Weaver Street Market: A modern day co-op story

The story behind the creation of Weaver Street Market, a new community owned natural foods store in Carrboro, North Carolina, reads like a modern co-op fairy tale. What makes the tale so modern is the approach taken by the founders in developing the project, the scope of support they got, and the store that resulted from their efforts.

Weaver Street Market is located in one of the fastest growing areas in the country, the Raleigh-Durham-Chapel Hill triangle. The area is not newly settled, however. Chapel Hill is home of the oldest state university in the U.S., the University of North Carolina.

The store opened last June on the first day of summer, about two and a half years after the project was originally conceived -- and several times as large! The store size is 7300 square feet, with 5400 square feet of retail space and 500 square feet of cafe seating.

"I'm glad we started thinking small, or the project probably would never have gotten off the ground," said Ruffin Slater, reflecting on the penniless position he and Randy Talley, the two founders of Weaver Street Market, were in when they began. "Our plan was to do a small store on the scale of Durham Co-op and then grow. We thought the financing would be easier for a 1 to 2000 square foot store, but also felt that such a store was not big enough. We felt pressure that Wellspring would take over the market if we did a small store."

The founders' concern was justified, considering Wellspring had come into the Durham Co-op market in 1981 and dominated the market ever since. At the time, Randy and Ruffin were co-managers of the Durham Co-op. "We realized Wellspring would always dominate the Durham market, so we decided to look for an open market," explained Randy.

Weaver Street Market

Carrboro, North Carolina
Opened: June 1988
Annual sales (est.)$2.6 million
Average sale$13.50
Customers/day574
Total size7500 sq. ft.
Retail size5500 sq. ft.
Inventory (wholesale)$120,000
Gross margin32%
Number of members600 households
Sales to members20%
  
DepartmentPercent of Sales
Grocery26%
Dairy6%
Cheese5%
Produce16%
HBA4%
Vitamin4%
Deli/cafe11%
Bread4%
Beer/wine5%
Bulk10%
Fish/meat7%
Frozen2%

They began looking in the Chapel Hill area, a market ripe for a natural food store, so ripe that Wellspring had targeted the area as a prime site for another store. The market pressure lead them to look at a larger site, about 3000 square feet. The site was located in Carrboro, right on the border of Chapel Hill and on the same main street that went through the center of Chapel Hill's downtown. But months of lease negotiations got them nowhere. They brought in Rex Stewart of Renovations, who helped convince them that the site was not affordable.

There was another good retail location across the street, but they had passed up the site because it was linked with a large supermarket located behind the prospective site. But after the deal got killed on the 3000 square foot site, they pursued the option across the street. The new site had many appealing features -- parking, lots of retail space, 20,000 cars passing every day, a large lawn in front, and it had been vacant since it was built more than three years before. A breakthrough came when they learned that the supermarket did not have jurisdiction over the site because it had been built after their lease agreement.

After lengthy negotiations, the Weaver Street Market signed a lease. "Finding a location was one of the hardest parts of the project," said Ruffin. "We spent more than a year looking for a site."

Financing: credit union and city

"Financing was the other hard part," he added. The only good thing about the time it took to get a site was that it allowed them to find funding for the project. Rex described their few resources: "They began with no capital, collateral or credit. Funding was leveraged through planning, preparation and networking."

The planning process started with preparing a business prospectus. Rex supplied Ruffin and Randy with some examples, and a business plan was created that was updated as the project grew, sites and sizes changed, and funding and assets were acquired.

 

Consumer and Worker Ownership

Consumer shares:

Weaver Street Market consumer shares are sold according to household size: a one adult share is $75, a two adult share is $135, and a three or more adult share is $175. Each adult named on the share receives the right to all member benefits. People may buy their share on a payment plan with a $20 downpayment and four quarterly installments plus a $5 administrative charge.

As of the beginning of 1989, we had 594 household members, representing 915 individual adults, and $63,630 in equity.

The benefits of being a shareholder include:

  • A 5 percent discount for all products in selected departments -- produce, bulk goods, cheese, deli/cafe/bakery, books, herbs, herbs, vitamins, and bodycare. The discount does not apply to the fish, grocery, or beer/wine departments.
  • Senior citizen home delivery -- regular delivery customers get called every Wednesday morning for grocery delivery that afternoon. The service has been primarily targeted to people who are homebound, and includes some non-seniors.
  • Community discount program -- area businesses offer Weaver Street Market shareholders a discount on their products or services. This program is just getting underway.
  • Special services such as check cashing privileges and an internal charge account system. The charge system requires accounting systems that are just getting underway, so this is not yet available.
  • Work option for a larger discount. There are 25 to 30 people who work three hours per week for an extra 15 percent across the board discount. They're involved in many departments as well as with the home delivery program and as grocery baggers.
  • Each adult votes for the consumer members of the board of directors, and may run for the board.

Worker ownership:

All workers are encouraged to become a partner in the store.

For the first three months on the job, all workers receive job training and participate in a store orientation series. Pending a good performance evaluation (self, peer, and manaer), the worker enters the next three month phase in which they receive more in-depth training on operations, marketing, finances, and communication and decisionmaking.

