food co-op moving forward

Brent Finnegan -- January 2nd, 2008

I’ve mentioned the Friendly City Food Co-op (FC2) on hburgnews before, but realized I never posted anything else about them.

Last week, FC2 organizers announced they have signed up more than 150 members to be part of their “consumer-owned, democratically-run cooperative” grocery store. When they reach 300 members, they say they will be able to “leverage additional bank financing, sign a lease agreement for a new store property, design and build-out the store renovation, and hire a general manager.”

21 Responses to “food co-op moving forward”

  1. John says:

    I love the idea of the co-op. However, I wonder why it is taking so darn long. Here is a list of things from their own website that they have done…

    “As of September 2007, after 20 months of effort, here’s what we’ve accomplished:

    Raised initial capital of $11,000 to begin work
    Hired Bill Gessner of CDS (Cooperative Development Services) to guide us through the start up of a cooperative grocery store business
    Developed a 3-stage business plan with an estimated opening of fall 2008
    Kicked off our membership drive with a community celebration held at the Hardesty Higgins House on a cold February evening with an attendance of 400
    Hired a lawyer to guide us through the incorporation, bylaws and securities laws of Virginia
    Renamed our Steering Committee the Founding Team, which has responsibility for guiding the organization up until the store is opened, at which point the Board of Directors will take full time control of the organization
    Held our first Members Meeting with 35 in attendance for a potluck at Hillendale Park in June, at which point we announced we had reached 100 members
    Now up to 125 members, as of the end of September 07
    Hired a market feasibility consultant who just finished his site visit in mid September and gave us a preliminary reaction: the market here looks very good for the launching of a retail food cooperative
    Hired a web developer to revamp our website and provide us technical support
    Divided our Founding Team into four primary support sub-teams: Membership Drive Team, Finance, Marketing, and Site Development

    I see alot of ‘activity’ but nothing really seems to be happening. And no, I have not contributed to the cause, so perhaps I have not earned the right to criticize. It looks like paralysis by analysis. Seems to me like it’s time to “sh– or get off the pot.”

    I’m sure that the fact that this is a ‘democracy’ is slowing things way down. Too many cooks in the kitchen, so to speak. Everyone is responsible for something, but no one is responsible for everything — it takes forever to get stuff done in an atmosphere like that.

    If they build it, I will definitely shop there.

  2. David Troyer says:

    Some would consider the progress they have made monumental, and while maybe not still on track for a Fall 2008 opening they must be close to that. I would join if I had plans to stay in Harrisonburg for a large chunk of time but I can’t commit to that.

  3. linz says:

    We happily joined the food co-op after talking to some of the organizers at a booth at the international festival. They were great about getting us all the info we wanted to review before joining and I highly recommend their website (linked in the posting) if you want to know more. It’s definitely good people trying to do a good thing for our community. I also appreciate the time and other resources that have also been spent on building a serious short and long term business model and what not.

    I think reaching the 150 mark is enough to show people on the fence that this is going to happen, so hopefully there will be a flood of new members so we can get this thing going! Could it be you??? :-)

    On a side note, my grandmother gave me a book for Christmas of her favorite recipes that she’s collected for decades and as I was looking through them I thought about how great it would be if the store was already open and I could try out the recipes using yummy organic and local ingredients from their shelves. Oh, and I would get a discount since I’m a member!

  4. Josh says:

    I’m with John, I’ll definitely shop at the co-op once it opens.

    How is the discount program structured now? I went to the February celebration/presentation and remember hearing that they plan to have one discount day per month for members. All other days, members and non-members pay the same price.

    Unfortunately, that makes membership a bit steep for a single person. It might make “feel good” sense but not much financial sense for someone in my shoes.

  5. Thanh says:

    I have been seriously debating whether or not to join the food coop for many months now. And I’ve met a number of cooperative founding members to have given many opportunities for them to convince me. (One of them lives across the street from me, I’ve met some at community events, and others at work related meetings.)

