What are co-ops all about, anyway?
Throughout your organizing efforts, you will encounter many people who do not know what a co-op is, how it operates or why it would be worth investing in. People are drawn to co-ops by a diverse array of factors, including community building, economic justice, access to healthy foods to name just a few. It’s a good idea to be well versed in many aspects of cooperatives so you can address your community’s interests. A collection of concise articles explaining the many aspects of cooperatives can be found on the Co-op: Stronger Together site.
We found the perfect site for a co-op! How do we get started?
Maybe your local grocery store has just closed. Maybe a piece of tempting downtown real estate has just been vacated. Whatever the reason, you found a location and you’re raring to go. Unfortunately, starting a cooperative grocery store is much more complicated and time consuming than simply finding a storefront and building some shelves. Successful co-op startups put in substantial effort building community buy-in, having professional analysis of the market area and feasibility, and raising funds. As your vision and knowledge evolve, what today seems like the perfect spot might not even be on the list of sites for consideration. Take time to lay a solid foundation for your co-op, and worry about its exact location later.
We want to start a food co-op. What should we do first?
Great news: You’ve already made an excellent first step by visiting the Food Co-op Initiative website. The first step in starting a co-op is learning as much as you can. Learn about co-ops, learn about your community’s needs and vision, and learn about the organizing process. Some good places to start are the free e-book, How To Start A Food Co-op, and our video, A Food Co-op for Your Community. Sign up for our email newsletter to keep abreast of educational opportunities, and drop us a line to let us know you’re out there.
What do you charge for your services?
All the services of Food Co-op Initiative are free of charge. You will find it necessary to hire consultants for in-depth services as your project progresses; however, FCI is always available to answer questions and point you in the right direction.
Are you accepting applications for Seed Grants? Are we eligible?
Seed Grant applications are accepted on an annual basis as funding is available. See our Seed Grant page for current information and deadlines.
Any organizing group that intends to open a retail food co-op may apply. Applicants must be incorporated as a cooperative (or your state’s closest equivalent). FCI grants are on a reimbursement basis and require a substantial cash match. The number of grants we can offer is limited and therefore it is a very competitive process. We try to support a cross-section of the communities seeking co-ops, from rural areas to urban centers, small to large. Preference is given to those projects that appear to have a high likelihood of success.
When should we incorporate?
Incorporation provides some protection to the organizers (the so-called “corporate shield”) and assurance to potential members and supporters that the organizers will be accountable. In most states incorporation is relatively simple and inexpensive. We recommend that you consider filing with your state office as soon as you have a group of committed organizers, evidence of strong community support and a preliminary, informal assessment that your co-op concept can be viable. While Articles of Incorporation are pretty standardized, we still recommend that an attorney review your application. Refer to our Legal Primer for more details.
How soon can we plan on opening? How long does opening a food co-op take?
Recent experience indicates that a minimum of three years are required to open a successful food co-op. A five year process is not unusual. In rare situations, a co-op with a very effective organizing team and substantial financial resource may have a shorter timeline.
How big should our store be?
We have found a minimum of 3,000 retail sq ft is needed to create a financially viable, full-service grocery store. A professional market study can project potential sales volume for your store concept and recommend an appropriate size.
We’re starting a site selection committee. What do we need to know?
Along with all the nuances of what makes a good site, there are some practical considerations for simply running the committee/navigating the process. Blog post.
A professional market study will tell you how much income you can expect in different areas. Once you have specific sites, more accurate projections can be created. We have two webinars that outline the site selection process.
How much parking do we need?
Number of parking spots will have a direct impact on sales. A commonly used ratio is six parking spaces per 1,000 sq ft of retail space. This assumes that employees do not park in the customer lot. An alternative ratio is 4-11 spaces/1000 sq ft of total space. Parking is ideally in a dedicated lot.
What will starting a co-op cost?
A rule of thumb is $250 - $285/sq ft of floor space, including retail and back of the store (in a leased site). A good way to start forming your expectations is to download the Sources and Uses template. This is a document you will revise repeatedly as your project progresses.
That's a lot of money! Can't we do it for less if we buy used equipment, use volunteers to make repairs, etc?
Careful use of the Sources and Uses budget may show you places where you can do it for less. However, keep in mind that most “savings” come at a cost. For example, used refrigeration equipment is less energy-efficient, will require a larger repair budget after opening, and may result in lost sales if it breaks down. Your contractor, inspectors and safety regulations may not allow people in the construction area other than professional builders. The investment in an attractive, modern store is part of your long-term marketing effort, ensuring a safe and welcoming experience for your owners and community.
How do we finance our project?
Typical funding for a new retail co-op comes from a variety of sources. During your earliest organizing, founding members may donate or loan funds for basic expenses. Fundraising events in the community can also help support your early overhead. Once you are incorporated and have decided on your membership structure, you will begin collecting membership payments (equity).
During your feasibility and planning stages is the time to investigate community development funds, jobs programs, state business aid initiatives, and other forms of public funding. Rural communities may be eligible for grants or loan guarantees from the USDA. When you are ready to announce a site and have your business plans in order, a member loan drive can be initiated and commercial loan commitments secured.
Finally, as you move into the implementation stage, you will need to finalize all commitments and continue to recruit new member-owners.
For more financing and fundraising information, visit ourWeb Links page.
What are top mistakes organizers make that lead to setbacks or even store closure?
Food co-op startups that make it to opening day have a high success rate compared to private businesses. Some do fail, however. The article Why (Some) New Co-ops Fail is recommended reading for every co-op organizer.