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The Organic Coup

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How Costco Execs Plan to Overthrow Fast Food With The Organic Coup

America's first USDA-certified organic fast food restaurant is just making a pit stop in San Francisco on its way to world domination

Billed as the country's first USDA-certified organic fast food restaurant, The Organic Coup opened in Pleasanton this past November with essentially just one thing on its menu: a fried chicken sandwich. From the beginning the modest store had grand plans, chief among them to expand to ten locations in the Bay Area by the end of 2016. It seems incredibly ambitious, but the store is already well on its way, with a San Francisco Rincon Center location now softly open as of Wednesday, and two more to follow quickly on its heels in the Financial District and Pleasant Hill.

Co-founders Erica Welton and Dennis Hoover are ex-Costco executives with a combined 47 years of Costco experience between them, and they are owed some credit for the rise of the organic food movement, and all the credit for Costco now being the largest organic retailer in America (yes, over Whole Foods). The Organic Coup's rapid growth is no accident — Welton and Hoover are now applying the scale, operations and culture of Costco to the chain, all with the goal to compete with the likes of In-N-Out and Chipotle. Here's how they just may do it.


Coming Up Costco

Dennis Hoover and Erica Welton

Costco first introduced organic milk in 2003, and Welton was the one who brought the item into stores. She spent the next 12 years turning Costco into the nation's top organic food retailer, eventually wielding so much influence in the organic world that she could convince corporations to develop exclusively for Costco. It was at Welton's request that Lay's created its first organic potato chip, and why Hidden Valley removed MSG from its Costco ranch dressing.

It's safe to say she's a big deal, which is why Hoover needed no persuasion to sign on to the project. Welton approached him with the idea for The Organic Coup just as he was retiring from his position as senior vice-president for Costco's Bay Area region. After 33 years at Costco, during which time he oversaw $11 billion in business and 15,000 employees, Hoover knew the score. "It was Erica's vision from the start," Hoover told Eater. "She's an unbelievable businessperson."

Each now play to their strengths, with Welton driving the organic and food aspect, while Hoover focuses more on operations. But it's with "the Costco way" in mind. "That Costco mindset — whether it's on the quality of the product or rewarding our employees with the right wage or driving volume and being the most efficient that we could possibly be — all of that went into the thought of this business," Welton told Eater.

Creating a Concept

The idea for a cleaner fast food option first occurred to Welton in the standard entrepreneurial way: identifying a hole in the market. "Having kids, our house over the last 10 years transitioned to the point where 80 percent of our house is organic. I just look for clean food. I travel around with prosciutto and almonds in my pocket just to have clean snacks," Welton said. "I realized, 'Wow, there are other people like me. Where are they eating?'"

Welton was in the perfect place to see how much people were willing to pay for organic. "People started speaking with their dollar more and more [at Costco] to the point where we were up over 100 percent [in sales in the category]," she said.

With this knowledge in mind, Welton attacked how to best plug that hole. "Fried chicken sandwiches were so popular, between Chick-fil-A, Fuku, Shake Shack, Bakesale Betty. Between 2014 and 2015, it was kind of like 'the item' of ready-to-eat food," Welton said.

The Rincon Center location. | Photo: Patricia Chang

With a "clean" concept, fried chicken may seem an odd choice over the healthier grilled, but Welton insisted on it. "I wanted to offer something people can't get everywhere and don't make at home for themselves. Grilled chicken just doesn't seem special. Not that we wouldn't ever have it, but it is not something I would expect to be center stage," she said. "I wanted to serve food that tasted awesome — and oh by the way, it happens to be organic."

Making the Menu

With fried chicken decided upon, Welton set out to make the best version possible, enlisting a consulting chef in Florida (whose name she is keeping private, though she chose him for his "high-end background and experience with fried chicken"). "The fried chicken is our organic diva," Welton said, so while she developed a lot of the other items, like the sauces, herself, she felt it was necessary to bring in a chef to find the right breading and seasoning ratios.

Welton and Hoover recognized they had to keep the menu simple in order to gain organic certification, so once they had the right main item, they stuck with it in three different variations: a sandwich with slaw, a wrap with slaw, and slaw salad. The slaw has cabbage, carrots, jalapeño, and red onions. There are a lot of ways to customize with the sauces — ranch, sesame ginger, spicy barbecue ranch, and mustard vinaigrette — that Welton said gives people "a different eating experience every time."

