Frequently Asked Questions About the Harvest Market Conversion
1). How does this Harvest Market opportunity honor the Mission of the MFC? The Mission of the Manchester Area Consumer Cooperative Society, Inc:
We are a member-owned food cooperative working to build a full-service grocery store in the Greater Manchester area. Our mission is to sell and promote the best local foods and products including produce, meat and grocery items as well as bulk foods and health-care products. But we are much more than a grocery store; our Co-op’s impact and goals are far-reaching. We will engage the public in a dialogue about healthy and sustainable living through community programs including workshops, cooking classes and other educational resources.
The Harvest Conversion Opportunity falls within bounds of “the Greater Manchester Area” and is located on average about 5 miles from downtown Manchester.
AG presented us this opportunity, and after looking at all the factors, and conducting another professional Market Study - it is the most financially viable option for our sprouting food co-op. This decision is supported by consultants from Cooperative Development Services Consulting Co-op (CDS CC), who build food coops for a living. The MFC has been working with CDS CC for years, assessing the financial feasibility of various sites. The benefits of this site include: square footage, ample parking, high traffic count, accessibility, visibility, advantageous financing terms and lease rate, lower start-up capital needs, existing business with over $7M annual sales and 8000 customer transactions per week, seasoned staff and the infrastructure to achieve our greatest potential for success.
2. Why is AG letting us take over this store?
Associated Grocers of New England (AGNE) is a cooperative, just like us. AGNE’s members are individual grocery stores, to which they have been distributing products and produce for 70 years. We had established a relationship with AGNE because we knew they would be one of the suppliers for our store. When the AGNE President/CEO, Mike Bourgoine, came to us with this potential conversion opportunity, we were surprised. After much consideration, the Board voted to explore this opportunity and weekly meetings with AGNE’s senior management team ensued.
AGNE has demonstrated that this is a true collaborative effort and has expressed the belief that the store will prosper as a consumer co-op versus a conventional market. With the changes in the competitive marketplace and the rise of natural/organic/local demand, AGNE feels our Co-op’s powerful mission and vision will best succeed in this location. They will remain partners in the journey, offering us financial backing, in the form of a low-interest loan for inventory and a no-interest, staggered lease for all the equipment. One representative from AGNE will join the MFC Board and AGNE will work hand-in-hand with the General Manager for operations and product transitioning. This is a WIN-WIN for all.
3. When will we get a Manchester store?
This site gives our co-op the best chance at a successful business to serve the Greater Manchester area. It is two miles from the Manchester city line and about five miles from Elm Street. Once this site is profitable and sustainable, and there is enough demonstrated market demand, we can assess additional sites. It is important to note that we are profitable in Year 3 for this site; not until at least Year 6 for the other sites. The success of this site is dependent on our community coming together and supporting our co-op by shopping it!
Many food co-ops, such as our neighbors in Hanover and Lebanon NH, have multiple locations within a short distance of each other.
Below is a snapshot comparison of this Harvest conversion versus the two other sites for which we most heavily engaged in lease negotiations.
Item Harvest Site Site 2 Site 3
Traffic Pattern High, Central Low One Way Poor access
Lease Rate Range $8.65 per sq ft $11 per sq ft $16-18 per sq ft
Parking Ample Fair Poor
Co. Tenants Several Potential Poor
Total Square Feet 19,464 1 3,000 10,000
Average Income $116,000 $53,000 $53,000
Future Expansion Not necessary Potential No
Community Space TBD Limited None
Base Sales $7.3 Million Zero Zero
Profitability Point Year 3 Year 6 Year 7
Time to Open 6 Months 1.5 Years? 1.5 Years?
Capital funds needed $2 Million $3.9 Million $4 Million
Equipment Costs Minimal Cost Assume 100% Assume 100%
4. How will the “transition” from AG ownership to the Manchester Food Co-op take place?
On January 18th, 2016, AGNE announced the transition of ownership plans to all employees and key stakeholders and the MFC announced to all Member-Owners at a public Site Announcement Meeting. Member-owners also received notice through a mailed letter and email.
