Spilt Milk: The Journey of Harvey Milk’s American Diner

Editor’s Note 10/30/14: LGBT Weekly was contacted by the Milk Foundation’s attorney who assured us that despite what Nicole Murray Ramirez stated in his interview with LGBT Weekly, the Foundation’s attorney did not recommend withdrawing the Harvey Milk license.

Many in the community were shocked and saddened by the sudden shuttering of Harvey Milk’s American Diner. Part of the Hillcrest dining scene for one short year, the closing has drawn the inevitable question “what happened”? Let’s start at the beginning.

The concept of Harvey Milk’s was the brainchild of Mike Phillips and Frank Lechner. According to Harvey Milk Foundation board member Nicole Murray Ramirez, Phillips and Lechner approached him about the idea of naming the restaurant Harvey Milk’s. Ramirez said that the rights to the name Harvey Milk belonged to the Milk family not the Foundation. He approached Stuart Milk with the Phillips/Lechner concept and made the introduction. Ramirez said “I talked to Stuart because I know Big Mike and this community and also Frank.” When asked whether he had ever seen the business plan, Ramirez replied, “No.” The plan was for the diner to donate 1 percent of the restaurant receipts to the Milk Foundation. “Stuart thought it was a good thing,” Ramirez continued.

Neither Phillips nor Lechner had any significant restaurant management experience. They reached out to Tom Brown to complete the team. Brown had years of experience in the restaurant business. “To be very candid, everyone had concerns about Tom Brown including myself,” said Ramirez. “ Many people warned Frank and Mike about Tom Brown because, sad to say, he’s been associated with some restaurants that have not made it … but Mike and Frank thought differently.”

Lechner, Phillips and Brown developed a business plan. The original plan included an event space, as well as a restaurant and bar. Armed with the business plan, the three approached the Harvey Milk Foundation with the support of Ramirez and Stuart Milk. After months of negotiations, a deal was cut and approved by the Milk Foundation Board of Directors that included Ramirez. The Milk Family licensed Harvey Milk’s name for the diner to Right Time and Place, a corporation formed by Lechner, Phillips and Brown, in exchange for 1 percent of the revenues to be paid to the Harvey Milk Foundation.

Now with the benefit of the gay icon’s name and the support of the Harvey Milk Foundation, the group sought investors to bring the concept to reality. After months of meetings and presentations, Right Time and Place raised the initial funds they thought necessary to open the diner. Right Time and Place acted as the holding company and established Harvey Milk’s American Diner SD, the corporation that would open and manage the restaurant. The major investors in the diner included Phil Pace of Phil’s BBQ fame, Bill Cary, an individual who works in the defense industry and Wayne Back, an owner of a local furniture delivery business. Phillips, Lechner and Brown were responsible for day-to-day operations, managing costs, profit and loss of the business, as well as being the faces of the business to the surrounding community.

While pursuing investors, Right Time and Place also scouted potential locations. The initial desired location for the diner was University Avenue between Eighth and Ninth Avenues in the two story building adjacent to Bank of America. The building had the room to accommodate the proposed event space, as well as the diner and bar. An agreement with the owner was not able to be reached, so the group continued to scout for a suitable location.

When City Deli was put up for sale, Right Time and Place pursued the location at the corner of Sixth and University. Due to the size of the location, the concept of an event space was scrapped and Harvey Milk’s would now just be a diner with a bar.

During this period Right Time and Place already was not meeting their obligations to the Milk Foundation. The group had agreed to specific opening deadlines that were not being met. The Milk Foundation allowed Right Time and Place two extensions to their opening date. While the missed deadlines may have caused concern within the Milk Foundation, the project moved forward.

The City Deli assets were purchased for $325,000 which included the kitchen appliances and the fixtures inside the restaurant. A new lease had to be negotiated with the landlord that was guaranteed by one of the investors. The guarantee ensured that the landlord would get his money in the event the diner did not make it. Harvey Milk’s now had an official address.

With an aggressive build out plan, the owners hoped to have the diner open before Pride 2013. Since Pride is the busiest outdoor festival in San Diego the thought was opening before Pride would ensure that the diner got off to a good start. Due to construction and permit delays, Harvey Milk’s opened the week after Pride.

Before serving their first meal, there were detractors of Harvey Milk’s within the LGBT community. Some thought the use of Harvey Milk’s name was inappropriate and vowed never to patronize the diner. Some asked “is there a restaurant named after Martin Luther King”?

Harvey Milk’s opened with much press and fanfare but when patrons arrived they were greeted by the same menu and staff of City Deli. Coupled with small cosmetic changes, many asked, “What’s the difference; it’s just City Deli with a new name”? The diner closed weeks later to “finish the remodel,” and to develop a new menu, revamp the staff and have a grand reopening.

