fixed menu.

MATT: The prefixed? Yeah.

NASIR: It’s usually at least a three-course meal, right? Sometimes it’s five or what-have-you, depending on the restaurant you go to.

MATT: Yeah. Usually, you’re looking at an appetite… like, an appetizer/starter, an entrée, and a dessert. And so, I’m not a big appetizer fan. I don’t eat desserts – period. For me, it doesn’t really make sense.

NASIR: Period?

MATT: Yeah.

NASIR: I don’t eat desserts – question mark. I do eat desserts. Actually, it looks like San Diego Restaurant Week is coming in in a month. In fact, they have one month, seven days, two hours, thirty minutes, and four, three, two, one seconds.

MATT: By the time this episode comes out, it’ll be closer.

NASIR: Yeah. Why are we talking about this again?

MATT: We’re talking about it because, in your backyard, in Houston, have you been to the Sparrow Bar + Cookshop?

NASIR: No, it doesn’t sound like my cup of tea anyway.

MATT: Well, yeah, it does. I mean, you like cool, trendy places.

NASIR: I guess that’s true. I don’t like that it has a plus sign within the name. Like, how do you pronounce that? “Sparrow Bar plus Cookshop?” Just thinking about putting it into my Google to search for it or telling people, “Oh, meet us at…” I guess it’s just Sparrow and then it says Bar and Cookshop. Anyway…

MATT: It’s because you don’t like math so the plus sign, you’re confused.

NASIR: Yeah, there’s no equal sign. Where is the solution? If it gave me the solution, then I’d be fine.

MATT: Yeah. So, this Sparrow Bar + Cookshop put on or announced a $45.00 prefixed menu in August to help raise money for the Houston Food Bank. The only problem is this fell outside of the Houston Restaurant Week so people were thinking, “Well, that’s kind of weird. I mean, usually, we do this $45.00 prefix or whatever the prefix menu during Restaurant Week like everyone else does.” Then, people did some digging and found out that, back in 2013, there was supposed to be a donation made to the Houston Food Bank. There in fact was not a donation made so the belief was that this $45.00 prefix menu was to cover that donation from two years prior. Also, I guess there’s guidelines for the food bank and you can’t use a charity’s name without their permission and failing to disclose how much of the $45.00 will be donated – both of which SB+C failed to do, didn’t get permission, and did not disclose how much would be donated.

NASIR: What’s interesting is that, apparently, the person that wrote this article tried to get comment from the chef who apparently is some famous chef – or I don’t know if famous – she won Top Chef Masters Veteran, Monica Pope – it’s the person that owns it, I guess. But she was on vacation so she couldn’t comment. It’s hard to know exactly what happened here. All we know is that this Houston Food Bank didn’t actually receive any funds. By the way, Houston Restaurant Week is actually Houston Restaurant Weeks. Apparently, it lasts for like, I don’t know…

MATT: 52 weeks.

NASIR: It’s 52 weeks a year. That was a good one, actually.

MATT: Have you ever been to those sushi places where it’s like everything half off every single day? It’s like, well, if everything’s half off, then just put the prices down. I don’t get it.

NASIR: Yeah, there was this one sushi place – this was a while ago but by my house – they had the grand opening banner there forever and they just had a grand opening sale happy hour and it was just for weeks and months on end. By the time I moved, it was still up there. But, yeah, Houston Restaurant Weeks is from August 1st to September 7th so we’re actually still in it. But, yeah, how they found out was kind of strange because, on one hand, I kind of understand that maybe this was some kind of mishap, but the repercussions of this is pretty huge. Even if you forget to give donations like that, that can have some dire consequences because here you collect all this money and, for years now, you’ve kept it and not paid for it. This goes to other news stories we may have covered in the past where you’re representing that you’re going to provide some kind of charitable donation, a percentage of proceeds, and you’re using that marketing to do so and you don’t do it, I mean, if you don’t do it, especially if you don’t do it intentionally, it’s fraud – you know, plain and simple. If you don’t do it because you forget to, you still may run the risk of people thinking that you did it for fraud because it’s going to be hard for you to explain, “Oh, I forget to give X number of dollars times seven,” with the number of plates that you sold. You know, that’s not easy.

MATT: Well, yeah, and I guess the amount that was pledged in 2013 is undisclosed so we don’t know how much they would need to cover it. But, yeah, I mean, you can’t make this pledge to this food bank and then just completely ignore it. I mean, I’m assuming they’re trying to keep this much information in as possible so they don’t look even worse but, you know, it was a good move by the food bank to say, “Hey,” because they’re actually the ones that stepped in to say, “Stop doing this. If you guys can come even on what you owe us from 2013, okay, we can think about it, but we’re not going to let you use our name.” I think the reason behind it – someone might think, “Well, why would they do that? It’s free money.” But, obviously, it’s possible that they’re using the name of the Houston Food Bank to get people to show up and pay money when they normally wouldn’t – perhaps based on what’s happened before.

