MMC / MDARD Boot Camp Workshop Series Project
Case Studies, September 2014
9 Bean Rows
Overview
Mission: The 9 Bean Rows mission is to increase the availability and access to locally grown and handcrafted
artisan foods year round.
Their Story: In 2008, Nic and Jen Welty began their second season of Community Shared Agriculture (CSA) farming
at Black Star Farms, just south of Suttons Bay, MI. They installed a wood-fired pizza oven in the Black Star Farms
market (the Hearth and Vine cafe) and added artisan breads to their lineup of
produce. That fall, they started their own small farm in Omena (north of
Suttons Bay) and called it 9 Bean Rows. The 9 Bean Rows 11 acre farmstead,
while modest in size, is filled with wild and cultivated edibles. There are ramps,
blackberries, red raspberries, apple trees, choke cherries, asparagus, rhubarb,
table grapes, garlic, walnut trees, sugar maples, and a forest full of edible wild
mushrooms. There is also a spring-fed pond. Jen and Nic added a 144 x 34 foot
passive solar hoop house to extend their growing season, and Nic continues to
use the hoop house located at Black Star Farms.
Since those humble beginnings the bakery has expanded to a new location on a
second farm purchased in 2013. This new venue includes a retail farm stand
for bakery and produce sales. Paul Carlson, a friend who previous ran Black
Star Farm’s café, joined the Weltys in 2013 to help establish the 9 Bean Row
Restaurant in what had been the old firehouse in Suttons Bay. Renovated on
the cheap with lots of sweat equity and creative décor, the café quickly
garnered rave reviews for its food, local ingredient sourcing, and recognition as
the best new restaurant in the region by Traverse Magazine and Northern Express – two local magazines.
Business Structure
The 9 Bean Rows brand is structured as a cluster of related Limited Liability Companies (LLC) tailored to meet
business needs.
9 Bean Rows, LLC is the original incorporation established in 2009 and is the home for the farm and serves as the
asset holding company. The farm produces products for marketing and sales to a CSA, a number of farmers
markets in the Leelanau /Traverse City area, and to a range of wholesale markets that include its sister companies
– the bakery and restaurant.
1
Two other LLCs, Roux 9 and Boulangerie 9, have been incorporated in recent years as operating companies for the
bakery and restaurant respectively (see chart in Finance section, below). Both rent their facilities from the 9 Bean
Row, LLC that hold the title on the buildings they operate from. Both do business under the 9 Bean Row brand.
The 9 Bean Row, LLC’s members are Nic and Jen Welty. As 9 Bean Rows explores other ventures, it begins those
initiatives under the initial LCC structure, establishing new discrete units as they prove viable or when legal or
licensing requirements predicate. For example, the restaurant had to be structured as a separate legal entity for
reasons including the ability to secure a liquor license for the establishment. The chef partner in the restaurant
owns a small share in Roux 9, LLC and his compensation is structured with ownership and other incentives to grow
the business. Establishing the various LLCs also allows for better tracking and management of the specific
enterprise, including valuing the sales transaction between each of them, ensuring a way to manage each unit for
profitability. There is also a benefit of remaining clustered under the 9 Bean Row brand and having common
ownership, as they can offset each enterprise’s cash-flow needs based on
seasonality and sales, while still being managed as a discrete businesses –
very important in the early years of these beginning farm and value-added
enterprises.
In 2013, 9 Bean Rows issued W-2s to 32 people– primarily part-time help
in the restaurant and in the other ventures. Altogether, this equated to
ten full-time equivalent jobs, a small but significant contribution to the
rural Leelanau economy that also serves as a training ground for other
prospective food entrepreneurs. Much of this expanded workforce is a
result of the value-added growth beyond the farm base – through the
establishment of the bakery and restaurant.
