Friendly City Food Cooperative, Inc.
Business Plan
Created by the Board of Directors
June 18, 2009
Revised March 30, 2010
Friendly City Food Cooperative, Inc. Business Plan
March 30, 2010
Our Mission
To create the Friendly City Food Co-op as a consumer-owned, democratically-run cooperative that will
operate a retail grocery store that emphasizes healthy foods, quality goods, and local products.
Our Collective Goals
• To support local producers and sustainable agriculture,
• To provide health-enhancing foods,
• To keep prices as low as possible,
• To create a sustainable business based on member ownership and democratic
decision-making,
• To be fair and supportive to our employees and to be sensitive to the working
and living conditions of those who make what we sell,
• To be a community resource that helps the people of Harrisonburg and the
Shenandoah Valley lead healthier lives,
• To be good stewards of the environment through conscientious, sustainable use
of resources,
• To reach out to low-income members of the community, and
• To welcome all.
Board Membership
The Board of Directors for the Friendly City Food Cooperative, Inc. is currently comprised of
nine member-owners residing in the local community. They are:
Board Officers
Ben Sandel, President
Noel Levan, Vice President
John Ashenfelter, Treasurer
Ilse Ackerman, Secretary
Directors
Joe Cloud
Peggy Duhamel
Jonathan Lantz-Trissel
Sam Nickels
Gil Souder
Friendly City Food Co-op, Harrisonburg, Virginia, page 2
Board Members: Ilse Ackerman, John Ashenfelter, Joe Cloud, Peggy Duhamel, Jonathan Lantz-Trissel,
Noel Levan, Sam Nickels, Ben Sandel, Gil Souder
Friendly City Food Cooperative, Inc. Business Plan
March 30, 2010
I.
Executive Summary
Introduction
Michael Pollan observed in The Omnivore’s Dilemma that “the typical item of food on an American’s
plate travels some fifteen hundred miles to get there.” The production, processing, and transportation
of food accounts for a substantial portion of fossil-fuel consumption in the United States. Fortunately,
many people now recognize the dysfunction inherent in industrialized food production, a system that is
neither sustainable nor healthy. By focusing on locally‐produced, wholesome foods and products, the
Friendly City Food Co‐op (FCFC) will provide a more sustainable shopping option for Harrisonburg and
the surrounding counties. By serving as a showcase for local products, the co‐op will also add to the
sustainability of local agriculture and responsible farming techniques.
Business Concept
Food cooperatives are not new. Successful models exist in communities of varying size throughout the
country. Cooperatives are owned by their customer‐members who have a voice in the operation and
governance of the organization. FCFC owners pay $200 per household for a membership. While anyone
can shop at the food co‐op, members demonstrate their commitment to supporting a sustainable food
supply chain, and members vote annually on how much profit to keep in retained earnings for future
capital needs and how much to distribute to owners via a patronage refund.
The Friendly City Food Co‐op will locate its store in downtown Harrisonburg to help revitalize downtown
space and slow urban sprawl. The planned store will be 6,475 square feet, large enough to
accommodate dry grocery, meat, produce, frozen food, dairy, a deli, a grab & go section, and a
café‐style seating area. The store will actively seek out relationships with local farmers and producers to
highlight a broad selection of natural, organic, and locally‐produced food and products. In addition, the
store will have a strong selection of supplements and health and beauty aids, a customer service
counter, a small reference library, a selection of non‐food household supplies, pet-care products, and
general merchandise. We hope to include a community room that will be available to the general public
that will serve as a space for the co‐op to offer classes in cooking and nutrition to its member‐owners
and customers. The room will also serve as a field-trip space for local schoolchildren learning about
healthy foods, sustainable agricultural (farm to table concepts), and cooperative community‐based
business ventures.
Industry Analysis and Competitive Advantage
The grocery industry is very competitive, and most national grocery retailers now offer at least a small
selection of natural and organic products. The national retailers typically offer a very limited range of
these products and rely primarily on national supply chains rather than local ones. Additionally, specialty
natural foods retailers are also active in the market. Most of these stores offer only a limited selection of
products and are often viewed by consumers as a supplemental source of food or health and beauty
aides.
Friendly City Food Co-op, Harrisonburg, Virginia, page 3
Board Members: Ilse Ackerman, John Ashenfelter, Joe Cloud, Peggy Duhamel, Jonathan Lantz-Trissel,
Noel Levan, Sam Nickels, Ben Sandel, Gil Souder
Friendly City Food Cooperative, Inc. Business Plan
March 30, 2010
One of the largest obstacles to entry into the grocery retail market is the cost of
equipment and store space. Initial build out, inventory purchases, and working capital also require
significant upfront financial resources. Where national retailers may have the advantage of accessible
capital, cooperatives have the benefit of a base of member‐owners who share in the risk of the start‐up
venture.
In many ways, cooperatives have a competitive advantage. Consumers of local and natural goods are
often driven to purchase the products out of loyalty to a cause, concern for health, dietary restrictions,
or general concern for sustainability, and as such, are unlikely to switch to other retailers once they
commit. Owner‐members of cooperatives show a stronger allegiance to their store than typical
consumers. Store loyalty will be enhanced by the FCFC’s high degree of customer service, its closer
connection to suppliers, and the influence that the consumer has over the inventory and selection in the
store. Additionally, the customer’s concern for product quality and transparency in the supply chain will
yield a reduced sensitivity to product cost.
Industry analysis reveals several important facts about cooperative grocery stores, including:
• Growth in the natural food market has been between 5% and 10% per year, and is expected to
continue, while the general grocery industry is growing at only 2%,
• Co‐op food stores typically have larger trade areas than conventional supermarkets, and
• Co‐op and natural food retailers situated in small urban or suburban communities generally have trade
areas that extend into surrounding rural areas.
Because of their unique combination of local cooperative ownership and strong connection to the
supply chain, cooperative groceries have shown the ability to grow at rates equal to or better than their
regional rate of business growth.
Market Analysis
In a recent poll of Harrisonburg’s downtown merchants conducted by Harrisonburg Downtown
Renaissance, a full‐service grocery in the downtown area was seen as the most important need in terms
of new business development. Merchants felt that the availability of groceries was essential to
continued mixed‐use development and revitalization of the downtown core.
Residents and the workforce in downtown Harrisonburg will definitely be a major source of customers
for the cooperative, but the target audiences identified in the FCFC market analysis extend beyond the
downtown core. These audiences include:
• People looking for healthy foods and household goods at competitive prices,
• University staff and students from four local universities and colleges, with interests in economic,
environmental, social, and health issues, and
• Local farmers/producers who want a high‐quality store in which to sell their products.
A professionally completed market analysis for FCFC identified a trade area bounded by geographic,
competitive, and demographic barriers. As defined, the trade area includes an estimated 160,300
persons and is projected to grow at an average annual rate of 1%. Based on demographic characteristics,
the trade area has an estimated total annual expenditure potential for natural food merchandise at over
Friendly City Food Co-op, Harrisonburg, Virginia, page 4
Board Members: Ilse Ackerman, John Ashenfelter, Joe Cloud, Peggy Duhamel, Jonathan Lantz-Trissel,
Noel Levan, Sam Nickels, Ben Sandel, Gil Souder
Friendly City Food Cooperative, Inc. Business Plan
March 30, 2010
$42 million. Based on this expenditure potential and the relatively weak
competitive environment, FCFC is expected to achieve a 13.8% market share of natural food sales in the
trade area at maturity (~ 5 years).
The natural food market has traditionally been most attractive to customers with some college
education, white‐collar employment, and higher income levels. In the trade area, 47% of employed
persons are engaged in white‐collar occupations and almost 39% of households have incomes between
$50,000 and $150,000. Median annual household income is estimated at slightly over $44,000.
Perhaps the most telling market statistic is that more than 760 households have purchased shares in the
cooperative, and each of these households represents future shoppers. Industry benchmarks suggest
that once FCFC completes its financing and begins its build-out, membership will climb rapidly.
Product/Service Development Plan
The FCFC is following a three‐stage development plan. In the completed organizing stage, FCFC was
envisioned and incorporated, and leadership was recruited. The feasibility and planning stage, nearing
completion, involved the development of a business plan, a market feasibility study, financial pro forma,
and store floor design in consultation with the nationally recognized Cooperative Development Services
(CDS). Recent activities have focused on member recruitment, the first phase of a member investment
campaign, beginning a national search for a general manager and negotiation of the lease for the
intended store site. As FCFC moves into the final stage, implementation, the board of directors will focus
on completing the financing, hiring the general manager, finalizing the lease and renovating the store.
