OUTREACH COORDINATOR INVESTMENT CAMPAIGN
FREQUENTLY ASKED QUESTIONS
Isn’t my ownership enough? Why are donations or preferred shares needed?
The co-op needs start-up funds. Funds to build the store will come from ownerships, owner loans, preferred shares, donations, outside loans and grants. Owner loan programs and the sale of preferred shares are long-standing methods used by co-ops to raise money and community support for cooperatives. They demonstrate the existence of a loyal customer base and reduce the debt service making the business stronger.
What are preferred shares?
FRFC owners of Class A and Class B shares fully paid (the $100 fee to join) who are Minnesota Residents may purchase Class C Preferred shares. Preferred Shares are non-voting shares that can earn dividends of up to 8% once the co-op becomes profitable. In the event FRFC dissolves, Preferred Shares will be refunded ahead of Class A and Class B shares, but subordinate to future creditors, e.g., bank loans. Preferred shares may be redeemed only if authorized by the Board of Directors. Most likely this would not be until FRFC achieves profitability. Class C shares are not tax-deductible.
How will the co-op be able to compete with other grocery stores in Grand Rapids?
As a food co-op, we do not have to support a corporate office or stockholders demanding maximum return on investments. The co-op’s commitment is to its owners and through owner involvement in the decisions made for the co-op, the intention is to provide fair pricing and fair return on investments. Free Range Food Co-op will emphasize locally grown and produced products to help stimulate local agriculture, reduce the impact of long distance shipping and cycle money through the local economy. FRFC will emphasize naturally produced and organic products raised without the use of chemicals, GMO’s, or antibiotics and with due consideration for impact on the environment to provide healthier, more nutrient dense foods. The co-op will bring value to the residents of Grand Rapids and the surrounding cities, in addition to having a strong community centered mission with cooperative principles and values.
How will FRFC be different from other grocery stores?
FRFC is more than a grocery store: it is a community-owned business that will provide convenient access to fresh, local, organic, healthy and whole foods and products while also providing opportunities for education and continued learning for community members. It will be a community hub for sustainable business practices and environmental stewardship and will drive increased investment and positive development in our community.
Are you working with an attorney?
Yes. All of the legal documents have been reviewed by an attorney experienced in cooperative law and we understand them to be appropriate.
Can the co-op be financially successful?
According to Food Co-op Initiative, 152 food co-ops have opened around the country in the last 11 years and 72% of them are still in business. This shows promise and it is a much higher percentage than the average business. A professional market study conducted for FRFC indicated that there is sufficient sales potential to support a full-line natural foods co-op in Grand Rapids. The intent is that the co-op will have the ability to generate profit so that it can provide additional services to its owners and the community. Future decisions will determine how the funds are used. Some of these actions may include enhancement of the services offered in the store, expansion of the store, reduction of prices, increased dividends for owners, increased wages or investment in community projects. FRFC owners, through the board of directors will make the decisions about these actions.
If I buy shares and for some reason the co-op doesn’t open a store, do I get my money back?
If the co-op doesn’t open, or goes out of business once its open, its assets will be liquidated and funds will be used in the following order: liabilities will be paid and the remaining cash will be distributed to shareholders. It is unlikely that all of an owner’s investment could be returned if the co-op ceases development efforts before the store opens, because expenses will be incurred, and no income will have been received. While there is positive data in the success of food co-ops, like any investments, there are risks.
What is this money being used for?
The $10,000 grant from the Blandin Foundation, and all additional funds raised from owners during this Outreach Coordinator Investment Campaign will be used for wages and program support for an outreach and volunteer coordinator to work part-time for the co-op. Upon evaluation, the board has determined that volunteer coordination and community outreach is the highest area of need for the co-op at this time. In addition, any additional funds raised during this campaign will be used for business planning and costs associated with site selection.
What happens if we don’t raise enough money?
If we don’t raise enough money, we may not be able to continue developing the co-op. If adequate funds aren’t raised by the end of the investment campaign, the board will make a decision as to how to move forward.
What is a Food Co-op?
A food co-op is a community owned grocery store that exists to serve its owners and the community. Food co-ops are typically formed in communities to address needs that owners feel aren’t being properly met, such as better supporting local farmers & producers, making organic food more available and affordable, and building a stronger local, cooperative economy. The food co-op allows owners to work collectively to meet this need, rather than individuals trying to accomplish it themselves.
In Minnesota, food co-ops are regulated under MN Statute 308A & 308B, which lays out the legal requirements of how food co-ops are formed and operated. The food co-op is overseen by a democratically elected board of directors made up of co-op owners, elected by owners. This board is responsible for monitoring the operations, and meeting the mission and ends of the co-op on behalf of its owners. The co-op will also have paid staff like any other grocery store. This democratic approach to business results in a powerful economic force that benefits the co-op, its owners, and the community it serves.
Why do food co-ops have ownership?
Co-ops are built on ownership. The investments that owners make in buying shares and their involvement make the co-op possible. Owners also provide the start-up financial foundation for the business.
Will the co-op need money in addition to ownerships?
Yes. FRFC will also conduct fundraising, sell preferred shares and seek loans from owners, apply for grants, and borrow money from banks, cooperative lenders, and other outside sources. Success in all of these depends on having sufficient ownership because owners are the fundamental source of capital and the foundation of the co-op.
When will the co-op open?
There are a lot of different factors that will determine when our co-op will open such as recruiting a strong board and core group of volunteers, finding a suitable location for our co-op, raising enough funds during investment campaigns, and building ownership to a level that indicates strong community support for the co-op. The board will re-evaluate the timeline as we move forward at each stage.
Where will the co-op be located?
A location has not been chosen for the co-op yet. A professional market study has given us geographic recommendations based on the demographics of Grand Rapids. A site selection team has been formed and will begin working soon to narrow down suitable location possibilities for the co-op based on those recommendations.
What still needs to be done?
Growing ownership to at least 1200 owners, selecting a site for the co-op, lease or purchase negotiations, store renovations or building, hiring a general manager, and opening the store are still to come.
Is a food co-op a nonprofit?
No. A food co-op is considered a for-profit, cooperatively owned business. Cooperatives are regulated under MN Statute 308A & B, which requires the co-op to have a board that has legal obligations in the way it functions. In that respect co-ops are run a lot like a non-profit, but they don't run on investments or donations. We will have to be profitable as a cooperative grocery store in order to be successful.