Markets Served
9 Bean Rows serves a wide range of local markets as part of its strategy to provide fresh local food year-round to
their community. The farm produce is sold through a CSA, farmers markets, and wholesale channels. 9 Bean Rows
also sells to its sister bakery and restaurant. The wholesale channel reaches to other foodservice and retail users
in the region, including schools when in season. They sell both cultivated crops and a range of wild edibles
harvested on the farm. The bakery operates its own retail location that also sells 9 Bean Row produce and
beginning in 2014, CSA members can add “Breaking Bread” option that provides one loaf weekly. The restaurant,
on the main street of Suttons Bay, is well positioned to attract tourists, cottagers, and local residents year-round.
Nic also provides advise and services (hoop-house construction, production, marketing) to other local-foods
entrepreneurs – a complimentary income stream to the farm operations.
The common branding has served the various ventures well, leveraging recognition of 9 Bean Rows into new
channels effectively.
One product that 9 Bean Rows markets is Mixed Salad Greens to a number of channels that include direct sales
and wholesaling through the regional distributor Cherry Capital Foods. This approach to market provides several
2
outlets and associated income streams from the product. Below is an illustration of 9 Bean Row’s participation in
this regional food value chain1.
This model is very different from a traditional lineal go-to-market approach, and illustrates the importance of being
both creative in the approach and building trust relationships with others in the supply and value chain to achieve
success.
Advisors
Nic is a graduate of the Carnegie Mellon Tepper School of Business where he had participated in a number of
business plan competitions – great training and experience to bring to the 9 Bean Rows. Since the age of ten, Nic
has also been engaged in growing Atlantic Giant Pumpkins and other giant vegetables
(http://www.bigpumpkins.com/htgwcgpiii/nic_welty.pdf), cultivating his “green thumb”. This background
positioned him well in the food entrepreneur space.
Nic also relies on his father for guidance, leveraging his years of experience running the family farm.
The Welty’s came to Leelanau to work at Black Star Farm and gain some experience before starting 9 Bean Rows.
Don Coe at Black Star has been an important mentor (see sidebar).
The Welty’s are also well networked into the local food community in the region and statewide including the
Grand Vision Food & Farming Network http://www.thegrandvision.org/food-farming-network, and the Grand
Traverse Foodshed Alliance. Nic also serves on Michigan Food and Farming System (www.miffs.org) Council and
has relationships with Michigan State University (MSU) and MSU Extension including the MSU Student Organic
1 Food Value Chain Analysis, Grand Traverse Regional Food Hub Pilot Project, Final Report, Prepared by Heather Hirschtritt with
support from Susan Cocciarelli. February 28, 2014
3
Farm at the MSU Center for Regional Food Systems. These networks provide both a learning forum for 9 Bean
Rows and an opportunity for the Welty’s to contribute to the broader development of thriving and successful local
food farm enterprises.
Food Value Chain
9 Bean Rows continues to expand and meet market opportunity in the Traverse City region. Cherry Capital Foods,
a key wholesale customer, is building a new distribution center in 2014 that includes half dozen suites for supplier
business co-location. 9 Bean Rows will locate its produce processing facility in one of those spaces – allowing for
direct “through the wall” delivery to Cherry Capital for broader distribution.
Finance
Income Streams: In 2014, the 9 Bean Row
branded cluster will exceed half a million dollars
in sales from the various enterprises. The revenue
channels include:
9 Bean Rows, LLC that operates the
farms and produces the produce and
bakery products, provides consulting
and services to other local-food
entrepreneurs, and also serves as
the asset-holding company from
which other ventures rent/lease
facilities. The asset-holding arm of
the LLC is revenue neutral at this
time, with income covering
depreciation, and the prospect of
accruing future asset appreciation.
Roux 9, LLC a separate entity doing
business as 9 Bean Rows Restaurant
(allowing it to hold a liquor license)
Boulangerie 9, LLC – doing business
as 9 Bean Row Bakery.
