This Company Is Laying Off Employees Via Text Message
Fast casual chain Dig offers a real-time case study in how not to handle tough economic times
For the better part of the past decade, hungry, fashionable, and mostly millennial office workers in New York, Boston, and Philadelphia have assembled in snaking, overflowing lines at the 32 locations of Dig — formerly known as Dig Inn — to get their fast-casual lunchtime fix. Behind the counter, workers swirl about in controlled chaos, serving up a desk-friendly farm-to-table fantasy: some combination of wild salmon filet, farro, roasted Brussels sprouts, or cauliflower in a biodegradable to-go container for the lunchtime trade-up cost of about $12.
Founded in 2011 by former private equity associate Adam Eskin, Dig has built a following of lunchtime customers loyal to its vegetable-forward offerings, often sourced right from regional farms. Bolstered by investments from the likes of restaurateur Danny Meyer and other venture capital and private equity cash infusions, Dig helped usher in the Sweetgreenization of buzzing startup office districts along the East Coast.
But on Monday evening — on the heels of mass quarantines, a market crash, and a reeling restaurant industry — an estimated 40% of Dig’s 100-person corporate workforce was laid off across the Manhattan-based company. Staffers were informed via text message. A phone call followed 15 minutes later. Employees were told about their layoffs one by one, a laid-off employee (who requested anonymity) told me. “I knew the layoffs would happen — you could anticipate they were going to happen, given everything happening right now with the service industry in New York,” the former employee told me. “But when it happened, how it happened was a lot faster than I expected.”
As companies across virtually every industry brace for a coronavirus-triggered recession, Dig is a real-time case study in how not to let go of talent.
For laid-off workers, digital communications like email were shut off at 6:30 p.m. on Monday, just an hour or two after employees were informed of their termination. Each employee received two weeks of severance pay, regardless of how long they worked for Dig. In an email obtained by Marker, CEO Eskin acknowledged to employees that Dig had also made the tough decision to close “several” Dig restaurants, “with the potential for more to come.” Hundreds of Dig workers had been furloughed or laid off, he said, and Dig revenues were down 90% “and falling.” (Dig did not respond to a request for comment.)
As companies across virtually every industry brace for a coronavirus-triggered economic downturn, Dig is a real-time case study in how not to let go of talent. With statewide “shelter in place” orders continuing to roll out across the country, restaurant sales are projected to fall by 25% over the next three months, leading to losses of between 5 million to 7 million jobs. No restaurant, it seems, no matter how much funding it’s raised, is exempt from the tumult. In New Orleans, the devastation was sudden and brutal with the city’s biggest restaurant groups laying off large swaths of their workforces. A Change.org petition, signed by dozens of chefs nationally, urges government officials to “come to a swift plan for how you can meaningfully give your local restaurants the best chance for survival.”
For years, investors have been pumping millions of dollars into trendy fast-casual chains, a category first cracked open by Chipotle. Sweetgreen, which arguably led the fast-casual VC funding boom, managed to snag almost $500 million in VC funding at a valuation of over $1 billion, while the private-equity owners of Joe & the Juice were considering an IPO for their bougie juice shops last year. Investors view these retailers not just as places to get food, but as early stage scalable platforms.
The Dig layoffs are a reminder that the most vulnerable businesses right now are the ones that have already been experiencing signs of trouble.
In Dig’s case, it aimed to make simple, high-quality food available at a relatively affordable price with a focus on farming and sustainability (a few years ago, Dig followed in the footsteps of more upscale restaurants like the French Laundry and Blue Hill and opened a farm upstate in Chester, New York). It earned them the backing of both venture capital and private equity funding. As of last year, Dig had raised just over $50 million from investors including AVALT (also an investor in the fast-casual joint &pizza), Monogram Capital Partners, Bill Allen (the former CEO of OSI Restaurant Partners, which manages Outback Steakhouse), and Enlightened Hospitality Investments, a strategic investment platform within Danny Meyer’s Union Square Hospitality group. (In one of the most chilling blows to the industry this week, on Wednesday, Union Square Hospitality — the group not only behind Dig, but also Gramercy Tavern, Blue Smoke, and Shake Shack — laid off 2,000 people, some 80% of its workforce.)
The Dig layoffs are a reminder that the most vulnerable businesses right now are also the ones that have already been experiencing signs of trouble. According to three former employees, a report earlier this year revealed that Dig missed last year’s financial targets by $10 million. In recent months, the company began tightening its purse strings and cutting its marketing spend.
Dig also made a huge, expensive bet: a new upscale, vegetable-forward West Village restaurant called 232 Bleecker, helmed by the former chef de cuisine at Untitled at the Whitney. 232 Bleecker opened late last year to rave reviews and much hype, with $16 oven-roasted island creek oysters, $17 grilled carrots with hot honey, and $29 roasted scallops. The spending behind the restaurant, according to former Dig employees, was about $2 million. “It was the next shiny, new endeavor,” one former employee told me. In Eskin’s email to employees this week, he announced 232 Bleecker is one of the Dig locations that would be shuttered.
The company said that laid-off employees at Dig restaurants will be paid through their scheduled shifts, and “will begin receiving weekly food boxes to help bridge the time between now and when we hope to be able to hire everyone back.” Meanwhile, those who lost their jobs at corporate found it jarring to see Dig make an announcement on Instagram: The company had donated 4,000 meals this week to food banks and homeless shelters in light of the pandemic. “I think it’s kind of embarrassing for them,” one former employee told me. “You can’t be front-facing like that [on Instagram], and be firing people with just two weeks’ severance. I don’t care that I got laid off, I knew it was coming; it’s a matter of how it happened, when it happened.”