    I think the food cooperative is a wonderful idea, and like John and Josh, I will definitely shop there when it opens. I’ve had my hesitations on investing $200 to become a member, because a year ago I didn’t exactly have the money, and also because I wasn’t sold on the benefits they were trying to sell me.

    So yesterday, I emailed Jonathan Lantz-Trissell, one of the founding members, with some questions. I’ve asked for his permission to share his responses here in hburgnews and be happily obliged. And here they are below:

    = = = =

    THANH’S COMMENTS/ QUESTIONS:
    Hi Jonathan,

    I am strongly considering joining the food co-op. You might be wondering what has changed since we last spoke. My answer is, my perspective of membership benefits. Previously when I met with other steering committee members at local events, they tried to get my membership by telling me about the benefits of voting, buying in bulk, and having the opportunity to work at the coop if I wanted to. None of those were benefits I was seeking – I don’t have time to fully participate in voting because I’m involved in other community activities, I won’t be buying in bulk anytime soon because I live in a household of 2, and I probably wont be working at the coop.

    (For example, the reasons listed under “Why become and equity owner?” http://www.friendlycityfoodcoop.com/faqs.shtml do not satisfy me. Personally, I like the reasons explained at this page better, http://www.friendlycityfoodcoop.com/benefits.shtml, particularly under Community You Can Serve:

    – Owners will be supporting local farmers and revitalizing local agricultural infrastructure.
    – Owners will have the satisfaction of being part of the downtown rebirth.
    – Owners will have the satisfaction of being part of the movement to bring a full-service grocery store with healthy foods and products to our area, providing healthier food for our children, more sources of local sales for our farmers, and a center of community involvement around healthy food and lifestyle.

    JONATHAN’S RESPONSE:
    Good point. Different people write up different pieces and they obviously reflect why they personally are involved with the co-op. We definitely need the community piece in all our published materials though.

    THANH’S COMMENTS/ QUESTIONS:
    I began to think more about the other benefits that weren’t focused on by the steering committee members I had previously met. And I’ve been talking to other local food “activists” as well. I realize that I do want to better support local foods, etc, etc.

    I have some questions if you wouldn’t mind helping me.

    1. I understand that to date there are 165 members. Your website says somewhere (I can’t find it now) that you need 300 members in order to get equity and loans to start a process. What is that exactly?

    JONATHAN’S RESPONSE:
    Several reasons: we are not a huge corporation with lots of assets to borrow against for a new store. our assests are our member-owners primarily. the national cooperative bank who usually funds co-op groceries requires 30% roughly of total project costs to come from the ownership (membership). With our consultants we have come up with a project cost and working backwards have figured out how many members we need.

    THANH’S QUESTIONS/ COMMENTS:
    2. You say you need 300 members to get started, but on some materials I have received like the little bookmark thing, it says the co-op needs 800 members. What are 800 members needed for?

    JONANTHAN’S RESPONSE:
    We have several stages of membership to work through. At 300 member-owners we are able to establish that there is sufficient support in the community to continue on to stage 2, which includes serious commitments like securing a building lease typically for 10 years, hiring a general manager and securing financing for a $1.5 million project. The next benchmarks are 500 members and 800-1000 by opening in mid 2009.

    THANH’S QUESTION/ COMMENTS:
    3. There appears to be a large gap between 165 members and 800. The group has spent nearly 1 year to get 165 members. What are the groups plans for getting 635 members by 2009 when the store opens? Or do you only need 135 members?

