Lucky's Business Plan by Tadit Anderson
This is most likely of no interest to any reader outside of Columbus, Ohio. The principle of as above, so below holds. The crony capitalism and financial fraud on Wall Street and in "the City" on High Street is reflected also on Main Street.
I have not seen a copy of Lucky's Columbus's business plan, even so there are several points that are very obvious.
First it has to be noted that this is Lucky's second store, the first being in Boulder, Colorado and that is just by the information available on the web. There are some very experienced people involved in the development of what is to be a midwest natural foods chain. The experienced management included people that were formerly with both Whole Foods and Sunflower. At this level alone CNFC is going to be far, far out planned and out financed, particularly given that the management at CNFC is entirely out classed in every way possible. CNFC has had interim management for over a year and a half, and even at the beginning of that period Karen Hansen had no retail experience at all, though a business degree which apparently focused upon administration, not management and certainly not financial management. The interim status has obvious drifted into something more than an interim status thanks to there being little regard for fiduciary responsibility to the member owners. The management involved with the Lucky's Farmer's Market expansion is simply world class.
Second note that Lucky's Farmer's Market is using a formula that combines what CNFC has endeavored to be, and it is both well capitalized and well located. Note also that Lucky's is most likely going to be served by UNFI which means that Lucky's will many of the same products that CNFC carries and probably will discount their prices compared to CNFC, at least for awhile. Note here that several of the staff currently at CNFC also shop at the Giant Eagle, because their wages and probably Clintonville rent prevent them from affording doing their major shopping at CNFC. Obviously also is that Lucky's has been working to establish relationships with local growers and other suppliers. Giant Eagle has never done a very good job at the whole and natural foods marketing, mostly because their purchasers operate off site at the main headquarters as do most corporate grocery operations. As such their buyers are most likely conventional grocery buyers who really don't know how to market whole and natural foods. This makes Giant Eagle's control of whole and natural foods sales also soft, and open to challenge by a more knowledgeable operation.
Third, the timing on Lucky's opening at the latest will be in late August, before and as OSU students return. We can expect very aggressive marketing to Clintonville with attractive specials on a weekly basis, accompanied by special events. We expect that their marketing budget will be large for two main reasons, first that this opening is the first step of a larger plan, and financing for the rest of the expansion will be more available if they do succeed in Clintonville. Second is that they know that CNFC is an easy target, and they are probably very familiar with the details and level of management at CNFC as well as CNFC's perpetually slim net profit margin. My estimate is that it will take about a 10 to 15 % drop in sales at CNFC before its operation as it stands will not be able to pay all of its current staff and overhead costs. Even if it downsizes staff, it won't be able stock and purchase to serve the remaining sales. There will soon be low stock levels due to the declining working capital. Once CNFC eliminates itself possibly near the end of this year or early next year it will be forced to close its doors. By the continuing disregard for financial management CNFC has nothing near the financial reserves or financial management to survive this sort of competition. Given the politics of the board and history of CNFC, and lack of parking for people outside of Clintonville at CNFC, switching over to patronizing Lucky's will be easy. Lucky's will be the right size for Clintonville, as compared to Whole Foods which seems to prefer larger stores, and they will have ample parking.
Fourth, and this may not be known yet to the Lucky's management, if the CNFC board and management goes forward with buying into the Microsoft POS system and the related training, that expense will be very costly at a time when working capital will be declining. The change over from the IS4C POS system will also be costly in terms of staff time at least. Making the commitment to the Microsoft POS sytem will actually accelerate CNFC's financial decline because the current management and other staff have been resistant to making financial management an important part of their jobs, The MS POS sytem will be expensive and will not deal with the installed resistance to financial management. Taking the cost of this replacement POS system out of the working capital will greatly increase the stock outages and thereby will reduce sales. This investment can only come from dipping into the working capital or taking on additional debt, and doing either will make the financial situation for CNFC worse, and accelerate its closing. In addition the only on staff person dealing with the POS system is close to being terminated based upon tardiness. If he is fired, the transition to the MS POS system will be even more difficult and more expensive. Blaming the poor financial performance of the operation upon the current POS system, is much like blaming the postal service for delivering bills. It is a deflection to direct attention away from the lack of financial management and the lack of development of the existing systems.
Prior to about a year and a half ago I was the treasurer for the CNFC board, I was informed by both the interim manager and the bookkeeper that they would resist and oppose the implementation of financial management particularly over the purchasing function. More specifically the statement was that the staff was generally not competent to participate in the financial management process in the purchasing function. I was also told by the current board president that "not everyone could be an economist" inferring that the recommendations I was making were open to a majority rule decision by the board. Understand also that this was well after spending about $9,000.00 to bring in the top trainer for purchasing for cooperatives in all of the US. In essence this training was rejected out of hand, after the fact by the majority. Further my effort to develop estimates for the inventory of the different departments was deemed at too high of a level though elsewhere in the financial management of both food cooperatives and privately operated natural foods stores of a comparable size, it is a normal part of financial management and of staying in business. The need for financial management was stopped by the politics and financial illiteracy of the staff and the board.
Again, an important part of Lucky's business plan is competing with CNFC to gain its market share. Their investment indicates that they think that it is a sure bet. I would have liked to be in a position to disagree.
The next few months will play out, and I will be proved right or wrong(not likely). The bottom line at this point is that it is even too late to change the results from Lucky's opening on High Street. The existing jobs at CNFC will almost certainly disappear, so there is really not much to salvage. Given the utter lack of information on the financial condition of the operation and the near term prospects someone had to finally tell the members what is likely to happen very soon.
I took on the responsibility to serve the fiduciary interests of the membership, not to support a crony form of "cooperation."
in fiduciary fidelity, Tadit Anderson