The grand reopening celebration was planned to occur a few weeks after the diner construction was complete. Rumored honored guests were to be celebrities associated with the film Milk like Dustin Lance Black, Sean Penn, Cleve Jones and Stuart Milk. The event never happened.

With the remodel still not fully finished, Milk’s reopened and soldiered on. Hoping to recover from the initial criticisms concerning the food and service, the diner began to introduce new food items.

During the first six months of the business, the Yelp reviews were mixed at best. The reviews improved slightly over the last six months but there were still too many one and two star reviews to have Yelp drive customers to the diner. When asked what caused the food quality issue Ramirez said, “It was totally Tom Brown. Every one of (the owners) had their area. Tom Brown’s area was the kitchen, the food, and I told Big Mike you’ve got to weigh in on this as the food is not consistent. Tom Brown kept giving excuses.” When asked about Ramirez’s accusations, Tom Brown said “Nicole’s version of the facts is not true. I was sick, in and out of the hospital for the first year and a half. Frank Lechner would call me and we would try to run the kitchen together over the phone.”

All along the Harvey Milk Foundation was supposed to be receiving 1 percent of the sales receipts which Foundation Board member Miriam Richter said in an email “did not happen.” Harvey Milk’s did pay the Foundation $7,818.65 during the time it was operational. The Milk Foundation “had expenditures resulting from this agreement in excess of that amount which unfortunately means we have a net loss resulting from this venture,” continued Ms. Richter. The amount paid to the Foundation would be 1 percent of sale receipts had Harvey Milk’s generated $781,865.00 in revenue. The implication from the Foundation was that Harvey Milk’s revenues were much higher and therefore the 1 percent threshold was not met.

Rather quickly Harvey Milk’s reputation was set; so-so food, and challenging service. Service failure meant the diner was often giving out free food or drinks to accommodate unhappy customers, which affected the profitability of the restaurant. With the elimination of free parking a few months later, Tom Brown no longer involved in day-to-day operations due to health issues and a dash of community resentment at the use of Harvey Milk’s name; the owners had significant challenges before them.

Former employee management sources say that the owners never really had a handle on their food and labor costs. One former manager said, “The owners never communicated what the food costs were so I could not effectively manage my costs.”

To improve the volume of customers at Harvey Milk’s, the owners decided to implement a smaller version of their original event space concept. They partnered with the Sisters of Perpetual Indulgence, The Center, HRC, Lambda Archives and other community organizations to hold events in the bar space. The hope was that the event patrons would cover the cost of sponsoring the event by staying for dinner or imbibing a lot. The owners also thought the events were getting new people to try the restaurant.

Communication between the owners of the diner and the Milk Foundation was beginning to cause concern, Richter told LGBT Weekly. “The Foundation became concerned about the diner operations and our ability to get basic information including copies of required insurance along with non-receipt of the 1 percent of sales. We requested a meeting in San Diego this summer for which we sent, at our cost, the Foundation attorney and board leadership and we were assured they would take remedial action on all of our various concerns.” Ramirez attended that meeting and said, “I advised Stuart to withdraw his license and so did his attorney.” According to Ramirez, Stuart Milk did not rescind the license because of his relationship with Mike Phillips.

Diner employees indicated they were concerned that the events would often cost the organization money; in essence, the diner was losing money by providing the space to community organizations. With the restaurant’s sudden closing, several organizations were left scrambling for a space to hold their scheduled event.

Earlier in the year, Harvey Milk’s introduced Boy Bar to appeal to the younger demographic on Friday nights. In August, Harvey Milk’s was awarded a Nicky Award as Outstanding New Business. Yet, business was not improving appreciably. Employee sources also expressed that they told the owners that the Boy Bar concept did not fit with the diner concept. “You can’t have blasting techno music at 7 p.m. when a family is trying to eat its dinner,” one employee complained. Another said, “The half naked boy in the marketing did not appeal to many segments of the community.”

There were signs that something was amiss in the last several weeks of the diner’s existence. The pastry chef was let go, which is a red flag for a place that markets its desserts and bakery. Then the diner was no longer open in the early morning, changing its opening hour to 10 a.m., missing out on breakfast which is traditionally one of the busiest times for a diner.

While the signs were clear that the diner was experiencing operational issues, the employees were shocked Oct. 9, when they were told the diner was shuttering for reorganization. LGBT Weekly was the first to report the story.