NASIR: Absolutely. My wife and I had this exact same discussion about Restaurant Week in general because, you know, it tends to be more crowded and then you have this price fixed menu of things that you may not want or, like you said, you don’t eat desserts. But then, she’s like, “Well, but a portion goes to charity and, if you’re spending that money anyway and you’re going out to dinner, sometimes, it’s actually…” I think for this case it was seven out of $45.00 but I think there are some restaurants that’d give even a bigger percentage than that. So, definitely, they get a benefit from being a part of this Houston Restaurant Week and donating that. But you know what’s really strange, Matt? Did you see the response when basically it spread that the food bank asked Sparrow to stop using its name to raise money, the restaurant basically tweeted, “We just wanted to do the right thing and make them some $$ at the same time. A new charity will be announced Tuesday PM.” Isn’t that a strange response to you? It kind of rubs me the wrong way a little bit, no?

MATT: Yeah, there is something wrong with that. I’m not sure exactly what it is but…

NASIR: It just has a tone to it, right?

MATT: Yeah.

NASIR: It just has a tone to it as if, like, we just wanted to do the right thing – and, of course, they walk into the public sphere and the first response that I see is the Sparrow Houston, the right thing is to donate the dollars collected for Houston Food Bank in 2013, not hold second fundraiser to collect the same dollars. That’s what the impression is, right? That’s what it seems to be and this has been only a few days yet there hasn’t been many other news stories about this but, to me, this is like, you know, if true, they’re still probably looking for the facts, but that is kind of disruptive, no?

MATT: Right, yeah, no, it is. I mean, it’s a pretty easy lesson. When you pledge an amount to a charity or non-profit or what-have-you, you need to follow through with that and, you know, the specifics of it, I would think that these, you know, somewhere like the Houston Food Bank would have people in place to kind of run you through the guidelines you need to follow. I mean, in fact, they even mention there are guidelines so you can just read them yourself but it’s not like you can plead ignorance on this or you can say you forget. I’m sure somebody at the Houston Food Bank reached out to the Sparrow Bar + Cookshop at some point and said, “Hey, what about that money you owed us that you said you’d pay us?” and they just ignored it, I’m assuming, but I don’t think it fell through the cracks.

NASIR: Yeah, it’s hard to know but, just based on that response, it makes me question it at the least.

MATT: Yeah.

NASIR: For businesses that are planning on doing some kind of promotion where X percentage goes to charity, I’m sure people have thought about doing this themselves but, even from a very large scale to the NFL sponsoring breast cancer or to every product has a little sticker on there saying a percentage goes to charity or what-have-you, probably the most important thing is at the least make sure that amount goes to charity – I think that’s obviously – but the second is you actually do need the permission of that particular charity to use that promotion. Now, you don’t need their permission to give them money but, if you’re using their trademark or brand in your marketing materials, then you probably need their permission to do so – unless they give some kind of blanket use which most companies don’t do that because they don’t want to be seen as affiliated with certain, you know, if they don’t agree with that particular company’s policies, they may not want to be affiliated with you and so you would have to request that.

MATT: Yeah, this is a pretty easy lesson. Like we said, there’s no reason to look too deep into it.

NASIR: Yeah, it’s an easy lesson not to pay up but I’m sure this happens. From a small business perspective, it’s like, “Okay, I want to run a promotion, I’m going to give X number of dollars to Red Cross,” and you put up Red Cross’ logo on your website, you put up other marketing material and, hey, that might not fly with the Red Cross so you might want to think twice about that.

MATT: Yeah.

NASIR: Speaking of, by listening to this episode, 80 percent of the proceeds that you pay to listen to this episode goes to Matt and I, and the 20 percent goes to you as a refund.

MATT: 20 percent back, automatically. 100 percent of our 80 percent goes to pizzas.

NASIR: You know, we forgot to, we’ve got to get a pizza episode coming up – next week, maybe.

MATT: What does this place have? I didn’t even check out their menu.

NASIR: You can’t just fit it in. It has to be, like, pizza-focused.

MATT: Uh, well, this is a local and global.

NASIR: Locally-sourced, globally-inspired.

MATT: Oh, man, you’re going to hate this website.

NASIR: Oh, I know, I’m looking at it.


NASIR: I know. No equal signs. By the way, I actually don’t like the website. I think it’s hard to read, the colors are kind of I don’t know, and there’s rumors that they don’t pay their charity that they advertise for so another reason why I don’t like it.

MATT: There you go.

NASIR: All right. Well, like you said, easy lesson but hopefully a good lesson for us to learn as well.

MATT: Yeah.

NASIR: Thanks for joining us.

MATT: Yeah, and keep it sound and keep it smart.


The Podcast Where Nasir Pasha and Matt Staub cover business in the news with their legal twist and answer business legal questions that you the listener can send it to info@legallysoundsmartbusiness.com.

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Legally Sound Smart Business

A business podcast with a legal twist

Legally Sound Smart Business is a podcast by Pasha Law PC covering different topics in business advice and news with a legal twist with attorneys Nasir Pasha and Matt Staub.
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