The MFC’s General Manager, Patrick Neily, starts his full-time role on February 1st, 2016.
AGNE will be working directly with Patrick, the MFC Project Manager and the MFC Board of Directors to gradually start transforming the existing product selection to match the requirements and needs of the Co-op.
Inside the store, there will be opportunity for existing shoppers to purchase an MFC membership, and the Manchester Food Co-op will conduct a large membership campaign. In order to secure this site, our Co-ops needs 1,000 additional member-owners.
The Co-op Team will begin the Member Loan Campaign to raise the funds needed to take over full ownership of the store. Our community needs to raise an estimated at $1.5 million in order to sign the lease for this site.
Once all funds are reached, final steps will be put into motion for a store re-design to execute a full conversion to the Co-op shopping model. The plans are to close for no more than 4 days for renovations and a grand opening celebration will follow!
5. What has changed in the competitive landscape that affected our site decision?
New competition within our Trade Area since the MFC’s inception:
Whole Foods - Spring 2016
Market Basket (2)
Trader Joe’s anticipated, as well as another grocery in the S. Willow Sylvania site
Because natural food is the fastest growing grocery segment (yay!), many large chain businesses are busting into the natural foods market including Market Basket and Hannaford and now large superstores such as Walmart, Walgreens, Target, SAMS/Costco, etc. These superstores must now be considered our competition, which is a shift for food coops. Competitive influences have changed our financially viable options and make an existing store more appealing.
For a rented location in Manchester, the square footage of our options, high lease rates, inadequate parking, uninvested landlords and total financing requirements have all been major obstacles in our way to securing a site.
Since it’s an already operating business will we see a dividend return more quickly?
In theory yes. Consider this, to take over an existing and fully operational business with a great partner who is willing to work with us to transition inventory and rent existing equipment, our total capital needs is $2 million. If we were to lease a location and do a full fit-up, we were looking at nearly $4 million total capital needs. If we were to purchase land and build our own building, the start-up capital needs increase by a range of $1M to $3M, depending on the value of the land. ALSO, the store sizes for the latter two options are substantially smaller, sometimes even half the square footage, and have higher lease rates.
Based on the current financials of Harvest Market - we expect to see greater margins on product sales especially when we add in bulk and health and beauty (including supplements) into the product mix. Those items alone will generate an estimated 30% more revenue than is currently made at this location.
Additionally, we are starting out with an existing sales base of $7 million annually and a loyal shopper base of about 8,000 transactions each week. In a lease or build situation we would not see these numbers until years 3-4.
We feel safe saying that dividends will be seen more quickly with this model - which is one of the reasons why it makes sense from a business standpoint.
6. What are the benefits to starting in this location (versus our other options)?
• Established business with $7M annual sales
• Existing customer base already loyal to store
• Traffic count, accessibility and parking - none of these categories could be matched with other Manchester locations
• Market study shows consumers in the area have high propensity for natural and organic foods shopping
• Business partnering with AG is a huge plus with many resources:
• Financial feasibility - $2M capital funds needed compared to nearly $4M
7. How is the Bedford store going to service the Greater Manchester area?
Our outreach, education and community impact will not be at all limited to the confines of our store walls. We plan to tour the Manchester area, hosting events and food demos at businesses, schools, hospitals, etc. We have already been doing this for years, but as an established store we will be able to really impact our community.
We need to be creative of how we ‘build’ our store beyond our doors
• Partnerships are important, we will continue to build these relationships as part of our mission
• Special events at partner businesses will be fun and exciting for all, we will bring the co-op “out” into the community frequently
• Mobile Market - another great opportunity, we can take education initiatives on wheels. We will work closely with local businesses to help us. Once we have the store operating smoothly, the chances for success with the truck are increased as we can serve Greater Manchester area while using the store as home base.
8. Shouldn’t the owners have been able to vote on this decision?
As according to by-law Section 5.1: Board of Directors Powers and Duties, Except as to matters reserved to member by law or by these by-laws, the business and affairs of the Coop shall be directed in the interests of members by a Board of Directors (sometimes referred to in these by-laws as “the Board”).