The owners told LGBT Weekly that Harvey Milk’s would be closed for three days for reorganization. When queried about why the organization closed so suddenly, one owner indicated that he was as surprised by the closing as the employees. That response indicated that Lechner, Phillips and Brown were not the controlling interests in Harvey Milk’s. The people driving the shuttering decision were the investors who were financing the operation. Phillips, Lechner and Brown were providing sweat equity, meaning they had ownership but their true contribution was to be building and managing the restaurant to profitability.

While the community was abuzz about the closing, Channel 10 revealed that employees’ final checks were bouncing. While the reorganization statement on the front door was putting the best spin possible on the closing, the revelation that employees were not getting paid was a shock to the community. Former employees, as well as dismayed community members, were making negative comments on Facebook. LGBT Weekly received several complaints from former employees, including an alleged non-related legal action by a former transgender employee.

Lechner is the face of the closing, appearing on the news and issuing statements about the future of the location. As of this writing, there has been no update concerning the future of the space. The statement that the restaurant would “reopen in three days” clearly was not true. In an interview with Channel 10, Lechner indicated that all employees’ checks had been reissued and that restitution was made to the check cashing establishment that cashed the bounced checks. Former employees have cried foul, some indicating that they have not been reimbursed for bounced check charges and others saying they have not been contacted by the owners.

Former pastry chef Ray Vizcaino said, “I still have not received my last paycheck and when I ask when I am going to receive it, I’m told ‘legal is working with accounting, be patient.’” According to some former employees, Harvey Milk’s only made good on some bounced checks but has not dealt with outstanding balances for work performed from Oct. 1-9. “I have rent to pay,” Vizcaino added. Former Chef de Cuisine Anthony Bundrick supported Vizcaino’s claim, “I have not been paid and am owed $3,800.”

Some employees have talked to the California Division of Labor Standards Enforcement (Labor Board) about not receiving their last paychecks. The Labor Board indicated to LGBT Weekly that employees should receive their final paychecks within 72 hours of the closing. If the business fails to comply then there are penalties. The Labor Board Web site states, “An employer who willfully fails to pay any wages due a terminated employee (discharge or quit) in the prescribed time frame may be assessed a waiting time penalty. The waiting time penalty is an amount equal to the employee’s daily rate of pay for each day the wages remain unpaid, up to a maximum of thirty (30) calendar days.” The waiting time penalty is owed to any employee that files a valid claim.

“I was told by one of the owners that if I went to the Labor Board it would delay my final paycheck even further,” said Bundrick. The Labor Board indicated that this could be seen as a form of retaliation which could cause additional problems for the diner.

Harvey Milk Foundation Board member Miriam Richter said, “We are just very disturbed that Harvey’s name and the Milk Foundation are being damaged by the actions of this restaurant.” The damage continues while the name remains on the facility while the investors decide the location’s fate.

It remains to be seen whether the owners will remove all of the signage that bears Harvey Milk’s name and image to minimize any further consternation within the community. Today, the name Harvey Milk remains on a neighborhood vacant storefront a la Pernicano’s. Ms. Richter said the signage “would be provided to the Harvey Milk Foundation and not sold or auctioned for the benefit of the owners.”

There has been both an outpouring of support and disapproval for the faces of Harvey Milk’s American Diner; Lechner, Brown and Phillips. Some have complained that Lechner was recently elected to the Hillcrest Business Association (HBIA) even though his business is no longer operational. Mat Wahlstrom of Roberts Electric Service, Inc., a Hillcrest based business said, “Nothing personal, but Frank Lechner should have been dropped from the ballot, given that the HBIA knew his business is no longer in business and so no longer a valid member. Letting him stand for election violated the Bylaws, which stated members must ‘demonstrate that they are actively conducting business.’ Certainly it has been the case that any time a board member’s business has closed shop, they have immediately given up their seat on the board. (Recent examples: Jillian DiCola – Hollywood Tans, Sean Cute – Ruby Room, Robert Lane – 1202/The Range.) What this exception shows is that once again the HBIA believes it is above the rules – even its own.” HBIA was contacted to determine whether Lechner was part of the new HBA board of directors, but LGBT Weekly received no response.

In the end, this is a story of yet another failed restaurant in Hillcrest. The problem is that the community never expected Harvey Milk’s name to be tarnished because of it. Now the waiting begins, will Harvey Milk’s reopen? Ramirez says, “It will not reopen as Harvey Milk’s.” Will the name remain on the shuttered space indefinitely? Will a new restaurant emerge with the same investors and “owners”? All will be resolved in the coming months.

The owners of Harvey Milk’s American Diner were contacted to contribute to this article; LGBT Weekly received the following response from Franck Lechner:

“Thank you for contacting us. We have been advised not to do any more interviews with the press until further notice. I will be happy to do so after we have been given the green light. Thanks for understanding.”

All of the parties mentioned in this story were contacted for comment.