    JONATHAN’S RESPONSE:
    Over the last 3 months we have been averaging 25 new member-owners a month, close to our goal of 30, which gets us past 800 by opening. Co-ops are not instant. Starting a new business by committee with hundreds of community members as owners takes a small miracle to accomplish (I have helped start a business before and I thought that was hard!!). But the time it takes is also its strength–we do up front what businesses spend the first two years building which is customers and community recognition. Our plans for getting new members is to get the current 165 to bring 2 other folks in as member-owners, and then those 300 to bring in 2 friends…. we are also constantly talking to groups like Rotary, church groups, businesses, etc. We have news pieces coming out on NPR, WSVA, the DN-R. It usually takes several conversations with each new member-owner (like yourself) and the 10 of us on the Founding Team can only do so much of it while each working full time besides. Most co-ops take 3-5 years to start. Our consultants are very impressed with our group, our process and how we are moving along our timeline. We will get to opening eventually. The sooner we get members, the faster that day will come!

    Feel free to call me with more questions. The fact that you are asking the questions makes you a great co-op owner (according to our consultants, co-op member-owners are usually highly educated and like to ask questions, which is why they don’t like shopping at places like Walmart and Food Lion!

    = = = = = =

    Jonathan’s responses got me thinking about a lot of things.

    – Is this an instance of where I should put my money where my mouth is? I talk about buying local and its importance for both human physical health, social health, and environmental health. But I only go to the farmers market on Saturdays in the Spring through Fall. This cooperative store would be open all year round and I could support local producers all year round. This store would also be open more days of the week, theoretically making it more convenient for me to buy more local foods and products.

    – If I invest in this, and if enough friends, neighbors and members of the community invest in this and make this venture a successful one, theoretically we will get a return on our $200 through savings received because we are members (the co-op talks about member discounts, etc)

    – I guess unless there’s somebody rich out there who can donate a large lump sum to get this store started so that they don’t have to get so many members to get a loan, they will need members of the community to contribute funds to get it started. Of course if someone wanted to contribute more than $200, they can buy more than one share, and I’m sure the current cooperative members would be happy to accept any money.

    – Although I personally have no plans on leaving this area. If I do end of leaving the area, I can sell my share back to the cooperative. (This is how I understood the contract that I recieved in my owner-member packet).

    – If this cooperative doesn’t work out because a large group of us are hesitant, then a cooperative idea like this probably wont come to this area for another 10+ years, or ever. A large number of serious people have already invested. So, I guess if the rest of us want a food cooperative to come to this area in the near future, then we need to invest in this initiative, get others to invest, and see it succeed.

    I need to mull all of this over with my fiancé later tonight, but I think this is an appropriate use of my funds.

  6. finnegan says:

    Good Q&A. Thanks for posting that, Thanh.

  7. Thanh says:

    No problem. Thanks to Jonathan really for taking the time to answer my questions and also for letting me post that.

    New cleared up thought for me
    – I’m begining to look at this $200 as an investment for my community as a whole. Not just for the other owners-members. If this venture succeeds, my investment will open up a food cooperative for a lot of other people to shop at. (It will open an opportunity for people who really cannot afford to invest $200 now, but may end up shopping at a place like this if it is available.)

  8. ammc says:

    Wow, thanks for all that info. Those were questions I had as well. I guess I’m still wondering what happens if the opening date still keeps getting pushed back, and how long people (and the co-op) are willing to wait before opening? Is it possible to open on a smaller level and then grow into the business plan? Seems like the projected ‘800 by opening’ is kind of vague since opening depends on when the 800 come. I’m super interested in supporting this venture and potentially becoming a member, but my situation is similar to Josh and Thanh. My family unit is small, my time is limited, and my budget pretty tight.

  9. linz says:

    Thanks Thanh and Jonathan! Great questions and thanks for putting your thoughts out there. I’ve had many of the same.

    Before joining, my husband and I discussed the investment of the $200 and how we interpreted that as well. The fact is, there is the possiblity of getting financial return on that some day and we already know there will be returns in the form of benefit to the community, and the return of having the ability to vote. But any investment is a risk if you’re looking to get your money back and then some and it could be a long time before we see that. So, before writing the check, we decided to only look at it in our own minds as a $200 gift to a great cause. The key word is gift. Thankfully we were in a position to do so.