At the end of the second three months of training, the current worker owners vote on accepting their new worker owner, who, if approved, then begins payment on a share. Worker owner shares cost $400, payable with a $25 downpayment and a $7.21 weekly payroll deduction.

The benefits of being a worker owner include:

  • A share in the store's profits.
  • A vote for the worker members of the board of directors, and the opportunity to run for the board.
  • Involvement in decision-making committees for the store.
  •  

The first committed financing came from the Center for Community Self Help, a local credit union whose mission includes developing community owned and worker owned businesses. A presentation was made based on the business plan, after a local financier and future board member had coached them for it. "Our lack of collateral was a problem," said Ruffin, "but the board believed in us and could see we were serious about the project." Having a tight business plan helped. "They said it was one of the best plans they had ever seen."

The credit union approved a $100,000 loan on two contingencies: (1) that they hire someone with experience in project development and retail management; and (2) that they secure another $200,000 in financing and have a signed lease. At that point the co-op's founders set up a long term contract with Rex Stewart to help them manage the project. The credit union gave them a letter of intent, which set the stage to acquire the other two-thirds of the financing.

The next third came from the city of Carrboro. "The mayor heard about the project," Randy explained, "and told us that Community Development Block Grant money was available." The location was one of the primary keys in getting money from the city, because the program was geared at revitalizing the downtown area. Other criteria were that they create jobs for low income people (1 job for every $10,000 loaned) and that they have other funding -- the city wanted to provide "gap financing."

The Board of Aldermen approved the loan 7-0. The presentation, however, was only the piece that clinched the deal. Most of the selling had been done before the presentation was made. "We sent a letter to all of the Board members with a copy of the business plan," Ruffin said, "and then followed up with a phone call and met individually with those who were willing, before the meeting." In addition, they went around to local merchants and got letters of support. "Some merchants and others came to the presentation and spoke on our behalf," Ruffin added. It was the networking that made the loan possible.

Since then, other businesses have opened up in the area. "We were confident the store would have that effect in the community," said Ruffin, "and used examples of where other natural food stores had had this effect when we made the presentation."

Plus shareholders

The final third of the financing came from individual loans and shareholder equity. The team used the same business plans and presentation with individuals as they had with the City.

In addition to having the business plan, Ruffin also prepared a disclosure statement outlining the potential investors' risks, and presented that along with the business plan. As he described them, "the business plan was upbeat, citing the market potential, projected earnings, and spelling success. The disclosure statement was conservative, outlining the risks."

Marilyn Butler joined the team and offered her expertise in fundraising to help secure an additional $110,000. She developed a mailing list by trading lists with community organizations, non-profits, and others with goals and interests similar to those of Weaver Street Market. She prepared an attractive shareholders brochure explaining the benefits of becoming a member, and a letter which was sent out to potential investors.

Promoting the equity program also was a successful way to promote the store; about two hundred shares were sold before the store opened. (See sidebar on "Consumer and Worker Ownership.") "We refer to the store as 'community owned' and call the members 'shareholders' and their memberships 'shares' because we think it is more reflective of their position," says Randy. "We also were sensitive to the fact that a co-op had gone out of business here and had a funky reputation."

The philosophy of the founders was to embrace the best of what they had seen in co-ops and the best they had seen in privately owned stores. "We started with a clean slate and no organizational history," explained Ruffin, "so we could create a whole new organization. We wanted the store to be owned by the community and by the workers. We felt that worker ownership allows the organization to be more reflective and responsive to the needs of the business. The owners are then more directly involved with the operation."

Meeting the market

The result is a community owned store with an entrepreneurial spirit. The store reaches out to all sectors of the community. The design, structure, product mix and pricing are intended to make everyone comfortable at the store.

The only product the store does not offer that might segment them is fresh meat. They do have a fresh fish department. Original plans included a meat section, but an experienced butcher and quality source at a good price could not be found. Whether they will carry the product eventually is undecided. A recent customer survey indicated few people miss the department, "but we're not sure if that is reflective of the community," stated Randy.

After just over a half year in operation, the staff feels they are just starting to get things really under control. "Sales were way beyond our expectations when we opened," claimed Randy. As a result, the staff and management initially concentrated on serving customers and stocking the store. Now they have fully staffed the store and are setting goals for each department.

The marketing department also is just getting into gear. The store had a large, successful grand opening and has continued to advertise and do some promotions. But their plans are to have a large impact on the community. Here again they are recognizing their prominent competitor. "Wellspring did everything that we had always aspired to do," Ruffin stated. "They were community minded, educated their customers, and had a positive influence on the community."

"We are going to start aggressively marketing our equity program again," said Marilyn, who has been concentrating on personnel duties and operations. The co-op has over 600 members currently, but she expects a much larger number soon. The worker ownership program is also a major focus at this time. "We are preparing a training program and anticipate having 20 to 30 worker owners in about six months," Ruffin said. "We are also working on a bonus plan."

A final bit of advice from Ruffin: "We gave away T-shirts to everyone who bought a share. They became a real item in the community, like a status symbol or something. It also helped announce the store's coming before we opened."

See other articles from this issue: #021 February - March - 1989