Management Team
FCFC has a highly stable and committed board of directors, many of whom have worked together for the
more than four years the co-op has been in development. The board is comprised of nine members
who, in addition to a strong commitment to the cooperative’s values, bring expertise in farming,
entrepreneurial business development, finance, marketing and governance, and have experience
working with other cooperatives, community‐supported agriculture, and/or nonprofit organizations.
Some are small business owners, one works for a successful local software company and one co-owns
the local abattoir. Member‐owners with other special skills have also been instrumental in the
cooperative’s planning efforts.
Financial Plan
Launching the FCFC will require significant financial resources. Current plans call for raising $1.77 million
from a combination of sources. Sales of shares to members and member investments account for
$800,000. Subordinate debt from vendor credits and community loans account for an additional
$268,000. An additional $674,450 will be acquired from local financial institutions or private lenders.
Major expenses include $388,500 for leasehold improvements, $453,250 for equipment, and $168,000
for store inventory. Budget plans include a contingency for cost overruns and an allowance for working
capital. Current projections are for a positive cash flow in the third full year of operation. Detailed
financial plans and projections are included in the full business plan.
Friendly City Food Co-op, Harrisonburg, Virginia, page 5
Board Members: Ilse Ackerman, John Ashenfelter, Joe Cloud, Peggy Duhamel, Jonathan Lantz-Trissel,
Noel Levan, Sam Nickels, Ben Sandel, Gil Souder
Friendly City Food Cooperative, Inc. Business Plan
March 30, 2010
Timeline to Launch
The board of the FCFC is working intensively to get the store open by the end of 2010. Finalizing the
lease and completing the financing will determine the exact timeline. At this time, principal financing
has been committed, the site has been identified and a lease has been negotiated and is expected to be
signed by the end of April, and the member investment campaign is over halfway to its goal. After space
and financing are finalized, hiring a general manager and store design and renovations will commence
immediately. The general manager will begin developing formal agreements with local farmers and
suppliers, staffing the store, and preparing for opening.
II.
The Industry, The Friendly City Food Co-op and its Products and Services
The Grocery Industry and Cooperatives
Retail grocery cooperatives like the Friendly City Food Co-op can be considered parts of two industries:
the natural and organic food industry and retail cooperatives. The natural and organic food industry has
been growing steadily at 5% - 10% annually, in contrast to 2% growth in the conventional grocery
industry. It has established a strong network of regional and national distributors along with trade
shows and magazines. The cooperative industry adds its own network of distributors and also provides a
breadth of information on cooperative business models, vendor and farmer relations and management
and governance. Trade organizations include the National Cooperative Business Association, the
National Cooperative Grocers Association and the Cooperative Grocers Information Network which
gathers and contextualizes data from cooperative groceries of all sizes and provides this information
back to cooperatives to establish means, norms and comparative knowledge.
Business Concept
The Friendly City Food Cooperative, Inc. will open a full-service grocery store in downtown Harrisonburg
emphasizing healthy, local, natural and organic products. As a cooperative, community members
become FCFC owners by purchasing a $200 share of common stock, which is non-appreciating. While
anyone can shop at the food co-op, members demonstrate their commitment to supporting a
sustainable food supply chain and vote annually on how much profit to keep in retained earnings for
future capital needs and how much to distribute back to owners via a patronage refund.
As a cooperative, FCFC will model and promote sustainability through innovative bulk food options that
reduce food and packaging waste, working with farmers and producers to create a demand for
sustainably produced goods, and by being a major factor in a vibrant and sustainable downtown by
meeting an essential need that supports the current and coming business and residential development.
Products and Services
The planned store will include a variety of departments such as dry grocery, meat, produce, frozen food,
dairy, a deli, a grab & go section, and a café-style seating area. The store will actively seek out
relationships with local farmers and producers in order to highlight a broad selection of natural, organic
and locally-produced food and products. In addition, the store will have a strong supplements/health
and beauty aids section featuring a customer service counter, a small reference library, and a selection
of non-food household supplies, pet care, and general merchandise. The store may include a community
Friendly City Food Co-op, Harrisonburg, Virginia, page 6
Board Members: Ilse Ackerman, John Ashenfelter, Joe Cloud, Peggy Duhamel, Jonathan Lantz-Trissel,
Noel Levan, Sam Nickels, Ben Sandel, Gil Souder
Friendly City Food Cooperative, Inc. Business Plan
March 30, 2010
room that will be available to the general public and will serve as a space for the coop to offer classes in cooking and nutrition to its member-owners and customers.
III.
Market Analysis
Local Demand
In a recent poll of Harrisonburg’s downtown merchants conducted by Harrisonburg Downtown
Renaissance, a full-service grocery in the downtown area was seen as the most important need in terms
of new business development. Merchants felt that the availability of groceries was essential to
continued mixed-use development and revitalization of the downtown core.
Downtown residents and workforce will one source of customers for the cooperative, but the target
audiences identified in the FCFC market analysis extend beyond the downtown core. These audiences
include:
• People looking for healthy foods and household goods at competitive prices,
• University staff and students from four local universities and colleges, with interests in economic,
environmental, social, and health issues, and
• Local farmers/producers who want a high-quality store in which to sell their products.
Trade Area and Target Population
A professionally completed market analysis for FCFC identified a relatively large trade area bounded by
geographic, competitive, and demographic barriers. Based on the fieldwork observations in the
Harrisonburg area, and the types of trade areas served by other analogous natural and co-op food stores
in similar types of markets, it appears that the primary trade area will include 35 census tracts in
Harrisonburg, Rockingham County and parts of several surrounding counties.
As defined for purposes of this study, the trade area to be served by the proposed Friendly City Food Coop extends about 35 miles to the northeast, where it is limited by distance and several other retail
centers; 35 miles to the northwest, where it is limited by distance and geographic barriers; 12 miles to
the southwest, where it is limited by the existence of the Staunton trade area; and about 15 miles to the
southeast, where it is limited by the barrier effect of the Blue Ridge Mountains.
Projected Market Share
Using these parameters, the trade area includes an estimated 160,300 persons and is projected to grow
at an average annual rate of 1%. Based on demographic characteristics, these household-based
residents, have a total annual expenditure potential for natural food merchandise estimated at about
$42.16 million. This potential is based on an estimated average per-capita expenditure potential of $276
per year. Based on this expenditure potential and the relatively weak competitive environment, FCFC is
expected to achieve a 13.8% market share of natural food sales in the trade area at maturity (~ 5 years).
Given the patterns of accessibility that exist in the Harrisonburg area, it is estimated that about 80% of
the proposed store’s business will be derived from the defined trade area. An additional 20% will be
derived from residents who live beyond the immediate trade area, as well as from travelers, tourists,
visitors to the market area and seasonal residents.
Friendly City Food Co-op, Harrisonburg, Virginia, page 7
Board Members: Ilse Ackerman, John Ashenfelter, Joe Cloud, Peggy Duhamel, Jonathan Lantz-Trissel,
Noel Levan, Sam Nickels, Ben Sandel, Gil Souder
Friendly City Food Cooperative, Inc. Business Plan
March 30, 2010
The natural food market has traditionally been most attractive to customers with some college
education, white-collar employment, and higher income levels. In the trade area, 47% of employed
persons are engaged in white-collar occupations and almost 39% of households have incomes between
$50,000 and $150,000. Median annual household income is estimated at slightly over $44,000.
Key Owners
– board
Community Support
members &
key
Perhaps the most telling market statistic is that more than 760 households have
volunteers
purchased shares in the cooperative, and each of these households represents
Active Owners – Vote in
board elections,
future shoppers. As shown in the pyramid graphic, the number of owners
sometimes come to
represents a much larger group of community members who will shop at the comeetings
op but won’t become owners.
Social Owners – Like belonging, read
the newsletter, rarely come to
meetings
Environmental Scanning and Management
The Shenandoah Valley economy is evolving. The effect on the natural and Shopping Owners – Join because of economic
benefits but exercise no other involvement
local food marketplace of revitalization efforts in downtown Harrisonburg,
urban relocations and retirements from the Washington, D.C.
metropolitan area, relocation and expansion of knowledge economy
Customers – Shoppers but not Owners
companies and their employees, and the anticipated growth of James
Madison University, the Friendly City Food Co-op recognizes
untapped potential in the available target audience. There will also be a critical need for FCFC to remain
on the forefront of information regarding the composition of the local community, the characteristics of
its client-base once established, and trends and innovations in local and natural food markets.