    If we get something back, then great. If not, then we used our available resources to support something we really believe in and give people who are taking it seriously and putting a lot of their own time and money into the venture and chance to succeed.

    I know that $200 is a chunk of change. I’m sure many of us on this blog would like to drop money on things we care about, but we’re not always in a position to do so. But if you are, I think the food co-op is a great oppportunity; not just to support the store itself, but also to support another co-op business model in our area.

  10. David Miller says:

    I’ve joined. I’m looking forward to opening day. A grocery store, downtown! $200 is a small price to pay. If you review the agreement, you’ll find that it does benefit to join (if you need a better reason to want a locally owned grocery that attempts to purchase locally and provide our community with healthy low mileage foods).

  11. finnegan says:

    The DNR ran their story on FC2 today.

  12. Deb SF says:

    What great shorthand for the concept: low mileage foods. Thanks David!!!

    I’m in the middle of Michael Pollan’s new book: In Defense Of Food, which is in part an argument for just this kind of venture.

    http://www.amazon.com/Defense-Food-Eaters-Manifesto/dp/1594201455/ref=pd_bbs_sr_1?ie=UTF8&s=books&qid=1199720319&sr=8-1

  13. Thanh says:

    Thanks Deb for the book recommendation. I really enjoyed Polland’s “Omnivore’s Dilemma” and look forward to this next read.

    My finace and I joined the co-op. Everything got put into the mail yesterday. :o)

  14. Sam Nickels says:

    Hey folks. Great questions and comments. Glad to see this discussion is happenin.

    The DNR story gave us great coverage. We’ve had about 15 requests for member-owner packets at least. And we’re getting very excited about the upcoming ANNUAL FEBRUARY FOOD COOP CELEBRATION, downtown at Court Sq/Callies/Wine& Gourmet, Feb 16 all evening, so set that date aside. THE GOAL is to have owners invite new potential members, and tell them to bring their checkbooks.

    SOOOOO glad to see Thanh finally jumped on the bandwagon.

    AMMC had a question about number of members we need to open. Sorry this has been confusing, it is has been for us too, as we’ve worked with our national consultants (we want the best!). But basically we don’t want to get too hung up on them. They are ballpark figures. At 300 member we should have enough to begin a member loan campaign. This will be to ask owners who have capital in CDs or savings or wherever if they are willing to loan 5 or 10 or 25k to the coop on market rate terms, or better if they wish. The $200 shares and the loans will then make up the total owner equity capital needed to leverage bank financing. If we get lucky and get some big owner investors (they have to be owners to loan to the coop, VA securities laws), then we can move ahead more quickly and with fewer members. If we get little in member loans, we’ll have to work harder at getting members (maybe 600?) before we’ll have enough equity to leverage bank financing. The amount of money in the bank in turn determines when we can hire a GM, sign a lease and begin buildout (renovation). All this to say, we have a “plan” but reality is always different. Still, we are happy with progress to date.

    Early on “John” asked about our slow progress, and questioned whether democracy is slowing us down. Like Jonathan L-T I’d say democracy is our strong point. We have strong directive leaders, we have wise experienced consultants, and we have a Founding Team that has worked their butts off for 23 months. If anything, we need more people to join the Founding Team and help us with tasks to move this thing along. We’ve also hired a part time project manager to assist with owner-member recruitment (Adam Campbell) and he’s turned out to be doing an excellent job.

    The fact that we sign up members ahead of time (meeaning we have a nearly guaranteed clientele) means that there will be strong banking interest in our venture, which in turn means we can get favorable terms. The Founding Team made a strategic decision 20 months ago to NOT open a small store while we organized a larger venture, because it could sap our energy for developing a store that was large enough to appeal to many shoppers, obtain volume discounts, and be competitive with other local grocery stores. I think we made a good decision.