The members of the Board, entrusted with the task by Member-Owners to promote our vision, have been working almost 3 years obtaining knowledge about what is feasible for the co-op in this highly variable natural foods market. We have had to be nimble and proactive in our pursuit of knowledge concerning all the keys in this decision - the market, site options, and financial feasibility. Also, confidentiality was necessary to keep viable location options available. In particular for the Harvest Conversion site, confidentiality was needed to respect the current employees and not cause undue stress over job security. All of this would not have been possible with consensus of a large group.
We feel this is an amazing opportunity! We consulted coop and business experts to help guide and advise us all along the way. We also searched and found an amazing fit for a General Manager as the feasibility of the conversion option progressed.
9. Do we have to become Member-Owners in order to keep shopping at this location?
The Co-op is open to the public, all-inclusive!
Becoming a Member-Owner is a $100 investment (not an ANNUAL fee) per household. Each household allowed one voting member. When you own a piece of the Co-op, you are supporting your local agriculture, community, economy - as well as the health of generations to come.
Member-owners may receive shopping benefits that will be defined as the financials of the store are developed. Discounts will be limited in the first couple of years while the co-op works toward profitability. But once profitable, the Member-Owners may receive the following based on what the GM and the MFC Board agree upon:
• price breaks
• annual dividends based on a percentage of shopping spend
• opportunity for ongoing input in store and product decisions
• qualified discounts to participating local businesses
• incentives (discounts to workshops and educational sessions)
10. What will happen to Harvest Market Employees?
The MFC absolutely wants to be respectful of the existing employees. All employees will have the opportunity to apply for positions at the Co-op - we encourage it!
The Co-op also plans to add more positions; our staffing model requires additional employees to execute the level of customer service for which we strive.
The culture, and therefore the people, represents the face of the MFC to all shoppers is a crucial piece of our Mission. We are thrilled to have the opportunity to start off with seasoned staff who can be trained about the differences of a food co-op and cooperative principles.
11. Will prices and options change immediately?
The product transition plan will be strategic and calculated; our General Manager will lead this charge with AGNE and Co-op consultant support. To ensure the least disruption to existing customers, it is important to retain the best-selling conventional products, working within the high quality standards and buying principles of the MFC. And then adding plenty of new products, including bulk items, supplements and health and beauty (departments which don’t exist in Harvest Market). And of course, in line with our Mission, sourcing plenty of product from LOCAL farmers and producers!
Prices need to take in consideration the source:
• balance with multiple options (organic/local/natural/conventional)
• competitive prices for local farmers and producers
• educate consumers about the breakdown of the pricing
• use creative ways to offer affordability for those who need it
12. Are we still pursuing the Mobile Market?
We were pursuing the Mobile Market project last year when progress in obtaining a physical site seemed not financially viable, with the intent that we wouldn’t do anything to interfere with our progress for a site. When this conversion opportunity popped up, we tabled the Mobile Market project since we didn’t have the manpower to successfully accomplish it without jeopardizing the potential site.
As we develop our store, we will also assess what the mobile market will look like based on funds available and partnerships we can forge. We have raised close to $10,000 for this initiative and we are still accepting donations to help get the truck on the road. Our goal is to raise a minimum of $50,000.
A Mobile Market will set our co-op apart from all others, giving us the opportunity to reach even more members of our greater community. It can also serve as CSA pick up, Catering Drop-Off, and Prepared Meal Purchases for example. This is key to:
• serving the Low Income / Low Access areas of Manchester
• promoting of local foods (grown and produced)
• educating on the value of healthy food sources
We welcome Member-Owners to help us with this initiative to make it happen sooner.
13. Why do we still need to raise another $1.5M? What will that be used for?
In order for the MFC to thrive in this location, we need to invest in substantial changes to both store design and product selection. The process of converting a primarily conventional store to our Co-op includes:
• Top-notch training - a major tenet of a food cooperative is its knowledgeable staff
• Hiring of additional staff - more employees will be needed to fulfill the needs of the co-op model
• Renovations - physical upgrades and re-design to create a store with a coop feel and decor
• More signage to effectively communicate product information to customers
• Sourcing local products direct from farmers and producers