IV.
The Economics of the Business
Gross and Operating Margins
First year gross margins are estimated to be 34%, moving to 35.5% in year two and 37.5% in year three
and beyond. Operating expenses as a percentage of gross sales begin at 47.88% reflecting increased
startup promotions, staffing and consulting and drops, over the next eight years to a stabilized rate of
about 34%.
Profit Potential and Durability
Grocery cooperatives, although operating with relatively slim margins, can develop significant profit
potential through sales volume. FCFC is projecting losses in the first three years, modest profits growing
from $15,000 to $66,000 in years 4-7, with steady profit growth thereafter. Many factors affect longterm profit durability but cooperatives have shown, with strong management and governance, the
ability to yield steady, modest profit as a sustainable long-term business.
Fixed, Variable and Semi-variable Costs
As noted in the documents in section XI, Cost of Goods Sold is always the largest cost category at over
60% of gross sales. Personnel is next starting at 26.10% and stabilizing at 23% by year three. Occupancy
is a relatively small expense starting at 12.28% and dropping to mid 3% and other Operating,
Administrative, Governance and Promotion expenses are the rest of the costs.
Friendly City Food Co-op, Harrisonburg, Virginia, page 8
Board Members: Ilse Ackerman, John Ashenfelter, Joe Cloud, Peggy Duhamel, Jonathan Lantz-Trissel,
Noel Levan, Sam Nickels, Ben Sandel, Gil Souder
Friendly City Food Cooperative, Inc. Business Plan
March 30, 2010
Table 1. provides additional cost details by year.
Table 1. Ten Year Cost Projections, Source: Friendly City Food Co-op Financial Planning Documents
Cost of Goods Sold
• AS % OF GROSS SALES
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10
1,704,780 2,165,846 2,518,425 2,770,268 3,047,294 3,199,659 3,359,642 3,527,624 3,704,005 3,889,205
66.00% 64.50% 62.50% 62.50% 62.50% 62.50% 62.50% 62.50% 62.50% 62.50%
Total Personnel Costs
• AS % OF GROSS SALES
674,163
26.10%
809,254
24.10%
926,780 1,019,458 1,121,404 1,177,474 1,236,348 1,298,166 1,363,074 1,431,228
23.00% 23.00% 23.00% 23.00% 23.00% 23.00% 23.00% 23.00%
Total Occupancy Expenses
• AS % OF GROSS SALES
317,178
12.28%
236,058
7.03%
245,803
6.10%
261,924
5.91%
273,445
5.61%
286,697
5.60%
301,550
5.61%
229,605
4.07%
238,396
4.02%
245,955
3.95%
Total Operating Expenses
113,952 105,594 126,344 138,822 152,543 160,123
• AS % OF GROSS SALES
4.41%
3.14%
3.14%
3.13%
3.13%
3.13%
NOTE: Includes Store Supplies, Credit Card Fees, Telephones, Small Equipment and other items.
168,080
3.13%
176,434
3.13%
185,203
3.13%
194,410
3.12%
Total Administrative Expenses
• AS % OF GROSS SALES
65,645
2.54%
46,339
1.38%
55,607
1.38%
61,168
1.38%
67,284
1.38%
70,648
1.38%
74,181
1.38%
77,890
1.38%
81,784
1.38%
85,874
1.38%
Total Governance/Member Expense
• AS % OF GROSS SALES
14,207
0.55%
18,468
0.55%
22,162
0.55%
24,378
0.55%
26,816
0.55%
28,157
0.55%
29,565
0.55%
31,043
0.55%
32,595
0.55%
34,225
0.55%
Total Promotional Expenses
• AS % OF GROSS SALES
51,660
2.00%
58,763
1.75%
76,560
1.90%
84,216
1.90%
92,638
1.90%
97,270
1.90%
102,133
1.90%
107,240
1.90%
112,602
1.90%
118,232
1.90%
Time to Break Even and to Positive Cash Flow
Estimated breakeven point is late in the third year, with positive cash flow occurring late in the second
year. Additional detail is shown in Scenario Planning in section XI.
V.
Marketing Plan
Pre-Opening Communication and Recruitment
In the early phases of the co-op‘s development the most important parts of the marketing campaign have
involved establishing local name recognition and recruiting member-owners. Both of these efforts have
proved successful. In terms of name recognition, FCFC held numerous community events, developed a
quality website (www.friendlycityfoodcoop.com), launched a monthly newsletter, and implemented a PR
campaign. Board members and member-volunteers interact with the community at many public venues
with the goals of sharing our vision for the co-op; providing education about healthy choices, good
nutrition, our food system, and the local agricultural infrastructure; and promoting the owner-member
concept. In addition to several dozen small local events staffed by board members and volunteers, FCFC
has hosted four “February Fests” in downtown Harrisonburg. These events are free to the public and
feature music, a silent auction, local food samples, and information about the co-op. Each of the events
was attended by more than 400 adults.
Friendly City Food Co-op, Harrisonburg, Virginia, page 9
Board Members: Ilse Ackerman, John Ashenfelter, Joe Cloud, Peggy Duhamel, Jonathan Lantz-Trissel,
Noel Levan, Sam Nickels, Ben Sandel, Gil Souder
Friendly City Food Cooperative, Inc. Business Plan
March 30, 2010
The monthly newsletter updates are sent electronically to keep members abreast of
achievements, upcoming events, news and important milestones in the development of the co-op. The coop also maintains and updates on a weekly basis a website that includes announcements, updates,
newsletters, membership growth counts, progress reports, the business plan, information on cooperative
principles, and links to other websites of interest. Also, the co-op holds an annual meeting for members at
which an annual report is given, and we discuss co-op progress, status, future direction, concerns, and the
election of officers.
Community support for the co-op is strong, and has built steadily over the last 4 years. Over 760
households have invested in a co-op share and interest from potential members remains strong. Interest
has been maintained by word-of-mouth and media coverage on local television and in newsprint. FCFC has
also started using Facebook and other technologies to communicate with members and potential
members.
Post-Opening Marketing
While most of the specific marketing strategies will be led by the co-op’s general manager, the board will
encourage and support a multimedia campaign strategy using web, television, direct mail, and print media
to attract loyal and new store patrons. In addition, regular advertising with in-store specials and
information about featured products will be disseminated to member-owners and specific target
audiences. Finally, the promotion of community awareness events, lifelong learning opportunities, fitness
programs, and cooking classes are seen as vital to success of the cooperative and meeting community
health and sustainability goals.
VI.
Development Plan
Development status and tasks
The overall development of the FCFC involves three major stages:
• The organizing phase, which has been completed;
• The feasibility and planning phase, which is currently nearing completion; and
• The implementation phase.
The current focus of the founders and board of directors is to complete the feasibility and planning phase
and lay the groundwork for the implementation phase. This work has progressed in consultation with the
nationally recognized Cooperative Development Services (CDS) organization and has resulted in a business
plan, financial pro forma, and marketing activities have been implemented.
The primary goals are to continue to grow our membership base, secure the site and complete the
financing. In addition to individual members, the FCFC is actively reaching out to possible providers and
vendors in the local area as both members and major investors.
Difficulties and Risks
The biggest risk to the current development plan is to fail to meet target goals for financing, which would
increase the time to opening and create additional costs.
Friendly City Food Co-op, Harrisonburg, Virginia, page 10
Board Members: Ilse Ackerman, John Ashenfelter, Joe Cloud, Peggy Duhamel, Jonathan Lantz-Trissel,
Noel Levan, Sam Nickels, Ben Sandel, Gil Souder
Friendly City Food Cooperative, Inc. Business Plan
March 30, 2010
Another key risk is a more agile entity filing the same competitive space in a similar
location downtown or near downtown. At this point there are no obvious candidates for a downtown
grocery store, but there is active development in process and starting at several downtown locations.
The lack of a secured site is a difficulty in recruiting many community residents that are only moderately
interested in the FCFC. The membership and marketing committee is working hard to convert this kind of
potential member, but anecdotal evidence makes it clear that having a physical building will lead to a large
bump in membership.
Finally, the current US economic downturn has made it much more difficult to secure bank financing,
particularly for a business structured like FCFC, but we have been fortunate to have strong financial backing
from community members.
Costs
The current operational costs are approximately $3500/month, mainly in payments for legal services,
financial and business planning with CDS, expenses related to membership and marketing and a half-time
employee. We’ve calculated our acquisition cost for each new member varies from roughly $20 to nearly
$40, depending on events, time of year, weather and many other factors.