    The end goal here is better food and better health for our community. If doing it right means taking a few years to get it off the ground, that’s what we’ll do.

    Sam Nickels
    Co-Chair, Founding Team
    http://www.FriendlyCityFoodCoop.com (JOIN TODAY)
    476-4180

  15. John says:

    I was reading a blog this AM that I take a peek at about once a week, and thought about the Co-op as I read it. http://www.blogmaverick.com/2008/01/02/the-best-equity-is-sweat-equity/
    The guy who writes it is Mark Cuban, the dude who owns the Dallas Mavs of the NBA. He is a complete wacko but is an amazing businessman.

    I’m certainly not saying that the Co-op is ‘doing it wrong’. I guess I’m saying I think there is another, much faster way to get the store operating. There’s nothing wrong with starting small (with the option of expanding if you have success), or negotiating a lease that includes buildout in your terms (somthing I would definitly suggest that the Coop attempt to make happen – it would reduce your needed cash by 200k or so according to the numbrs on the website), or starting with used equipment, etc.

    In terms of marketing, I think I’d also focus on local business owners (especially ones that own restaurants). Offer them a larger discount, as they’d buy in volume. Or offer smaller discounts to employees of small companies that buy shares — they could sell it as a benefit of working for that employer. In other words, company X buys a share for $200 and that allows the 5 employees of that company to shop with a 2% discount.

    I’ve got a zillion ideas – and maybe some of them stink, but I bet they’d get the place open a whole lot faster, and with less risk to the investors. The benefits of this coop are non-existent until the doors open.

    That all being said, I can’t wait to shop there once it does open!

  16. Lantz-Trissel says:

    John and anyone else… please come out to a Friendly City Food Co-op founding team meeting. We’d love to hear some of your ideas. Meetings are the first Thursday of each month in the Community Mediation Center on Main Street.

    A couple comments… I read the blog you linked. 1) we are a start-up just like the companies Mark Cuban began. The twelve of us who have spent 5-10 hours per week for two years in our own dimly lit basements for no pay can tell you about sweat equity. We work off a shoestring budget. I’m sure within two years Cuban’s businesses were throwing around bigger numbers than we are. 2) Cuban talks about only capitalizing from you own money or that of your customers who advance you capital. Exactly what we are doing…how about an advance of $200, John? 3) Just like Cuban went to investment bankers and industry experts to help shape and critique his business ideas, we’ve met with the experts in our field: Cooperative Development Services; the GMs of Co-op Groceries in Roanoke, Chatham NC, Austin TX, Philadelphia PA, Tacoma Park MD; and several dozen business leaders here locally. 4) Groceries and the retail sector in general is different than the tech sector. 5) as a cooperative we abide by the Cooperative Principals one of which says all members are equal, so we don’t discount for some and not for others.

    Lots of sweat equity to go for FCFC… seriously, come join us.

  17. John says:

    LT — you are missing the point. My jist is that you all need to think smaller — not bigger. Cuban says in the article that he started Microsolutions with $500 (FC2 forecasts sources of 1.5 MILLION(!!!) The point is that you don’t have to start with 1.5 million. You could start with what you have now, or pretty darn close to it.

    By your numbers mentioned above (assuming an average number of 7.5 hours per week, per person) you all have accumulated 9,360 hours on this project thus far (7.5x52x2x12). Granted that I have contributed zero of those.

    And you are right — these 2 sectors have very little in common. Yours is exponentially simpler. Do you think that the co-op started by the folks at Little Grill had thousands of hours of planning and 2 years of intellectual development? I’ll guess and say no. I can only go by what I have read — and they claimed that they were breakeven when they closed. Seems to me that breakeven should be good enough for a FC2, no? Then grow from there? Heck, most businesses start out LOSING money.