The Organic Coup

The menu in full. | Photos: The Organic Coup & Patricia Chang

The only other item on the menu (besides organic drinks sourced from outside vendors) is the chocolate caramel popcorn. It's incredibly simple compared to the myriad of options available at McDonald's or Chipotle, but "our menu is our business plan," Hoover said. "The only reason we're sitting here is because that sandwich is delicious." Welton has already experimented with adding dishes — tater tots are at the Pleasanton store and will come to SF in a few weeks, the SF location is debuting with a tofu option, and a breakfast item will be added to both stores come June.

The menu may be short, but developing it was not. Take just the ranch sauce, which Welton said was the hardest item to develop. She recognized that the flavor had to compete with the category leader, which is Hidden Valley. "When people think ranch, their mind immediately remembers Hidden Valley. Because Hidden Valley ranch has MSG, and that chemical in it kind of imprints on your mind that taste, that eating experience," she said. "We wanted to deliver that level of quality and not disappoint people." Some of the ingredients used to mimic the flavor include kombu extract and shiitake extract.

Sourcing Suppliers

With a concept basing itself on being organic, finding the right suppliers was essential. Welton wanted them to not only be organic, but also local. With that in mind she wielded her strong influence from her Costco days to get top organic suppliers to develop product specially for The Organic Coup:

  • The chicken: Mary's Air-Chilled Organic Chicken. Mary's chicken is sweeping the nation, seen with increasing frequency on restaurant menus and in Whole Foods. Rather than chill the chicken in chlorinated water, which is how most chicken producers do it, Mary's chills the chicken in a refrigerator. It also kills the chicken in a less stressful way than standard industry practice.

    For Welton, Mary's (located in San Joaquin Valley) started raising five-pound chickens, which created the perfect size breasts for her chicken sandwich, once cut in half. "She helped get our chickens in different marketplaces," Mary's Northern California sales representative Dan Sinkay told Eater SF as to why Mary's went through the extra effort for Welton.
  • The Hodo Soy tofu patty

  • The tofu burger: Hodo Soy. Right here in Oakland, Hodo Soy is used by many local chefs like Corey Lee and Daniel Patterson, as well as national brands like Chipotle.
  • The bun and wrap: Best Xpress. "I had executives from Bimbo bread company, which is the largest bread company in the U.S., come in and ask, 'Who is doing this bread because your bun is awesome,'" Welton said. That company is Best Xpress, which — surprise — developed the bun and wrap for Welton after supplying bread to Costco for the past 30 years.
  • The tater tots: Cascadian Farm. This all-organic farm in Washington supplies the frozen product for the soon-to-come at all locations tater tots. Suppliers for this product will be switching up over time.
  • The produce: Bay Cities Produce. "I was nervous about the produce, of course, especially after Chipotle," Welton said. But Bay Cities Produce "not only tests the produce that's washed, but they also test the water that the produce is washed in, and they have a lab in house where they're testing every production line," according to Welton.
  • The popcorn: Popcornopolis. The variety of popcorn The Organic Coup uses from this Los Angeles-based company is coated in caramel and drizzled with white and milk chocolate, plus the SF store now freshly pops some with sea salt.
  • The oil: Nutiva Refined Organic Coconut Oil. Though this is the most expensive oil Welton could use, she insisted on it for its clean flavor and nutritional benefits.

Pushing Paperwork

There are under a dozen USDA-certified organic restaurants in America, and most of them are in California (like Core Kitchen in Oakland). In order for a restaurant to get USDA certification (just like a farm or a brand), it must show that every product used — from the food to the cleaning solution — is USDA-certified organic. It's the only guaranteed way to know a restaurant is serving legitimately (or, at least, government-certified) organic items, and the process isn't difficult (nor terribly expensive), Hoover said, just time-consuming with a lot of paperwork.

"We're offering a choice for families and people that want to have something fast and not have to worry about the chemicals."

As to why businesses may do it? "It reaches a certain clientele," USDA public affairs specialist Sam Jones-Ellard told Eater. "It's really just a business decision on their end whether or not they think that's something that's worthwhile that will draw in more customers, or something they might not want to invest the time and resources into."