VII.
Operations Plan
Geographical Location
The FCFC is restricted to the State of Virginia by the statute under which it was organized and to downtown
Harrisonburg by the prospectus and stated goals of the organization.
Facilities and Improvements
While the FCFC has not fully secured the site, it has identified and successfully negotiated on an ideal site of
just under 6,500 square feet.
This site has previously served as a grocery store, but will still require extensive renovations to fulfill our
vision for the FCFC -- costs which are broken out in more detail in the financial plan.
Strategy and Plans
The founders and board of directors are focused on membership growth and a successful completion of the
member investment campaign to secure a significant share of the capital required to launch the store. The
member investment campaign is ongoing and has reached over 50% of the $600,000 goal.
The board of directors realizes that an experienced store manager will be crucial to the success of the FCFC,
so strategic plans relating to the improvement, stocking, opening, and operation of the store will be made
once a national search has led to the hiring of this key position.
Friendly City Food Co-op, Harrisonburg, Virginia, page 11
Board Members: Ilse Ackerman, John Ashenfelter, Joe Cloud, Peggy Duhamel, Jonathan Lantz-Trissel,
Noel Levan, Sam Nickels, Ben Sandel, Gil Souder
Friendly City Food Cooperative, Inc. Business Plan
March 30, 2010
VIII.
Management Team
Organization
The Board of Directors and key volunteers continue to manage the start-up phase as they have done for the
last 4 years. Continuity of volunteer management has been extremely high over this period, building strong
trust and knowledge of the organization in the larger community. The end of 2007 saw the hiring of a halftime staff position to assist the Membership Growth & Marketing Team. The goal was to grow the number
of owner-member households, which has been successful, and now stands at over 760. Current board
committees include: Finance, Site Development, Recruitment, Grants, and Membership & Marketing.
The Board and key volunteers have depended heavily upon the ongoing support and advice of consulting
personnel from Cooperative Development Services, the largest and best known national consulting firm
specializing in the start-up and expansion of cooperative retail grocery stores. The three key consultants
with whom we work bring over 90 years of work in the
retail and cooperative industries. Their assistance has
Figure 1. Governance-Management Hierarchy
been in the areas of Board training, organizational
Owner-Members
development, business plan development, member loan
campaign development, financial pro forma documents,
and market feasibility study. The Co-op has invested
Board of Directors (1)
significant resources in these and other professional
services, including high quality legal assistance from a
local lawyer with a strong reputation and a history in the
cooperative industry. The Board recognizes that key
General Manager
actions to be performed soon will be the hiring of the
general manager (GM) and securing the site. We are
carrying out a national search for the GM and expect to
Staff & Volunteers
have the site secured shortly. While many businesses
depend on “location, location, location,” the Friendly City
(1) Chosen at the annual Owner-Member meeting
Food Co-op will additionally be focusing on
“management, management, management.” Our goal is
to hire someone who is able to open the store and
manage it profitably during the tough initial years of business
operations.
The Board has reviewed and adopted Carver’s “Policy-Governance Model,” which emphasizes the policysetting and oversight role of the board. Once the GM is hired, it will be his/her responsibility to hire all
staff, provide training and staff oversight, and generally run the store under the policy directives of the
board. The organizational structure is shown in Figure 1.
Management Compensation and Ownership
Board Directors receive no compensation. All Board Directors must be owner-members of the co-op. The
Board of Directors will determine the compensation structure for the GM, who will then be in charge of all
additional managers and employees. As owner-members, Board Directors will be eligible to receive
Friendly City Food Co-op, Harrisonburg, Virginia, page 12
Board Members: Ilse Ackerman, John Ashenfelter, Joe Cloud, Peggy Duhamel, Jonathan Lantz-Trissel,
Noel Levan, Sam Nickels, Ben Sandel, Gil Souder
Friendly City Food Cooperative, Inc. Business Plan
March 30, 2010
patronage refunds along with all other owner-members, in profitable years and upon
the approval vote of the membership at the annual meeting. All owner member households, regardless of
the number of shares purchased, are entitled to one and only one vote per household membership.
Other Investors
Current incorporation documents and bylaws permit the purchase of two additional investor opportunities
beyond the purchase of an owner-member stock share ($200). One is a member loan, which is available
only to owner-members, but carries no additional voting rights. The other is preferred stock, which again
carries no additional voting rights, and which, to date, has not been offered.
Employment and Other Agreements, Stock Options, Bonus Plans
Employment and other agreements, stock options and bonus plans for management and employees have
not been determined. While not required, management and employees will be welcome to join as ownermembers, but will be limited to one vote as are all other member households (stock options, then, carry no
benefit in our cooperative securities structure, since refunds are based on a patronage system -- how much
each household buys at the store is the percentage they receive of the refund).
Human Resources
The Directors of the Board, Key Volunteers, and the co-op’s “Community Champions” include wellrespected community leaders who have supported and nurtured the organization via the role of
volunteers, advisors and promoters. Brief biographies are included in Appendix B to highlight the range and
depth of talent and experience accessible to FCFC.
Due to our goal of locating the co-op in the downtown area, our project has received the enthusiastic
endorsement of community leaders interested in keeping Harrisonburg’s downtown desirable and
commercially viable. One such person is Eddie Bumbaugh, Director of the Harrisonburg Downtown
Renaissance, who has joined the co-op, provided us useful contacts, and promoted the importance of co-op
membership to the many people he comes in contact with. Other important community members who
have joined the co-op and given us valuable advice and assistance include Allon Lefever, former chair of the
MBA program at Eastern Mennonite University, Thomas Jenkins, a longtime downtown business and
property owner, Andy Perrine, Vice President for Marketing at James Madison University, Eugene Stoltzfus,
long-time local architect, and Charlie and Cathy Strickler, who are founding members of the Climate Change
educational initiative in Harrisonburg VA. The Co-op also counts on the presence of several current and
former city council members as owner-members.
Other Shareholders, Rights and Restrictions
All shareholders are owner-member households who have purchased one or more stock securities from the
Friendly City Food Cooperative; all are entitled to one and only one vote; other rights and restrictions are
listed in the legal documents of the co-op, including the stock agreement form, which is signed by all
owner-members and the Food Co-op’s registered securities agents, all 4 of whom are Board Directors.
Friendly City Food Co-op, Harrisonburg, Virginia, page 13
Board Members: Ilse Ackerman, John Ashenfelter, Joe Cloud, Peggy Duhamel, Jonathan Lantz-Trissel,
Noel Levan, Sam Nickels, Ben Sandel, Gil Souder
Friendly City Food Cooperative, Inc. Business Plan
March 30, 2010
Supporting Professional Advisors and Services
As noted above, the Co-op has relied heavily (but not exclusively) upon the consulting services of
Cooperative Development Services (CDS) out of Minneapolis MN. Our primary business development
consultant is Bill Gessner. Other CDS consultants have included Pete Davis, who did our market feasibility
study, Denise Chevalier, who worked with us on the financial pro forma, and PJ Hoffman, who is our floor
design consultant. Lynn Suter, our legal advisor from the law firm Lenhart Obenshain, has assisted us with
incorporation, bylaws, securities registration, member investment documents, and general legal advice.
IX.
Critical Risks and Assumptions
Risks
The fundamental risk to the success of FCFC is insufficient capital to open and stock a store that is viable
as a long-term business. Specific issues related to this risk include the following:
Thinly Capitalized
The co-op is thinly capitalized, which makes it difficult to execute its business plan and to obtain loans.
Raising capital through the sale of Member Shares or the Member Loan Program is highly speculative
because investment in the co-op is high risk with a low, if any, return.
Reliance on Borrowed Funds
If the co-op is unable to secure the financing represented by this Member Loan Program or the other
financings anticipated by the business plan, it will not be able to execute its business plan, which
includes repayment of the Notes. No commitment for borrowed funds has been made to the co-op at
this time.
Rescission Risk
The Notes will be offered and issued pursuant to the “intrastate” offering exemptions from registration
provided under the federal Securities Act of 1933. If the Cooperative should fail to comply with the
requirements of such exemption, some or all of the Noteholders could have the right to rescind their
loans. If a number of Noteholders were successful in seeking rescission, the cooperative would face
severe financial demands which could adversely affect the co-op and the non-rescinding Noteholders.
