Last week’s announcement that beloved Melbourne watering hole and live music spot Shebeen was to close imminently was an especially sad event for music fans, who’ve grown accustomed to seeing their favourite venues go under.
Shebeen was, of course, a venue with a difference. Founded by Simon Griffiths, the owner of socially conscious Who Gives A Crap toilet paper, and veteran Melbourne publican Vernon Chalker, the venue gave 100 percent of its profits to charity.
But when the venue confirmed its closure last week, questions arose about just what kind of contributions Shebeen had made, as well as uncertainty about just what the circumstances of the venue’s closure were.
“Over the last 12 months it has become apparent that the wall of our band room is shared with the Melbourne East Police Station’s sleeping quarters,” the owners of the venue wrote in a statement.
“As a result we have received significant pressure from the Police and the VCGLR, and we received an infringement notice from the VCGLR which we have unsuccessfully appealed.”
“After working with our landlord to look at all available options we are incredibly sad to announce that we will be closing Shebeen for business on June 25.”
“We’re deeply sorry for all of the shows that were booked after this date and are working flat out with The Venue Collective to find new homes for all of these shows.”
“We owe a huge thank you to everyone that has been a part of Shebeen to date, and would love to see you for one last non-profit song, banh mi or drink before we close our doors.”
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Tone Deaf subsequently obtained a copy of Shebeen’s venue license and found that the venue had been operating with a restaurant and cafe license, which comes with a list of restrictions regarding noise, the sale of alcohol, and the service of food.
Eyebrows were then raised when Griffiths told a Fairfax interviewer that the venue’s affiliate charities, which includes groups like the One Acre Fund and Vision Spring, may not receive any money in the end.
“I think since making that investment we probably will not be able to donate in the end,” Griffiths told The Age, who reported that the venue had still not made back the money first invested in the bar when it opened in 2013.
According to a spokesperson for Griffiths, The Age had misquoted the Shebeen founder and the venue had indeed made donations to charity. As for the venue’s closure, “extreme pressures” from regulatory bodies had made the business unviable.
So what actually transpired to result in the closure of Melbourne’s favourite ‘philanthro-pub’? Why did the venue close so suddenly and what was their actual relationship with their affiliate charities? The answers are in fact related.
Shebeen was the brainchild of Griffiths, who came up with the idea after travelling around the world and frequenting bars and eateries in developing countries. The concept was simple: punters buy drinks and the money goes to help the country where the drink was made.
The idea finally came to fruition in 2013. As Griffiths told Open Journal, all professional services from legal matters to graphic design and PR were provided pro-bono. Even light fittings were provided for free by Coco Flip.
“Financially, we had about 25 private ‘social investors’ (who don’t receive any financial return on their capital) put cash behind us, then created product partnerships with Brown-Forman, Schweppes and Silver Chef to build the remainder of our start-up budget,” Griffiths said.
Things were off to a great start. Just six months after opening, Broadsheet reported that things at Shebeen were going superbly and that the venue had already managed to raise “a mighty $12,000 ready for donation”. But Griffiths’ ambitions were high.
“$12,000 is a great achievement, but that’s just increasing,” the founder told Broadsheet. “The goal is somewhere between $100,000 to $200,000 for the end of our first year. We’re on track to make that happen.”
But then well-meaning idealism came face-to-face with reality. According to documents obtained exclusively by Tone Deaf, Shebeen made a donation of $10,000 to Rotary, to be distributed amongst the affiliate charities, in June 2013 based on its expected profit at 30th June.
At the end of the financial year it set aside an additional $2,787 for future donations. However, as Shebeen wrote in a statement, “In hindsight, donations were made too early as the complexities of the business and accounting principles were not fully understood.”
As a result, from an accounting point of view, Shebeen made a loss during the 2013 financial year. The non-profit venue had not only donated its profits but the bottom line that every organisation needs to keep it afloat.
When Shebeen managed to turn “a small profit” in the 2014 financial year, the directors of the company quickly realised that the venue did not have sufficient cash flow to make a donation “as it was an accounting profit, not a cash profit”.
They decided to build up cash reserves to ensure the future of Shebeen before making any further donations. The company took on a small loss in 2015 due to operational costs, which were to be accounted for the following year, but then fate intervened.
Whilst both the Victorian Commission for Gambling and Liquor Regulation (VCGLR) and Victoria Police insisted pressure put on Shebeen was minimal when contacted by Tone Deaf, amounting to a formal warning and a single infringement notice, Shebeen tell a different story.
According to an official Shebeen document, amid declining operating revenues, the venue began to receive “regular visits from members of the nearby police department” unhappy about the noise bleeding into their sleeping quarters.
The visits began in July 2015 and whilst not all of the police’s complaints were formally registered, venue management “corresponded and met regularly with them to try to address their grievances, and did everything we could do appease them”.
“It wasn’t enough. They questioned our staff, Directors and lawyers on every aspect of our liquor licence and operations.” The enquiries eventually made their way to the VCGLR who tested noise levels inside the venue and did not find any compliance issues.
“The goal is somewhere between $100,000 to $200,000 for the end of our first year. We’re on track to make that happen.”However, the VCGLR did take issue with the way the venue had been operating, which they claimed was in breach of their license, issuing a fine. Shebeen’s lawyers contested the infringement, insisting it was issued contrary to law and based on a misinterpretation of the license terms.
Unlike licenses granted to bars and live music venues, Shebeen’s restaurant and cafe license, inherited from its previous incarnation as Manchester Lane jazz club, meant the predominant activity on the premises must be the preparation and serving of meals “at all times”.
The license also restricts live music noise to within trading hours, defined as 11pm, and the venue must have enough tables and chairs in place to seat “at least 75 percent of the people on the premises at any given time”.
“Thousands of licensees that hold restaurant and café licences would be in breach of their licence conditions every day if their licence was put under the same scrutiny as ours,” Shebeen’s lawyers reportedly advised management.
The venue was forced to shut off live music after 11pm, severely impacting revenue as the business attempted to reshape its model. After a failed appeal and without resources to pursue the matter in the Magistrates Court, Shebeen was done for.
Griffiths, who told Tone Deaf that his gross wage from Shebeen since it opened in 2013 totalled $26,264, began to loan Shebeen funds on an interest-free basis in 2015. They money covered day-to-day operating costs like staff wages and supplier costs.
The loan was to be repaid slowly once the venue’s performance improved, with repayments dependent on Shebeen’s profit and cash flow. Some of the businesses who most have trouble managing margins and not having revenue swallowed up by operational costs are live music venues and non-profits, and Shebeen was both.
But all the while punters remained unawares. Shebeen continued to promote a reputation as a non-profit bar that gave all of its ‘money’ to charity. When you purchased Bia Ha Noi beer, your cash went to “help Room to Read provide eduction to school kids in Vietnam”.
Shebeen would say as much on their website and their official Facebook page, reminding punters that the money they spent on grog was actually helping people. Griffiths didn’t try to break the veneer in interviews, either.
Speaking to Australian Ethical in June 2014, Griffiths told an interviewer, “Last year we were able to make our first donation of $12,000 and the projections for this year are looking fantastic.”
In retrospect, it seems as though an opportunity was missed. The company who’d previously asked punters to contribute to crowdfunding campaigns was suddenly too shy to be upfront about floundering revenues and ask for the community to support what everyone agreed was a great idea.
When one looks at the swift rise and fall of Shebeen, it seems it was the ambition and idealism behind the very idea of a ‘non-profit venue’ that became its undoing. The great idea crumbled under the pressure of regulatory bodies and one has to wonder what that could mean for the future of venues everywhere.
