Beloved Tri-Cities restaurant incubator under fire for mismanagement, financial chaos

Pasco Specialty Kitchen, the beloved business incubator that helped launch some of the region’s best known restaurants, is under fire for mismanagement, financial chaos and even unsanitary conditions.

Damien Davis, who managed the kitchen in 2018 and is now a consultant, said it had become “rudderless” in a 2022 assessment commissioned by the Downtown Pasco Development Authority. The authority runs the kitchen and oversees key city initiatives, including the Pasco Farmers Market, Cinco de Mayo festival and other programs.

“The (Pasco Specialty Kitchen) is an understaffed, undertrained, and underfunded community asset that has been plagued by inadequate program direction and a complete lack of community awareness of its very existence,” Davis wrote.

The quasi municipal agency contracted with Davis’ firm, Davis Consulting 509 Prime LLC, to support the farmers market in mid-2022.

In February, it signed a new $45,000 agreement for him to advise the kitchen on a turnaround.

The development authority established the kitchen, which is known by its initials “PSK,” in 2003 to support food and restaurant startups, including food trucks. Tenants lease time in the 10,000-square-foot facility at 110 S. Fourth Ave. as they build their businesses.

Ideally, its clients graduate and become standalone businesses and restaurants.

Many have done just that. The incubator’s client list includes Ciao Trattoria restaurant, Fast & Curryous, DeliCakes by Angelica, Brother’s Cheese Steaks, Eat Hot Tamales, Ninja Bistro, Pepper Preppers and many more.

But 2018 was the last time revenue covered costs. The deficit has grown in recent years, according to Davis.

The DPDA released Davis’s unsparing assessment to the Tri-City Herald.

In it, he says the red ink can end this year if specialty kitchen adopts a back-to-basics strategy for marketing, record keeping, billing and other activities.

DPDA at a crossroads

The report comes as the development authority comes under scrutiny from the city of Pasco, which created it to operate the kitchen, organize key public events, support economic vitality in downtown and manage the local Main Street program.

The authority and the city have engaged a separate consultant to study the organization and get to the root cause of its recent difficulties, which include a series of executive directors.

Kylie Grimes, chair of the DPDA board, said the loss of institutional knowledge is part of the reason behind the challenges.

In 2022, the development authority lost tens of thousands of dollars managing Cinco de Mayo, a signature event. Its losses included $42,000 in rebooking fees over a communications issue.

The trouble was evident in December, the authority asked the Pasco City Council to raise its 2023 subsidy to $240,000, more than twice the $100,000 it previously received.

The council agreed, but on a 5-2 vote that included a stern warning that group needed to report its progress amid a sense by some that it was “fundamentally broken.”

The council cast the decision as a vote of confidence in Jerry Martinez, who was appointed executive director in June.

Martinez said he’s eager to get to the root of the challenges.

“Are there some areas where we need to dive into our nonprofit and focus less on development?” he said. “Is there a better way to be the DPDA?”

Specialty kitchen losses

According to Davis, the specialty kitchen expenses total about $144,000 a year. Client fees and city subsidies via the federal Community Development Block Grant Program pay the bulk of the bills.

The development authority makes up shortfalls from its budget, which is $566,000 for 2023.

Davis said 2018 was the last year rent and city subsidies were enough to break even. It lost $14,000 in 2019, $22,000 in 2020, $63,000 in 2021 and an estimated $70,000 in 2022.

Grimes, the board chair, clarified that a prior manager chose to withdraw the incubator from the block grant program, which reimburses expenses. It has re-enrolled and 2023 expenses will be covered, she said.

Excess earnings from 2018 carried it through mid-2021, Davis said.

About a dozen tenant-clients use the kitchen, a drop from recent years. Davis said 20-25 clients is ideal.

At least one current client said he’s happy to call the specialty kitchen home.

Marcus Ash, owner of Marcus Made It, formed his business four years ago and moved it into the kitchen a year later. Ash uses the wash facilities and refrigerators, but has his own fryer.

Marcus Made It specializes in Southern cuisine such as fried chicken, macaroni and cheese, buttermilk biscuits, collard greens and more..

Under the new management, repairs are happening faster, he said.

“It’s been wonderful,” he said.

He would love to sell through the specialty kitchen’s walk-up window, which is available after Brother’s Cheese Steaks moved to its own storefront on West Gage Boulevard near Costco in 2022, but for now it is too expensive.

But, he said, that’s the “dream.”

Complaints mounted

The report blamed chaotic business practices for the kitchen’s financial problems.

Davis said clients face fluctuating costs and said they had not heard a clear plan about improving the facility. He recommended updating equipment and adding staff.

Davis found critical files associated with the federal grant program weren’t being maintained. Intake interviews were incomplete. There were no marketing materials or even a list of prospective clients interested in using the kitchen.

Morale was low and communication poor, he reported.

Particularly damning, Davis said the kitchen nearly lost its certifications to operate from the Benton Franklin Health District and the U.S. Department of Agriculture. Re-certification could have taken 18 months.

“If you lapse, it’s a big deal,” Davis told the development authority board during a February update.

A client survey found concerns around trust, sanitation, lack of updates, inconsistent operations, missed opportunities and overall ambivalence, according to his assessment.

Kitchen potential

The Davis report is nevertheless bullish on the potential of the specialty kitchen to support food-related entrepreneurship.

“The (kitchen) is a resource that can and should be targeted toward incubation and acceleration in a city that is considered a boomtown. However intentional or not the (kitchen) is rampant with inefficiencies and seems a rudderless program during much of its existence,” the report concluded.

Martinez said the report represents conditions in 2022, before the work to improve the business began. He is committed to carrying out the steps needed to get back on track.

“The report from Damien is very helpful from an operations perspective,” he said.

Grimes agreed. The specialty kitchen is an important tool for entrepreneurs who want to sell food items at farmers markets and elsewhere but can’t afford their own commercial kitchens. She’s particularly proud of DeliCakes, a recent graduate that moved into its own brick and mortar shop in Kennewick.

“Anytime that we have somebody graduate, it’s a success,” she said.