In addition to the risks related to financing, there are a number of other more typical risks, including the
following:
General Risks
There are general risks inherent in any business undertaking, particularly those encountered by start-up
businesses, many of which are beyond the control of the co-op’s management. These risks include the
following: lack of sufficient capital; availability of credit; unanticipated problems, delays and expenses
association with implementing the co-op’s business plan; competition; marketing difficulties and
uncertain market acceptance of the co-op’s products; uncertain sources of products; regulatory
developments; and risks associated with rising food prices in general and a weakening economy.
Friendly City Food Co-op, Harrisonburg, Virginia, page 14
Board Members: Ilse Ackerman, John Ashenfelter, Joe Cloud, Peggy Duhamel, Jonathan Lantz-Trissel,
Noel Levan, Sam Nickels, Ben Sandel, Gil Souder
Friendly City Food Cooperative, Inc. Business Plan
March 30, 2010
Competitive Conditions
The retail food industry is highly competitive and many of the co-op’s potential competitors are owned
by large, diversified food companies with resources far greater than that of theFCFC.
Reliance on Key Personnel
The Co-op relies on the management staff and its Board of Directors, none of whom has any legal
commitment regarding their length of service with the co-op. The co-op does not maintain key life
insurance on any personnel.
Uncertain ability to attract additional qualified personnel
There is no guarantee that the co-op will be able to recruit and retain people possessing the skills and
experience needed by the co-op.
Assumptions
The fundamental assumption underlying FCFC is that the community wants the co-op. This assumption
is supported by the marketing study, several surveys, member comments, and other anecdotal
evidence. There are examples of successful co-op’s organized in similar ways in cities of similar size.
X.
Overall Schedule
The project schedule (Figure 2) has been broken down into three phases, as shown in the graphic below.
Key dependencies affecting grand opening in the third quarter of 2010 are site availability and financing.
Figure 2:. Project Schedule
Friendly City Food Co-op, Harrisonburg, Virginia, page 15
Board Members: Ilse Ackerman, John Ashenfelter, Joe Cloud, Peggy Duhamel, Jonathan Lantz-Trissel,
Noel Levan, Sam Nickels, Ben Sandel, Gil Souder
Friendly City Food Cooperative, Inc. Business Plan
March 30, 2010
XI.
The Financial Plan
In the section that follows, the Friendly City Food Co-op’s financial planning documents are presented.
Table 2-7 detail income and expenditures to date (Table 2), financial pro forma documents (Tables 3-5),
the breakeven analysis (Table 6) and the statement of projected sources and uses (Table 7).
Financial projections indicate that Friendly City Food Co-op will realize a positive cash flow late in its
second year (Table 6). The fluctuations in cash flow in years four through ten reflect the payback of both
the bank and member loans. Additional member loans may supplant some of the bank financing which
would improve the cash flow even further. The desire is to reach positive cash flow as quickly as possible
and for cash flow to remain stable and steadily grow. The numbers shown compare favorably to other
successful cooperative grocery startups.
It should be noted that FCFC runs on a July 1 to June 30 fiscal year.
Table 2. Current Financial Statement, June 2009 through February 2010
NET (Equity - Fees)
BUDGET CURRENT
0 $3,508
Mar-10
Feb-10
($1,196.12) $12,789.26
SOURCES
Benefits & Donations
Grants
Member Equity
Old Loans
Member Loans
TOTAL
$10,000 $10,741
$90,000 $13,750
$200,000 $153,536
$1,950
$600,000 $211,500
$391,477
$0
$0
$4,290
$0
$11,000
$15,290.45
USES
Leasehold Improvements
Equipment
Inventory
Fees (all Planning and Pre-Start-Up costs)
Start-up promotion
Start-up staffing
Operating/Admin prior to opening
Holding Site Costs
Interest During project
TOTAL
$300,000
$0
$420,000
$1,466
$158,400
$0
$147,000 $113,918
$4,000
$0
$80,000
$444
$60,000
$0
$59,800
$0
$22,000
$0
$115,827
$0
$0
$0
$5,043
$444
$0
$0
$0
$5,486.57
$0
$0
$12,145
($1,000)
$18,000
$29,145
Jan-10
Dec-09
Nov-09
Oct-09
Sep-09
Aug-09
Jul-09
Jun-09
$3.58 ($1,908.44) ($2,491.85) ($878.12) $1,288.45 ($464.72) ($3,094.60) ($539.37)
$0
$0
$6,125
$30,000
$36,125
$0
$0
$2,325
$0
$6,000
$8,325
$0
$0
$0
$0
$0
$0
($644)
$6,121
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
($644.26) $6,121.42
$0
$0
$0
$4,233
$0
$0
$0
$0
$0
$4,233.44
$0
$0
$400
($2,000)
$4,000
$2,400
$665
$0
$4,625
$0
$78,500
$83,790
$0
$0
$3,630
$0
$30,000
$33,630
$15
$0
$3,555
$0
$15,000
$18,570
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$2,892
$5,503
$2,342
$4,020
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$2,891.85 $5,503.12 $2,341.55 $4,019.72
$35
$0
$1,650
$0
$19,000
$20,685
$0
$0
$1,950
$0
$0
$1,950
$0
$0
$0
$0
$0
$0
$4,745
$2,489
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$4,744.60 $2,489.37
Note: Figures shown for March 2010 represent only a partial month.
Friendly City Food Co-op, Harrisonburg, Virginia, page 16
Board Members: Ilse Ackerman, John Ashenfelter, Joe Cloud, Peggy Duhamel, Jonathan Lantz-Trissel,
Noel Levan, Sam Nickels, Ben Sandel, Gil Souder
Friendly City Food Cooperative, Inc. Business Plan
March 30, 2010
Table 3. Pro Forma Income Statement
INCOME
Year 1
4,200
615
RETAIL SQ/FT
GROSS SALES SQ/FT
Year 2
4,200
800
Year 3
4,200
959
Year 4
4,200
1,055
Year 5
4,200
1,161
Year 6
4,200
1,219
Year 7
4,200
1,280
Year 8
4,200
1,344
Year 9
4,200
1,411
Year 10
4,200
1,482
GROSS SALES
2,583,000 3,357,900 4,029,480 4,432,428 4,875,671 5,119,454 5,375,427 5,644,198 5,926,408 6,222,729
COST OF GOODS SOLD
1,704,780 2,165,846 2,518,425 2,770,268 3,047,294 3,199,659 3,359,642 3,527,624 3,704,005 3,889,205
GROSS MARGIN
878,220 1,192,055 1,511,055 1,662,161 1,828,377 1,919,795 2,015,785 2,116,574 2,222,403 2,333,523
EXPENSES
Personnel Costs
Payroll & Salary Expense
Payroll Taxes & Benefits
Total Personnel Costs
505,622
168,541
674,163
606,940
202,313
809,254
695,085
764,594
841,053
883,106
927,261
973,624 1,022,305 1,073,421
231,695
254,865
280,351
294,369
309,087
324,541
340,768
357,807
926,780 1,019,458 1,121,404 1,177,474 1,236,348 1,298,166 1,363,074 1,431,228
Occupancy Expenses
Rent
Real and Property Taxes, Insurance & CAM
Repairs & Maintenance
Insurance
Utilities
Licenses & Permits
Building Services
Depreciation/Amortization
Total Occupancy Expenses
40,469
3,885
10,332
10,332
32,375
1,000
0
218,785
317,178
43,868
4,002
10,642
10,642
33,994
1,030
0
131,880
236,058
47,268
4,122
10,961
10,961
35,693
1,061
0
135,738
245,803
53,743
4,245
11,290
11,290
37,478
1,093
0
142,785
261,924
53,743
4,373
11,629
11,629
39,352
