The Goldilocks Solutions: Right-sizing Your New Food Co-op

The Goldilocks Solution

Finding a Just Right Store Size

AgendaFairy Tales & Co-ops: What should you believe?

• Once Upon a Time• Goldilocks (& the Three Bears)• The Three Little Pigs• The Moral of the Story• Happily Ever After

Myths & Misconceptions

• Co-ops can start small and grow– haven’t they always?

• People will support us because we are a co-op

• Small stores don’t require as much organizing and planning to be successful.

• Bigger store = bigger risk• If we don’t do something soon, our

members will abandon us.

Updating a few fairy tales

Grocery stores:• Have very low profit margins– WHEN

SUCCESSFUL• Your competitors invest in state of the art

equipment, information systems, merchandising and promotion.

• Economies of scale matter• You can buy Silk ® at Walmart ® cheaper

than through your distributor

Goldilocks as Mentor

• Review the Options• Test the Fit• (Avoid Angry Bears)

Too Small• Revenues are low, expenses are

disproportionately high• Unlikely to qualify for NCGA membership • Limited ability to meet the community’s needs

and expectations• Perishables (local food) require lots of space and

high turnover• Susceptible to competition• Even if profitable, capital will accrue verrrrrrry

slowly.• Future expansion will look a lot like starting over.

Too Big

• Overhead costs not covered by sales volume

• Empty space/empty feel• Rare

Just Right• Inventory mix and selection matches market

needs• Enough space to operate efficiently and shop

comfortably• Room to grow into mature sales projections• Sales revenue and margins can cover expenses

and generate surplus

Store size should be a business decision, based on hard numbers, analysis, and vision.

Porridge

• Yelm Food Co-op, Yelm, WApopulation 7,000

• Spiral Natural Foods Co-op & Grocery, Hastings, MN

population 23,000

• Common Ground Food Cooperative, Champaign-Urbana, IL

population. 82,000/41,500

Yelm Food Co-op

Retail square feet 1,000Year open 2007First year sales $400,000Current sales $912,000Employees None until 2008Volunteers YesHours of Operation Mon -Sat 9 am - 7

pmSun 10 am - 5:30 pm

Spiral Natural Foods

First Store(s)(3 downtown locations)

New Store

1979 2011

3,150 ft2 retail 1,855 ft2 retail

$400,000 $765,000

$1M projected this year

Common Ground

First Store New store Expansion

Opened in 1984 2008 2012

900 ft2 retail 2150 ft2 retail 5700 ft2 retail

$650,000 (in 2008)

$1.9 million (yr. 1) $7.2 million (projected)

$3.9 million (yr.4)

Goldilocks Revisited

Finding “Just Right”o Visiono Market Studyo Feasibility Researcho Community Surveyo Site Selection

3 Little Pigs• House of Straw

o Quick & Easy!o Immediate gratificationo Huff and puff…

• House of Stickso Recognition of need for more structure…o … but inadequate executiono Huff and puff…

• House of Stoneo Extra care and investmento Built to lasto Wolf Kabobs

What if Small is the Only Option?

• Careful business planning is critical• Are there potential reductions to operating

expenses?• How long will they exist?• Is the competitive environment stable?• Do you have the best possible site?

• Is a buying club a better option?

The Moral of the Story

Use good business plans,Get professional advice,Build the right sized co-

op,And…

Questions?