Food Co-op Business Plan: Member Owners and a Grocery

A food co-op is a grocery owned by its shoppers. Members buy an equity share, often a couple of hundred dollars, which together with member loans pays for much of the build-out; in return they own the store, elect its board, and share in its profit as a patronage dividend when there is one. Day to day it's a grocery like any other: produce, groceries, bulk foods by the scoop, refrigerated and frozen, wellness, and often a deli. Departments keep different shares of each dollar, and wages are the biggest cost. The plan below works in departments per $100 of sales. In the example, a Lincoln food co-op starts with $575,000, ends its first year about $69,100 behind before the owner's pay while sales build, and makes about $6,100 a month at full speed. Below is each part of the plan, the first year month by month, the startup budget, and a free template.

The short version

• Describe the co-op in a paragraph: the members, the store, what's missing nearby, the goals.
• Raise member equity and loans before you build.
• Plan sales by department per $100: produce, groceries, bulk, refrigerated and frozen, wellness, deli.
• Bulk and the deli keep the most; groceries the least.
• Wages are the biggest cost.
• Profit returns to members as a patronage dividend when the board declares one.
• TaroStack keeps dates on the perishables and makes the deli's food batches from stock. More below.

Part 1: the business description

Sandhill Food Co-op, a made-up food co-op in Lincoln, Nebraska, writes:

Sandhill Food Co-op is a 6,000-square-foot member-owned grocery in Lincoln with about 1,200 member owners, selling local and organic produce, groceries, bulk foods, refrigerated and frozen foods, wellness products, and a deli with soups and salads made in house. In its first year it aims to reach $150,000 of sales a month.

Part 2: what members put in

Member equity is ownership, not a donation: it can be returned when a member leaves, under the bylaws. Member loans are paid back with interest. The startup budget in Part 6 is what this money pays for. How margins differ by department is in grocery store profit margins by department.

Part 3: suppliers, members and the deli

Produce comes from a regional distributor and about 30 local farms; groceries and bulk from a natural foods distributor, weekly. The deli makes soups, salads and sandwiches each morning, under the store's retail food license. Members get a discount day each month and a vote; the board decides each year whether to pay a patronage dividend. Where a grocery loses money to waste is in grocery store shrink.

Part 4: what each category earns

At full speed the business sells $150,000 a month and keeps $57,700, 38.5%; groceries brings $15,300 of it.

Part 5: the first year, month by month

Fixed costs are $51,600 every month: wages ($30,000), rent ($9,000), utilities ($4,000), loan payments ($3,500), equipment upkeep ($1,200), insurance ($1,000), register and software ($600), member events and ads ($800), and other costs ($1,500). Sales start at half of full speed:

The year's sales are $1,430,100, and the business ends it $69,067 behind, before the owner's pay. It breaks even at about $134,140 of sales a month, in the ninth month. The lowest cash point, −$87,204 in month 8, is covered by the $90,000 of working cash with about $2,800 to spare. Member shopping decides the first year: a co-op whose members shop there weekly fills its ramp faster than the plan shows, and one whose members shop rarely doesn't.

Part 6: the startup budget

The $485,000 before working cash is earned back in about six and a half years at full speed. A health food store owned by one person is in health food store business plan, and selling bulk without packaging in how to start a refill store.

Get the template

Download the food co-op business plan workbook. Four sheets: your categories, each per $100 of sales with its variable cost and hundreds a month at full speed; the first year, month by month, with sales ramping up, profit, cash, the first profitable month, the lowest cash point and whether the working cash covers it; your fixed costs; and the startup budget. It's an ordinary Excel file with no macros, and it works in Google Sheets, LibreOffice and Numbers.

Where this stops working

The plan uses one shrink allowance per department. Thirty local farms deliver on their own schedules, the deli cooks a different amount each morning, and what wilted on Tuesday is a guess by Friday.

How TaroStack does it

TaroStack keeps dates on the perishables, records shrink by reason, and makes the deli's soups and salads batches from stock.

The deli's batches. Soups and salads are recipes: a batch takes the vegetables and stock off stock, costs what it used, and gets a lot with a date.

Dates, oldest first. Dairy, meat and deli food keep their dates, the oldest goes first, and an alert comes before a date runs out.

Shrink with a reason. Every adjustment carries its reason, expired, spoiled, damaged or lost, reported by reason, item and site.

Recipes, batches, lots, expiry and losses by reason are on every plan, from $49 a month. The first 30 days are free, with no credit card. If you'd like a hand setting up, ask, and we'll do it with you.

Questions people also ask

How much does it cost to start a food co-op?

The example budgets $575,000, including $90,000 of working cash; the build-out is the biggest item.

Is a food co-op profitable?

It can be: the example makes about $6,100 a month at full speed before the owner's pay, after a first year that ends behind.

How do food co-ops raise money?

From member equity shares and member loans, often with a community lender; in the example, $575,000 from 1,200 members, 60 member lenders and one lender.

Do food co-op members get a share of the profit?

When the board declares a patronage dividend, members get a share in proportion to what they bought.