1,126
0
151,595
273,445
55,355
4,504
11,978
11,978
41,320
1,159
0
160,404
286,697
57,015
4,639
12,337
12,337
43,386
1,194
0
170,642
301,550
58,726
4,778
12,707
12,707
45,555
1,230
0
93,902
229,605
60,488
4,921
13,088
13,088
47,833
1,267
0
97,711
238,396
62,302
5,069
13,481
13,481
50,224
1,305
0
100,092
245,955
Occupancy Expenses less Depreciation/Amortization
0
Depreciation/Amortization
0
Operating Expenses
Store Supplies
64,575
Credit Card Fees
34,871
Telephone
2,108
Small Equipment purchases
4,133
Trash/Baler
1,550
Bad Debt, Cash Over (Short), Bank Charges
258
Vehicle Expense
0
Miscellaneous
6,458
Total Operating Expenses
113,952
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
41,974
45,332
2,171
5,373
2,015
336
0
8,395
105,594
50,369
54,398
2,236
6,447
2,418
403
0
10,074
126,344
55,405
59,838
2,303
7,092
2,659
443
0
11,081
138,822
60,946
65,822
2,372
7,801
2,925
488
0
12,189
152,543
63,993
69,113
2,443
8,191
3,072
512
0
12,799
160,123
67,193
72,568
2,517
8,601
3,225
538
0
13,439
168,080
70,552
76,197
2,592
9,031
3,387
564
0
14,110
176,434
74,080
80,007
2,670
9,482
3,556
593
0
14,816
185,203
77,784
84,007
2,750
9,956
3,734
622
0
15,557
194,410
Administrative Expenses
Office Supplies/Postage
Dues & Subscriptions
Legal, Accounting, Consulting Fees
Travel Expenses
Total Administrative Expenses
10,694
5,347
47,823
1,782
65,645
13,902
6,951
23,170
2,317
46,339
16,682
8,341
27,803
2,780
55,607
18,350
9,175
30,584
3,058
61,168
20,185
10,093
33,642
3,364
67,284
21,195
10,597
35,324
3,532
70,648
22,254
11,127
37,090
3,709
74,181
23,367
11,683
38,945
3,894
77,890
24,535
12,268
40,892
4,089
81,784
25,762
12,881
42,937
4,294
85,874
Governance/Member Expense
Board of Directors
Newsletter Expense
Member Services
Total Governance/Member Expense
8,136
5,166
904
14,207
10,577
6,716
1,175
18,468
12,693
8,059
1,410
22,162
13,962
8,865
1,551
24,378
15,358
9,751
1,706
26,816
16,126
10,239
1,792
28,157
16,933
10,751
1,881
29,565
17,779
11,288
1,975
31,043
18,668
11,853
2,074
32,595
19,602
12,445
2,178
34,225
Promotion Expense
Advertising
Merchandising & Promotion
Contributions/Donations
Total Promotional Expenses
25,830
12,915
12,915
51,660
33,579
12,592
12,592
58,763
50,369
13,096
13,096
76,560
55,405
14,405
14,405
84,216
60,946
15,846
15,846
92,638
63,993
16,638
16,638
97,270
67,193
17,470
17,470
102,133
70,552
18,344
18,344
107,240
74,080
19,261
19,261
112,602
77,784
20,224
20,224
118,232
TOTAL OPERATING EXPENSES
0
INCOME FROM OPERATIONS
0
Interest expense
City/Community Loan
Member Loans
Vendor Credit
1st Position Debt
Total Interest Expense
PROFIT/(LOSS) BEFORE PATRONAGE & TAXES
1,236,805 1,274,477 1,453,257 1,589,966 1,734,130 1,820,369 1,911,857 1,920,377 2,013,655 2,109,923
-358,585
-82,422
57,798
72,194
94,246
99,426
103,928
196,198
208,748
223,600
6,729
18,000
0
40,467
65,196
6,124
18,540
0
39,085
63,749
5,499
19,096
0
35,955
60,550
4,849
19,669
0
32,630
57,148
4,179
19,055
0
29,100
52,334
3,482
16,378
0
25,354
45,214
2,763
13,620
0
21,375
37,758
2,016
10,776
0
17,152
29,944
1,244
7,848
0
12,668
21,760
445
4,830
0
7,907
13,182
-449,610
-146,171
-2,752
15,046
41,912
54,212
66,170
166,254
186,988
210,418
Friendly City Food Co-op, Harrisonburg, Virginia, page 17
Board Members: Ilse Ackerman, John Ashenfelter, Joe Cloud, Peggy Duhamel, Jonathan Lantz-Trissel,
Noel Levan, Sam Nickels, Ben Sandel, Gil Souder
Friendly City Food Cooperative, Inc. Business Plan
March 30, 2010
Table 4. Pro Forma Balance Sheet
YEAR 1
YEAR 2
YEAR 3
YEAR 4
YEAR 5
YEAR 6
155,302
0
173,040
0
328,342
134,218
0
178,231
0
312,449
234,180
0
183,578
0
417,758
336,767
0
189,085
0
525,853
349,921
0
194,758
0
544,679
367,264
0
200,601
0
567,865
YEAR 7
YEAR 8
YEAR 9
YEAR 10
BALANCE SHEET
ASSETS
CURRENT ASSETS
Cash
Prepaid Items
Inventories
Accounts Receivable
TOTAL CURRENT ASSETS
FIXED ASSETS
Land
Building contingency
Building
Equipment
Leasehold Improvements
Accumulated Depreciation
Gross FIXED ASSETS
OTHER ASSETS
Investments
BLANK
Deposits
Organization Development Costs
Depreciation/Amortization
TOTAL OTHER ASSETS
TOTAL ASSETS
LIABILITIES
CURRENT LIABILITIES
Accounts Payable
Accrued Payroll and Payroll Taxes
Sales Tax Payables
BLANK
Income tax Payable
BLANK
Loan Payable Current Portion
TOTAL CURRENT LIABILITIES
389,761
0
206,619
0
596,380
463,224
0
212,817
0
676,042
553,510
0
219,202
0
772,712
661,519
0
225,778
0
887,297
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
573,850 583,850 603,850 643,850 693,850 743,850 803,850
828,850 853,850 878,850
717,100 727,100 742,100 762,100 787,100 812,100 837,100
862,100 887,100 912,100
-129,785 -261,666 -397,403 -540,189 -691,783 -852,188 -1,022,830 -1,116,732 -1,214,443 -1,314,536
1,161,165 1,049,284 948,547 865,761 789,167 703,762 618,120
574,218 526,507 476,414
0
0
0
89,000
-89,000
0
0
0
0
89,000
-89,000
0
0
0
0
89,000
-89,000
0
0
0
0
89,000
-89,000
0
0
0
0
89,000
-89,000
0
0
0
0
89,000
-89,000
0
0
0
0
89,000
-89,000
0
0
0
0
89,000
-89,000
0
0
0
0
89,000
-89,000
0
0
0
0
89,000
-89,000
0
1,489,507 1,361,734 1,366,305 1,391,614 1,333,845 1,271,627 1,214,500 1,250,260 1,299,219 1,363,712
189,744
19,605
4,617
0
0
0
168,327
382,294
208,719
21,565
5,079
0
0
0
175,446
410,809
219,155
22,644
5,333
0
0
0
182,903
430,034
230,112
23,776
5,599
0
0
0
190,716
450,203
241,618
24,965
5,879
0
0
0
198,900
471,362
253,699
26,213
6,173
0
0
0
207,479
493,564
266,384
27,524
6,482
0
49,863
0
192,355
542,608
LONG TERM LIABILITIES
City/Community Loan
Vendor Credit
1st Position Debt
Member Loans
TOTAL LONG TERM LIABILITIES
165,388 147,153 128,270 108,715
14,000
0
0
0
674,450 569,784 512,561 451,809
618,000 636,540 655,636 587,284
1,471,838 1,353,477 1,296,467 1,147,808
88,465
0
387,310
496,587
972,361
67,494
0
318,832
403,130
789,456
45,778
0
246,131
306,831
598,739
23,289
0
168,946
207,603
399,837
0
0
87,000
105,356
192,356
0
0
0
0
0
TOTAL LIABILITIES
1,635,867 1,607,015 1,567,088 1,530,102 1,383,170 1,219,490 1,048,943
871,199
685,920
542,608
578,000
0
-198,939
379,061
625,250
0
-11,951
613,299
672,500
0
148,604
821,104
EQUITY
Member Equity
Allocated Retained Patronage
Retained Earnings
TOTAL EQUITY
TOTAL LIABILITIES & EQUITY
116,766
12,965
2,691
0
0
0
31,608
164,029
148,346
15,563
3,498
0
0
0
86,132
253,538
172,495
17,823
4,197
0
0
0
76,106
270,621
247,250 294,500 341,750 389,000 436,250 483,500
0
0
0
0
0
0
-393,610 -539,781 -542,533 -527,487 -485,575 -431,363
-146,360 -245,281 -200,783 -138,487 -49,325
52,137
530,750
0
-365,193
165,557
1,489,507 1,361,734 1,366,305 1,391,614 1,333,845 1,271,627 1,214,500 1,250,260 1,299,219 1,363,712
Friendly City Food Co-op, Harrisonburg, Virginia, page 18
Board Members: Ilse Ackerman, John Ashenfelter, Joe Cloud, Peggy Duhamel, Jonathan Lantz-Trissel,
Noel Levan, Sam Nickels, Ben Sandel, Gil Souder
