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

Comments

details

I forgot to mention that Columbus, Ohio has long history of being a test market. So far the geniuses at cnfc have decided to attack the messenger and the message rather than realize that they are invested in an end game. Typical actually of the one big happy dysfunctional family pattern. It is clear fact of human behavior and as noted by Ann Wilson Schaef people particularly in leadership positions tend to re-create their dysfunctional family of their orgin in their personal lives and in their working lives. If they were bullied, they will bully etc. The way out of this process is some sort of internal recovery, the real kind. The marketing dysfunctional person asserted that cooperatives sell food to serve their members, and corporations operate to serve their profits. What she left out is that a dysfunctional staff will also operate to serve their own needs at the expense of the membership. Staff that has management that serves the needs of a dysfunctional staff will act to avid being evaluated for their performance. There are similar forms of dysfunctional corporations. Gresham's dynamic will also intervene here, in an unregulated market, crime will come to dominate the business of that market.

Regarding the truism of "We

Regarding the truism of "We make a profit to sell food to coop members,not sell food to make a profit" there are a few important missing pieces.

First even cooperatives need to self-capitalize to do things like financethe cost of new equipment or the cost of re-locating or expanding the operation.

Second, when the primary management staff are resistant to the transparency of financial management or limit their management concerns to issues such as tardiness, then little concern will be applied to review how the staff actually perform their jobs, such as over-buying, slow moving stock, a lack of knowledge of their products, their relative
unwillingness to contribute to a cooperative work environment. When the board is unwilling to evaluate the operation as the primary agent of the membership of that cooperative to assure that the operation is being managed appropriately including evaluating management of the operation in the interests of the membership, then their concerns may be limited to monthly sing-a-longs and the removal of dissenting voices.

Cooperatives could perform in the manner of a productive cooperative culture. Real management is actual less about occupying a certain level of authority and reciting truisms, than planning and evaluating the performance of the operation and its variety of functions. Democracy based upon either majority rule or benign despotism is an inadequate basis for
management in the absence of being functional relative to the financial details. Democracy must also be reflected in how it serves its membership.

There is a very old and simple economic principle, when a market or business is not regulated according to transparent and measurable standards, then the business of that business will either fail or that business will be involved of fraud. When cooperation is limited to satisfying the comfort levels of a select group of staff, then it will generally have a limited life span. Spending months and months ruminating about a possible relocation without having any financial resources to
accomplish that goal ends up seeming ridiculous and perhaps primarily serving some conflicting self interest.

In the aftermath that was the Olentangy Cooperative grocery I was forced to assume the position of its treasurer. In attempting to recover the operation we discovered multiple types of fraud, including Federal FICA taxes not being paid and multiple cash deposits which went missing and multi-types of incompetence by the former board including negotiating the lease on the space upward substantially under the assumption that the operation would be very profitable. By the time that the situation fell apart the original board members had lost interest in their responsibility for their decisions and indecisions.

Two more pieces about Lucky's Farmer's Market. To make their operation viable I expect that they have already contracted with local growers to buy their entire harvest. Being that CNFC has not operated at this level I expect that local produce will difficult to find at a quantity level sufficient to supply CNFC members, so in effect by not growing the sales and profitability of CNFC, the actual competition just became a lot more competitive. Second I went and inspected at a distance the Lucky's store facility from a no hard hat distance, and they will not be open for business until at least the end of August.

the difference between wishful thinking and management seems to be difficult when the culture is comfortable with its legacy of dysfunctions.

Dithering as usual and misc

The current news on Lucky's new store in Columbus is that it will open in October. I'm told as well that some staff at CNFc/CCM will be applying there.What poses as management there is still concentrating on upgrading their POS system, under the assumption that it is the source of their poor performance. Their implosion is going to be comical, I fear.

Lucky's Now Hiring

Lucky's has posted a banner out front announcing that they are "NOW HIRING." If CNFc loses 25% of their work force at this point, they will be in an even deeper mess by losing experienced workers and shuffling around to find replacements which are not likely to be the people that they would ordinarily hire. I can't help but imagine that both that this is normal process, and that Lucky's will place a higher priority on hiring away CNFc employees, unless they are seriously toxic, such as the incumbent trolls. Hell, they could even hire away CNFc staff and then fire them before the store actually opens, just to mess with the mess at CNFc.

lessons unlearned, let's all pretend this is a business

Lucky's has been open for a week now, and I have never seen that parking lot so consistently full to over flowing. The sales at CNFc are way down, much more than the lethal 15% . I expect that they will have to start laying people off or stumbling on until they have to file for bankruptcy. The topper is that the new and supposedly improved Cols. Free Press is not likely to be interested in a post mortem, because it might offended the perpetrators. So, for the Free Press crowd which has never patronized the store, is willing to avoid political blow back against of actually speaking the truth to power about the fraudulent nature of CNFc. I am entirely disgusted with the PC nonsense, and the disinterest in either economic or political literacy in favor of imagined political grease.

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