Kimbal Musk is revamping a controversial relief fund the same week that newly unemployed workers at several of his restaurants nationwide complained that the Boulder-based restaurateur cut them off amid the COVID-19 pandemic.
The Silicon Valley entrepreneur told 5280 that the Kitchen Family Fund would now be available to the roughly 100 employees who were laid off last month at Musk’s now-shuttered operations in Highlands Ranch, Cleveland, Indianapolis, and Memphis. His existing 500 restaurant employees—including 400 furloughed workers—will continue to be able to apply for the one-time grants, which Musk says will not exceed $400 per person.
The change, Musk said, had nothing to do with a HuffPost story released Tuesday, in which seven former Next Door American Eatery employees across several states said Musk had betrayed them when access to the emergency fund was cut off. The article gave the impression that Musk pocketed the Family Fund money, that he laid off workers to avoid fund payouts, and that those former employees had their accrued paid time off and sick-leave time withheld when they lost their jobs.
Musk—who returned this year as chief executive officer of his restaurant group and whom I profiled in a piece published on 5280.com on April 9—and his spokeswoman said laid-off employees were paid their owed benefits in March, which 5280 confirmed with two employees who earlier spoke to HuffPost. As of Friday, 41 current employees received $400 each in tax-free grants from the Family Fund, and another 84 applications were outstanding. (The HuffPost story initially did not include the number of payouts and intimated that Musk may have defrauded his current and former workers. An update to the story later included an inaccurate count of employees who had gotten fund payments.)
“We have a fucking business to save; this is triage right now,” said Musk, who added that his company has been approved for a loan through First National Bank in Boulder as part of the federal aid rescue package that will eventually carry eight weeks of payroll for current employees, including those who have been furloughed. Musk declined to provide specifics on the amount of the loan needed to cover pay for his workers but said it is a “very, very big number.” Since the pandemic began closing restaurants nationwide, Musk said he personally covered salaries for his 100 non-furloughed workers. Musk does not draw a salary for his work with the Kitchen Restaurant Group.
The Family Fund came under scrutiny when former workers at Musk’s shuttered Next Door restaurants said they were led to believe they would receive $400 each from the fund to help carry them through the pandemic’s early stages. Several workers said they began applying for the fund in mid-March, when Musk announced the then-temporary closures of four restaurants. A few days later, the restaurant group announced changes to the fund and said its employees would have to reapply for grants. Soon afterward, Musk closed the restaurants and laid-off roughly 100 employees. When those former employees later asked about the fund’s money, Musk’s restaurant group told them the grants were available only to current workers.
In reality, the fund held $11,000, which was funded with voluntary weekly donations (between 50 cents and $2.50) from employees and also backed by Musk. Musk and his business partner, chef Hugo Matheson, said on Wednesday that that they added another $14,000, to bring the fund’s total to $25,000.
Before the Indianapolis restaurant was closed on March 23, Reggie Moore helped process several of his co-workers’ applications. In an interview with 5280, the former head chef said, “A lot of people had their hopes up because they thought this would bring a little relief into their lives. We were made to feel like there was money there that we could access, but it didn’t turn out that way. I feel misled. [Musk] just needs to tell is people that he flubbed up. I don’t fault Mr. Musk, though, because it’s his people who were in charge of getting us the information, and it was not correct.”
Musk blamed himself for the fund’s shortcomings, saying it was created two years ago to take “two to three applications a year,” and was never designed for a pandemic in which his employees might be eligible for money all at once. He said employees never should have been led to think there would be hundreds of dollars in individual grants for applicants. At its initial funding level, the Family Fund would have averaged less than $20 per employee. “This is our mistake,” Musk said. “The real issue about the Family Fund is we weren’t paying any attention to it, and then it became something that was urgently needed. Obviously this fund was communicated incorrectly. That money—it just wasn’t there. It didn’t even occur to us to think of the Family Fund because there was no money in it.”
Late last month, the National Restaurant Association estimated that the industry would take a $225 billion loss because of the pandemic, in a year when sales were expected to reach nearly $900 billion. In a survey from the James Beard Foundation, 60 percent of the nearly 1,500 respondents said they didn’t “have enough operating capital to sustain a closure for one full month.” Respondents said they had to eliminate 78 percent of their hourly workers and 58 percent of their salaried employees.
Musk denied that his layoffs had anything to do with the Family Fund’s limited resources. Musk instead said the COVID-19 pandemic forced state and local governments to make swift decisions that rapidly changed the business landscape. “On Monday [March 16], we planned to do furloughs, but then [Denver Mayor Michael Hancock] said restaurants in the city would be closed for eight weeks” for everything except takeout and delivery, Musk said. “Then we started getting new information from other mayors and governors [closing more restaurants to dine-in customers]. We had to process that information. By Wednesday, it was, like, ‘Oh my goodness, we are going to have to indefinitely close four restaurants because they’re not coming back.’
“That’s just how it works,” Musk added. “You can’t have all the information. The information we had Monday morning was not the information we had Monday afternoon, and it was not the same information we had the next day. No one expected eight weeks to be closed. No one.”
The Family Fund is administered by a third-party nonprofit in West Palm Beach, Florida, called Emergency Assistance Foundation, Inc. The fund was initially administered under Internal Revenue Service guidelines that prevented payouts to former employees, the company said. According to a companywide note addressing frequently asked questions about the fund, those restrictions were lifted when President Donald Trump announced a national emergency. The declaration—Musk’s team discovered—allowed the fund to be designated as an Immediate Response Program, which “makes it easier to apply for and get financial assistance to eligible team members” and opens the fund to recently laid-off workers. The fund, as it was initially constructed, was previously suspended because of “excessive” $200 application fees that were to be taken from the fund’s balance. The revamped fund—which now will carry $25 application fees—could be opened by Monday. The company note says laid-off employees who donated to the fund can receive a refund. At the most, an employee would have given $130 over 12 months—or roughly $260 since the fund’s inception, in April 2018
Money for the reconfigured fund will be taken through tips at currently open Next Door restaurants, where salaried workers are fulfilling take-out orders. That money—which will be collected through May 20—will then be matched by Musk. The restaurateur would not say how much money the fund might raise but added that he was “optimistic” that the number could extend into tens of thousands of dollars. An application, Musk added, did not ensure that current or former employees would receive the grant, though he said the fund would be exhausted by this summer.
Mason Whitman, the former head chef at Musk’s Next Door restaurant in Memphis, said his job was “the best I’ve had in the industry,” which left him disappointed about how the Family Fund was portrayed to him and his co-workers. “It wasn’t what it was made out to be,” he said. “I know business is business, and I don’t blame [Musk] for having to close restaurants and do layoffs, but all of this definitely could have been handled a lot better.”