Friendly City Food Cooperative, Inc. Business Plan
March 30, 2010
Table 5. Pro Forma Cash Flow Analysis
Year 1
Year 2
Profit (loss)
-449,610 -146,171
Depreciation (Gross Accumulated Depreciation)
218,785 131,880
Interest Expense Add back
65,196
63,749
Subtotal
-165,629
49,458
Year 3
-2,752
135,738
60,550
193,536
Year 4
15,046
142,785
57,148
214,979
Year 5
41,912
151,595
52,334
245,841
Year 6
54,212
160,404
45,214
259,830
Year 7
66,170
170,642
37,758
274,570
Year 8
166,254
93,902
29,944
290,100
Year 9
Year 10
186,988 160,555
97,711 100,092
21,760
13,182
306,459 273,829
Changes In Working Capital
Prepaid Items
Inventories
Accounts Receivable
Accounts Payable
Accrued Payroll and Payroll Taxes
Sales Tax Payables
BLANK
Income tax Payable
TOTAL
CASH FLOWS FROM OPERATIONS
0
-5,040
0
116,766
12,965
2,691
0
0
127,381
-38,248
0
-5,191
0
31,580
2,598
807
0
0
29,794
79,252
0
-5,347
0
24,149
2,260
700
0
0
21,762
215,298
0
-5,507
0
17,249
1,782
420
0
0
13,944
228,924
0
-5,673
0
18,974
1,960
462
0
0
15,724
261,565
0
-5,843
0
10,436
1,078
254
0
0
5,925
265,756
0
-6,018
0
10,958
1,132
267
0
0
6,339
280,909
0
-6,199
0
11,506
1,189
280
0
0
6,776
296,875
0
-6,385
0
12,081
1,248
294
0
0
7,239
313,698
0
-6,576
0
12,685
1,311
309
0
49,863
57,592
331,421
INVESTMENTS
Investments
Deposits
Organization Development Costs
Land
Building contingency
Building
Equipment
Leasehold Improvements
CASH FLOW FROM INVESTMENTS
0
0
0
0
0
0
-5,000
-7,500
-12,500
0
0
0
0
0
0
-10,000
-10,000
-20,000
0
0
0
0
0
0
-20,000
-15,000
-35,000
0
0
0
0
0
0
-40,000
-20,000
-60,000
0
0
0
0
0
0
-50,000
-25,000
-75,000
0
0
0
0
0
0
-50,000
-25,000
-75,000
0
0
0
0
0
0
-60,000
-25,000
-85,000
0
0
0
0
0
0
-25,000
-25,000
-50,000
0
0
0
0
0
0
-25,000
-25,000
-50,000
0
0
0
0
0
0
-25,000
-25,000
-50,000
CASH FLOWS FROM EQUITY ACTIVITIES:
Member Equity
Allocated Retained Patronage
CASH FLOWS FROM EQUITY ACTIVITIES
47,250
0
47,250
47,250
0
47,250
47,250
0
47,250
47,250
0
47,250
47,250
0
47,250
47,250
0
47,250
47,250
0
47,250
47,250
0
47,250
47,250
0
47,250
47,250
0
47,250
CASH FLOW BEFORE DEBT SERVICE
-3,498
106,502
227,548
216,174
233,815
238,006
243,159
294,125
310,948
328,671
DEBT SERVICE (Principal & Interest)
City/Community Loan
Vendor Credit
1st Position Debt
Member Loans
TOTAL LONG TERM LIABILITIES
-23,733 -23,733 -23,733 -23,733 -23,733 -23,733 -23,733 -23,733 -23,733 -23,733
-14,000 -14,000 -14,000
0
0
0
0
0
0
0
-40,467 -89,853 -89,853 -89,853 -89,853 -89,853 -89,853 -89,853 -89,853 -89,853
0
0
0
0 -107,076 -107,076 -107,076 -107,076 -107,076 -107,076
-78,200 -127,586 -127,586 -113,586 -220,662 -220,662 -220,662 -220,662 -220,662 -220,662
TOTAL CASH FLOW
BEGINNING CASH
ENDING CASH
-81,698
237,000
155,302
-21,084
155,302
134,218
99,962
134,218
234,180
102,588
234,180
336,767
13,153
336,767
349,921
17,344
349,921
367,264
22,497
367,264
389,761
73,463
389,761
463,224
90,286
463,224
553,510
108,009
553,510
661,519
Friendly City Food Co-op, Harrisonburg, Virginia, page 19
Board Members: Ilse Ackerman, John Ashenfelter, Joe Cloud, Peggy Duhamel, Jonathan Lantz-Trissel,
Noel Levan, Sam Nickels, Ben Sandel, Gil Souder
Friendly City Food Cooperative, Inc. Business Plan
March 30, 2010
Table 6. Breakeven Analysis
Cash
Profit (Loss)
Profit (Loss) as % of Sales
Total Cash Flow
DEBT/EQUITY
DEBT/EQUITY+MEMBER LOANS
CURRENT RATIO
DEBT COVERAGE
Year 1
Year 2
155,302 134,218
-449,610 -146,171
-17.41%
-4.35%
-81,698 -21,084
-11.18
-6.55
2.16
2.48
2.00
1.23
-1.71
0.33
Year 3
234,180
-2,752
-0.07%
99,962
-7.80
2.00
1.54
1.42
Year 4
336,767
15,046
0.34%
102,588
-11.05
1.59
1.38
0.95
Year 5
349,921
41,912
0.86%
13,153
-28.04
1.48
1.33
1.08
Year 6
367,264
54,212
1.06%
17,344
23.39
1.32
1.32
1.14
Year 7
389,761
66,170
1.23%
22,497
6.34
1.14
1.32
1.20
Year 8
463,224
166,254
2.95%
73,463
2.30
0.82
1.43
1.27
Year 9
Year 10
553,510 661,519
186,988 160,555
3.16%
2.58%
90,286 108,009
1.12
0.66
0.58
0.47
1.57
1.64
1.34
1.57
Table 7. Projected Sources and Uses
SOURCES
Benefits & Donations
Grants
Member Equity
10,000
20,000
200,000
0.56%
1.13%
11.28%
Member Loans
Owners Contribution
600,000
830,000
33.85%
46.83%
City/Community Loan
Landlord Contribution
200,000
0
11.28%
0.00%
42,000
2.37%
Free Fill
External, subordinated
26,000
268,000
1.47%
15.12%
1st Position Debt
674,450
674,450
38.05%
38.05%
1,772,450
100.00%
USES
Leasehold Improvements
Equipment
Inventory
388,500
453,250
168,000
21.92%
25.57%
9.48%
Fees
160,000
9.03%
4,000
80,000
5,000
22,500
0.23%
4.51%
0.28%
1.27%
23,000
30,000
207,000
1,541,250
231,200
1,772,450
1.30%
Vendor Credit
1st Position Debt
Total Sources
Start-up promotion
Start-up staffing
Operating/Admin prior to openng
Holding/Site Costs
Interest during project
Post-Opening professional support
Working Capital allowance
Subtotal Uses
Overrun Allocation (15% of project costs)
Total Uses
11.68%
86.96%
13.04%
100.00%
Friendly City Food Co-op, Harrisonburg, Virginia, page 20
Board Members: Ilse Ackerman, John Ashenfelter, Joe Cloud, Peggy Duhamel, Jonathan Lantz-Trissel,
Noel Levan, Sam Nickels, Ben Sandel, Gil Souder
Friendly City Food Cooperative, Inc. Business Plan
March 30, 2010
Appendix A: Subscription Agreement
Friendly City Food Co-op, Harrisonburg, Virginia, page 21
Board Members: Ilse Ackerman, John Ashenfelter, Joe Cloud, Peggy Duhamel, Jonathan Lantz-Trissel,
Noel Levan, Sam Nickels, Ben Sandel, Gil Souder
Friendly City Food Cooperative, Inc. Business Plan
March 30, 2010
Friendly City Food Co-op, Harrisonburg, Virginia, page 22
Board Members: Ilse Ackerman, John Ashenfelter, Joe Cloud, Peggy Duhamel, Jonathan Lantz-Trissel,
Noel Levan, Sam Nickels, Ben Sandel, Gil Souder
Friendly City Food Cooperative, Inc. Business Plan
March 30, 2010
Friendly City Food Co-op, Harrisonburg, Virginia, page 23
Board Members: Ilse Ackerman, John Ashenfelter, Joe Cloud, Peggy Duhamel, Jonathan Lantz-Trissel,
Noel Levan, Sam Nickels, Ben Sandel, Gil Souder
Friendly City Food Cooperative, Inc. Business Plan
March 30, 2010
Friendly City Food Co-op, Harrisonburg, Virginia, page 24
Board Members: Ilse Ackerman, John Ashenfelter, Joe Cloud, Peggy Duhamel, Jonathan Lantz-Trissel,
Noel Levan, Sam Nickels, Ben Sandel, Gil Souder
Friendly City Food Cooperative, Inc. Business Plan
March 30, 2010
Appendix B: Board of Directors and Key Volunteer Biographies
Board of Directors
Ilse Ackerman (Board Secretary) currently works as editor-in-chief at Rosetta Stone. She built and
managed Rosetta Stone's content development organization and founded and managed Rosetta Stone's
Endangered Language Program. She has a Ph.D. in agricultural sciences from Cornell University. She was
a working member of Greenstar Cooperative Market in Ithaca, NY. She has lived in the Shenandoah
Valley a total of nine years and has been a member and working member of several Rockingham County
CSA's.
