A New Side of the Café Gratitude Closure Story, and Their Potentially Shady ‘Sacred Commerce’

Terces and Matthew Engelhart
Terces and Matthew Engelhart Photo: via Facebook

After learning earlier today that Café Gratitude was looking to sell their eight northern California restaurants because of some “aggressive lawsuits” they couldn’t afford to defend, Grub Street was contacted by a lawyer who’s currently bringing the two lawsuits, as well as a potential third suit, against the company that owns the restaurants, including the Mission’s super-popular Gracias Madre. Employment and civil rights attorney Stephen Sommers of local firm Kumin Sommers says he doesn’t buy for a second that the potential cost to the Gratitude owners of his current suits — estimated, at maximum, around $200,000 — is the primary reason for their saying that they need to close the businesses. “I live in the Mission and I walk by those restaurants all the time. They’re always packed, and they’re buying food from themselves, so how are they broke?” he says.

He adds, “A bowl of rice costs ten dollars! There’s something else going on here.” He notes that they don’t plan to close their farm in Vacaville — where owners Matthew and Terces Engelhart live (Terces is “secret” backwards, by the way, apropos of nothing) — or the central kitchen operation, near Rainbow Grocery on 14th Street, which supplies the restaurants with their vegan pizzas and “live” mac and cheese. With those two operations still running, he asserts they will likely just look to sell their foodstuffs to a new operator, in order to skirt further litigation or investigation into their other businesses.

We should clarify that neither the older claims regarding employees forced to take Landmark Forum seminars, nor any rumored ADA lawsuits, are a factor currently. And the primary beef from employees has to do not just with tip pooling, but with having to financially support a remote kitchen operation, and covering any daily losses from the restaurant’s take. Also, employees were allegedly given the choice to “either share your tips with managers, or lose your health insurance.”

The Engelharts wrote a book about their business practices in 2008, called Sacred Commerce, in which they justify their practice of sharing as being part of a new sacred community, a sort of anti-business business. “Our sacred enterprise, Cafe Gratitude, is sometimes accused of being a ‘cult’,” they write, “because the perception is that we ‘make’ people be grateful. Apparently the god of materialism, the Hungry Ghost, finds thankfulness threatening. But we are not threatened.” The gods of labor law may not find all this forced gratitude legal, that’s the only trouble.

Sommers points out that while crying poverty, Café Gratitude has brought on one of the biggest and priciest labor-defense firms in the country, Littler Mendelssohn, and if this were any normal labor dispute that firm would not likely be advising them to close their whole operation over a mere $200,000. “That’s just inviting further lawsuits,” he says. “All they’d need to do is change their tip-pooling practice — part of what they call their ‘sacred commerce’ that all employees participate in — pay some people out, and make everyone sign a waiver.”

Sommers also notes that after the current lawsuits were filed, and contrary to a claim of financial hardship, the Café Gratitude team took a three-week retreat with its whole managerial staff to Hawaii, to the vacation compound owned by the Engelharts.

There may be more to the story than just a couple of labor lawsuits, though. The Engelharts may claim that Sommers’s “aggressive” lawsuits are forcing them to close, but one of the people Sommers represents, current Café Gratitude employee Ravi Shankar (unrelated to the singer), is a bookkeeper who doesn’t come off as too aggressive at all. Shankar had been assisting Sommers with the first case, from the aforementioned former server Sarah Stevens, when it became clear to Sommers that Shankar had been misclassified as a full-time employee, and Café Gratitude was paying him a salary — under labor law, bookkeepers are always supposed to be classified as hourly employees. Shankar had a bone to pick with the owners over the fact that he had not been given adequate time off while his wife was ailing from cancer several years back, but he decided only to sue for back wages owed to him.

It gets fishier, though. Shankar says he witnessed, in the days after he and Stevens filed their suits against Café Gratitude, that the company purchased three industrial-sized paper-shredders and began covertly destroying documents in their main office.

All this, and the extension of the Gratitude empire into retail operations, as well as the business of spiritual “workshops,” points to the possibility that Café Gratitude’s plans extend well beyond the restaurant business, and perhaps that they have something more to hide. Terces Engelhart made a new plea to supporters today, via Facebook, that anyone who’d like to help the company in their hour of need should purchase some of their retail items, or sign up for one of these workshops.

The holidays are coming and many of our retail items are wonderful holiday presents. Our Abounding River board game is a meaningful gift for family and friends, and it is the beginning of the Gratitude Movement. … If you have participated in any of our workshops, please take what you learned, that had value to you, and give it away! If not, come join one of our upcoming workshops, they are still offered on a pay it forward basis.

As for when Café Gratitude will close, Engelhart encourages fans to keep coming in for the next few months as they figure things out. Sommers speculates that several locations haven’t been profitable at all, including their Healdsburg location, and that these will be let go while others may go to friendly buyers who will continue to do business with the Gratitude farm and food-prep operations. As for the Los Angeles location, which is somewhat of a celebrity hot-spot, that was sold to family members several years ago and remains a separate entity.

There’s bound to be more bad press stemming from all this, if not more lawsuits, so in the spirit of generosity we’ll leave off with Terces’s own words. “Be kind, offer forgiveness, acknowledge one another, take responsibility, be generous, know you will always be provided for and restore trust in all of your relationships. We continue to keep our hearts open and to be filled with gratitude for everything.”

Update: Matthew Engelhart responds to the lawsuits calling them “legalized extortion.” Also, this NYT piece from July bears noting — the Los Angeles location is said to bring in about $4 million a year in revenue, and is owned by the children of the Engelharts.

Café Gratitude to Close All Northern California Locations; Gracias Madre Threatened Too [Updated]
Café Gratitude Announces Closure [SFist]

A New Side of the Café Gratitude Closure Story, and Their Potentially Shady