Revenue
9 Bean Rows,
LLC
Farm:Produce
9 Bean Rows,
LLC
Consulting/Servi
ces
9 Bean Rows,
LLC Asset
Holding
Roux 9, LLC dba
9 Bean Rows
Restaurant
Approach to Business: Behind this simple
organization are five years of sweat equity, creative capitalization from a number of sources, and trust
relationships that have fostered this growth. The 9 Bean Rows name is derived from Yates’ poem “The Lake Isle of
Innisfree”, “…a small cabin build there, of clay and wattles made: Nine bean-rows will I have there, …and I shall
have some peace there”. The Welty’s have not strayed far from Yates’ vision, building small as they started, but
expanding as the opportunity arose!
9 Bean Rows was incorporated in 2009, a year after starting the CSA garden and hoop house on the site of Black
Star Farms (www.blackstarfarms.com) - where Nic had previously been farm manager. Black Star has a track
record of incubating complimentary value added food and hospitality ventures. That year Nic rented the land and
4
hoop house under an arrangement that had them pay only a percent of revenue. Initial working capital was
provided by the pre-sale of CSA shares. Jen Welty also leased the Black Star ovens for the early-morning hours to
launch the bakery, completing her baking before the Black Star culinary staff’s day began. This creative
arrangement allowed 9 Bean Rows to launch with minimal capital outlay. Nic was an astute manager, keeping
costs low by determining that he could grow amazing vegetables without the need of a tractor or other power
equipment – leveraging soil, compost, mulch, water, sunlight and a lot of sweat equity both on the production and
marketing side to establish the business and brand.
Asset Capitalization: Hoop houses are key to 9 Bean Row’s season extension production strategy in the Leelanau
climate and they now have three on the farm. The first hoop house at Black Star was financed in part through the
MSU Hoop houses for Health program, as well as some volunteer construction labor. By its second year, 9 Bean
Rows assumed ownership of the Black Star hoop house and financed the building of the second structure with
funds borrowed from family members. The third structure was partially financed with NRCS funds in partnership
with Northern Michigan Community Action Agency where the Welty’s had established an Individual Development
Account (IDA) that provided matching funds for small business start-up and expansion.
By year three, having some success in the marketplace, both the bakery and farm needed to expand. That year
Nic’s father had sold the home farm in Ohio, and invested some of the process as a part owner in a second 14- acre
farm purchased in 2012. That financing is structured to repay Nic’s father – as a partial contribution to his
retirement income.
The restaurant building was purchased in 2013 with a combination or bank financing, a SBA loan. The building
needed a lot of sweat equity to clean up the existing kitchen and make the front of house venue ready for opening,
but this minimized costs. Several customers of the 9 Bean Row Farmers Markets stepped up as angel investors
with fixed rate 10-year loans to cover the liquor license related costs and an operating/working capital fund.
Working Capital: The pre-sale of CSA shares are an important working capital source for the farm. By year-two, 9
Bean Rows had established enough of a track record to qualify for a Small Business Association (SBA) working
capital loans and 504 loans. This allowed them to establish wholesale account and manage cash-flow for the net30 day or longer terms till they received payment. Astute management and good planning have allowed 9 Bean
Rows to retain the working capital revolving credit needed for ongoing operations. Nic uses a self-developed realtime tracking app on his smart-phone to track yields, sales, margins and profits to ensure he is fully informed on
the status and progress of the various enterprises.
Key Learning
Plan well and manage costs. Early on, it’s important to invest sweat equity as a way to minimize expense, become
profitable and build real equity. Leverage branding and marketing across new market channels to get quick
recognition and grow new businesses.
Links
Visit the 9 Bean Rows website to keep current on the development of the farm and related businesses:
www.9beanrows.com
5
Nic and Jen’s work and 9 Bean Rows were recently featured in National Geographic Magazine –September 2014:
http://news.nationalgeographic.com/news/2014/09/140919-aging-american-farmers-agriculture-photos-ngfood/
6