John Paul Ashenfelter (Board Treasurer) is a small technology business owner who has worked with a
number of startup companies in central Virginia, including several of his own. He has financial and
business experience that strongly support the Food Co-op during its start-up phase. John is a Virginia
native who earned a BS in chemistry at JMU before pursuing graduate work in chemistry and later
science education at the University of Virginia. His family is a member of the Glen Echo Farm CSA and
Harvest Moon Food Co-op in Floyd, Virginia. John has served on non-profit boards, including in the role
of Treasurer.
Joe Cloud is the General Manager and co‐owner, along with Joel Salatin of Polyface Farms, of True &
Essential Meats (aka T&E Meats) in Harrisonburg VA. T&E is one of the few remaining USDA inspected
abattoirs and meat processing plants remaining in Virginia which do artisanal work with local farmers.
Having lived in Seattle for many years, he regularly shopped at the PCC Markets, perhaps the country’s
premier grocery co‐op. He came to appreciate the unique position in the marketplace that co‐ops can
hold, such as values‐related purchasing, and a commitment to supporting healthy lifestyles. During his
time in Seattle, for many years he led the Friends of Thyme Patch Park, a steering committee which
developed a new neighborhood park and community garden from a vacant parcel of land in his
neighborhood, an experience which gave him first‐hand knowledge of both the effort and joy of
non‐profit board work. He is the proud father of 2 college students, and lives next to his family’s farm in
Augusta County VA, where his parents still live. His educational background consists of a Bachelor’s
Degree in Biology from Reed College in Portland, Oregon, and a Master’s Degree in Landscape
Architecture from Harvard University’s School of Design. Before becoming a local food entrepreneur, he
enjoyed a 20‐year consulting career with the international planning and design firm of EDAW, Inc.
(which incidentally included a role in the initial master planning team for JMU’s ISAT campus!). It was
partially his interest in green design and sustainability issues that led to the decision to change careers
and redirect his professional energy to T&E, with the goal of building a local sustainable food business
supporting family farms. His knowledge and experience in business as well as the local meat industry is a
very useful perspective for the FCFC’s Board.
Peggy Duhamel is a relief veterinarian and adjunct teacher at Blue Ridge Community College. She
moved to this area in 2005 after owning her own small animal hospital in upstate NY for 18 years. She
has experience with bookkeeping, management, personnel issues and bank loan applications. She has
served as Treasurer and Secretary of a non-profit animal shelter in NY, preparing budgets and funding
requests to private and public agencies. She is an active Rotarian, serving as Board member and
Friendly City Food Co-op, Harrisonburg, Virginia, page 25
Board Members: Ilse Ackerman, John Ashenfelter, Joe Cloud, Peggy Duhamel, Jonathan Lantz-Trissel,
Noel Levan, Sam Nickels, Ben Sandel, Gil Souder
Friendly City Food Cooperative, Inc. Business Plan
March 30, 2010
Secretary of her club. She recently completed her part in a $45,000 humanitarian
Rotarian project in India.
Jonathan Lantz-Trissel is the Recycling Coordinator for Eastern Mennonite University, and has
experience as a small business owner (family businesses in carpentry, bakery, and a yarn store). He is a
trained mediator and experienced organizer for peace and environmental groups. As a life-long resident
of this community, Jonathan has extensive connections and resources. He was previously an active
member of Weaver’s Way Co-op in Philadelphia.
Noel Levan (Board Vice President) works as an occupational therapist, mediator and sculptor. He has
been an organic gardener for 28 years, a public speaker and a leader in his professional associations.
Previously, and for many years, he was a working member of the Buffalo Natural Foods Co-op and the
Roanoke Natural Foods Co-op, which continues to run a strong business 2 hours south of Harrisonburg
and provides donations and advice to our organization.
Sam Nickels is a consultant in management, grant writing and fund raising for non-profit organizations,
and provides cultural diversity workshops for private and public institutions. He has experience
preparing business plans, handling licensing and zoning issues for nonprofits. He managed an export
business for three years and has hiring and supervisory experience. He and his family were co-op
customers for years in Maryland. He has many useful contacts in Harrisonburg, including JMU, where his
wife teaches. Sam has served on a number of boards, and was CEO of Crossing Creeks Residential Farm
for persons with mentally illness during the start-up phase, which included the purchase of a 156-acre
campus and initial program development.
Ben Sandel (Board President) is the Office Manager for a local company that installs and supports
business networks and telephone systems. He also has experience as a retail manager, carpenter and
sales representative. He has been an active member and consumer at co-ops wherever he has lived:
Rochester NY, Albany NY, Burlington VT, and Takoma Park/Silver Spring MD, where he also served on
the Board and helped write the policy manual and bylaws. In his capacity as a sales representative he
has worked closely with many start-up businesses.
Gil Souder is a lifetime resident of Harrisonburg/Rockingham County, currently living near Hinton with
his wife, Josie Showalter, who is the manager of the downtown farmer’s market. His interest in the local
food chain started in the early 70’s with a Country Ham business, curing Country Hams and marketing
them to local country stores and groceries. Having recently sold his farming operation, he continues to
stay involved in the local agriculture community. He also has experience with Rockingham County as an
employee and Comprehensive Planning Board Member, retail and sales experience, mediation training
at the Community Mediation Center (now called the Fairfield Center), and a lifetime of business and
personal relationships in Harrisonburg/ Rockingham County and the agricultural community statewide.
He is passionate about preserving and enhancing local agricultural, sustainable small farming operations
and the environment, and as a lifetime resident of this area he is excited about the opportunity to be
involved in the rebirth of Downtown Harrisonburg.
Key Volunteers
Friendly City Food Co-op, Harrisonburg, Virginia, page 26
Board Members: Ilse Ackerman, John Ashenfelter, Joe Cloud, Peggy Duhamel, Jonathan Lantz-Trissel,
Noel Levan, Sam Nickels, Ben Sandel, Gil Souder
Friendly City Food Cooperative, Inc. Business Plan
March 30, 2010
MaryJo Swartzendruber manages her own cut flower business and works at the
public library, both of which have given her many contacts in the community. She has a valuable
background as co-manager of an organic farm in Iowa and organizer of a community-supported
agriculture (CSA) program. She has been a bilingual ESL and adult literacy teacher and has coordinated
these programs and trained other tutors. She was a working member of the New Pioneer Co-op in Iowa
and a customer at the Glut Food Co-op in Maryland.
Laura Dent is a technical writer at Rosetta Stone (formerly Fairfield Language Technologies). She has
experience in financial and business planning, project management and business proposals. She is a
practitioner of community processes such as consensus decision-making and non-violent
communication. She was a customer at the co-op in Cambridge, MA.
Tony Lopez is a linguistics pedagogy editor for Rosetta Stone, a language teaching company, which
brought him to Harrisonburg. He has extensive computer and website expertise, has taught in foreign
countries, speaks many languages and is comfortable addressing groups and training people. Tony is
also a founding member of “Mental Flossing,” a local community theater group.
Michael Swartzendruber
Friendly City Food Co-op, Harrisonburg, Virginia, page 27
Board Members: Ilse Ackerman, John Ashenfelter, Joe Cloud, Peggy Duhamel, Jonathan Lantz-Trissel,
Noel Levan, Sam Nickels, Ben Sandel, Gil Souder