    In regard to the ‘unequal discounts’ — find a way to make them equal! Sell your ‘shares’ to those most likely to buy in! I’d say by now that all of the people who were going to jump on the bandwagon have probably done so. Those left are either ambivalent or disinterested. Pitching shares to people in food service is a no-brainer. They have a DEFINITE need for your product. It is a far easier sale to convince someone that spends $800 per week on organic produce to buy in than it is to convince a family that spends $150 a week in total at the grocery store.

    I know I sound like I’m being negative. I just think you all need to adjust your ways of thinking to that of a business person– stop talking and start doing. There is a creative, quick solution to every single ‘problem’ that you all face, or think that youy face.

  18. kai says:

    2nd Annual Friendly City Food Co-op February Fest
    Feb 16th 7:00 – 10:00 p.m.

    At Harrisonburg’s

    Court Square Theater

    Cally’s Restaurant & Brewing Co. and

    Downtown Wine & Gourmet

    Share Free Food & Music with us in Cally’s Banquet Room

    Wine – Tasting

    Bid on Silent Auction Items

    With Music by

    Trent Wagler and the Steel Wheels*

    Your Room’s Right Here*

    Dave Landes

    Alex Albrecht

    The Lotus Eaters

    *These groups will perform in Court Square Theater,

    Concert Admission is $5 at the door for adults, children admitted free

    The purpose of this year’s Fest is to encourage new Friends to join the Co-op. So bring friends, and encourage them to join!

    For more information go to: http://www.friendlycityfoodcoop.com

  19. Thanh says:

    The tally on the Co-op’s website says they have 203 members! Pretty cool.

  20. Michael says:

    I am part of the Core Group with Valley Market, the grocery co-op forming in Staunton. I first wanted to say kudos to Friendly Cities and the progress they are making. Keep up the good work.

    Like a lot of the posters here, I did not understand why the Staunton co-op seemed to be so slow in developing. So I got involved (became a member and started volunteering). I quickly learned that co-ops of the general size and scope we are talking about here typically take 2-3 years from inception to grand opening. That’s right, 2-3 years. Further, unlike other types of business cited, “initial offerings” or “start small and grow into it” approaches almost always fail for co-ops.

    This information comes directly from folks who have opened co-ops all across this country, and is not my personal opinion. In fact, I was an extremely strong proponent of opening at the smallest scale possible and growing it from there. But the fact is, you cannot buy in the volume required to compete until you have a large enough base of membership upon which to have real purchasing power. People say they will shop there if you open now, but if carrots are 4 times as much as they are at Food Lion (or wherever), it will be a one time visit.

    Additionally, and perhaps most importantly, for those folks who feel that there is no benefit to membership until the store is open, they are missing the point of forming a cooperative. Anyone can shop at a co-op, and there would be no need for membership at all if that were the case. The reason to belong to a co-op, especially at this phase, is to invest in your community and provide an alternative way for member-owners to secure particular goods or service. If that isn’t reason enough to join, perhaps belonging to a co-op just isn’t for you.

    The Mark Cuban example and those in his article (Dell, Apple, MicroSoft) were indeed all started on a shoe-string, and are wildly profitable, global brands. They all also have one ego-maniac at the helm whose only real goal, at the end of the day, is to make as much money for himself and his shareholders as possible. If that means firing all of the employees of a division and shipping their jobs to China, then so be it. Remeber when computers were made in California? If a co-op makes a huge profit for the year, do you know what they do with it? They give it back to the members/owners (after necessary operating expenses and invetments of course). Co-ops exist only to serve the needs of their member-owners. With enough membership, a co-op can put any good or service in the hands of its member-owners at a price they are willing to pay, because they do not have the burden of finicky investors, and one person who makes more in salary a year than some entire countries’ GDP.

    Is it a slower way to grow a business? Absolutely. But if you look at a successfuly co-ops, like the one in Roanoke, they have watched large chain grocery stores came and went, while they remained. They did not grow exponentially becuase that was not the point. They serve their member-owners only, and have been doing so for 30 year.

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