It was obviously worth it to The Organic Coup, which bases its entire business plan on being certified organic. "Both Erica and I have been passionate about this movement — not just from an organic standpoint, but really the whole carbon footprint , the sustainability part of it — and that's what drives us," Hoover said. "We feel good about the opportunity to drive this business. We're offering a choice for families and people that want to have something fast and not have to worry about the chemicals."

Hatching the First Organic Coup

With the concept solidly in place, Welton and Hoover agonized over the right name, which ended up being an autocorrect win. "He texted me, 'What about The Organic Coup,' and he meant coop, but you know how Siri does autocorrect. I read it and I'm like, 'Oh my god, that's brilliant; yeah, like a takeover,' and he's like, 'What are you talking about?' And I'm like, 'Coup! You said coup!' So we just kind of went with it,'" Welton recounted.

Pleasanton may seem like a random choice for The Organic Coup's first location, but the team got the chance to use the space and thought it "would be a good place to do our proof of concept," Hoover explained. The last few months have seen visitors as far as New York City (including Food Babe Vani Hari, Warriors player Mo Speights, Raiders punter Marquette King and more), catering is a huge business from nearby offices and families make Saturdays the busiest day at that location.

And — the biggest proof of all — the store is set to do $700,000 in sales its first year according to Hoover, despite being a low foot traffic area. According to SF restaurant broker Cameron Baird, those numbers are pretty on par for a first-year restaurant, which in city proper is doing okay if it makes $600 per square foot annually and very well if it makes $1,000 per square foot. Those sales  — for Pleasanton — put the restaurant in the okay range.

Welton with the SF team. | Photo: Patricia Chang

An emphasis on training, citing In-N-Out's service as the gold standard for fast food, is also in the duo's plan. Part of The Organic Coup's vision is to pay its employees more than minimum wage, which is already in effect at the Pleasanton store. In San Francisco, workers start at $15 an hour and are bumped to $16 an hour after a three-month probation period. For comparison, SF's minimum wage is set to be raised to $13 an hour in July. "We're very proud of that, and we haven't experienced near the turnover of that of the industry," Welton said.

Staging the Coup

The Rincon Center location is only just open, but Welton and Hoover are already working on the next locations. Leases have been signed for a Financial District spot at Kearny and Sutter (224 Kearny St.), as well as one in Pleasant Hill near the movie theater (34 Crescent Plz.). The goal is to hit ten in the Bay Area in 2016.

The Rincon Center location. | Photos: Patricia Chang

Hoover anticipates the SF location to double the sales of Pleasanton (to $1,400,000 in the first year, or over $2,000 per square foot) because of foot traffic. "Everything we do is big. We are the first certified fast food restaurant in America, but our internal goal is to also be the most efficient restaurant in America," Hoover said. "We can do that based on the logistics that Erica has set up not only in food safety, but with her food products and the way we source product."

Growing Pains

Sourcing product is what CUESA executive director Marcy Coburn anticipates will be The Organic Coup's biggest challenge moving forward. "As you scale and demand grows for organic ingredients, it's going to be harder and harder to find the volume I anticipate they want to find in order to support many stores," Coburn told Eater. "I just heard Walter Robb, the CEO of Whole Foods, speak, and he said their biggest challenge is the supply side. They can't get enough organic product to support their demand."

"All I'll say is we're from Costco. At Costco everything is big, so we're used to scaling."

Mary's Chicken, at least, already has a plan in place to grow with The Organic Coup. "We're always working on building our current farms and expanding. We're building a new processing plant to accommodate the growth we expect to see. It's not just [Welton's] restaurant that's expanding," Mary's Sinkay said. "The clean food segment is growing, and our meat departments are growing at 10 percent every year, so in 10 years we're doubling our business."

The 10-Year Plan

Welton and Hoover are obviously playing the long game. Despite trying to play down the brand's future plans ("The whole team is focused on tomorrow," Hoover said), Welton admits her dream location is Las Vegas, while Hoover's is Disneyland — both are ambitious.

Both Welton and Hoover offer somewhat canned versions of their 10-year plans — "I hope The Organic Coup has locations coast to coast and inspires more people to go organic," Welton said, and, "We have an overall five-year plan, and after we finish a year we'll come back and talk and go from there," from Hoover. But Hoover cryptically says it best after some prodding.

"All I'll say is we're from Costco," he said. "At Costco everything is big, so we're used to scaling."

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