1,000
OWNER
COUNT
950

Chicago Market Board Meeting Minutes - August 30, 2017

August Board Meeting
Lakeview Pantry
Grant, Edward, Bill, Ankit, Lee, Linn, Kelly, Dana, Jen, Dan, Yani, Emily, Greg, Sunny via conference call, Katie for public period

Notes: Emily

Grant: 
-Welcome to new Board members- we are now 15!
-All new members have done orientation. Will be added to Basecamp projects now.
-We recently submitted a grant proposal to FCI for Urban Market Seed Grant. $10k matching grant. Earmarking for 3 consultants: attorneys, marketing, (third) but we were not selected. We do have a USDA grant application submitted as well.
-We reviewed the CM Vision with the whole group.
Bill:
-Recent $5k expense to our Architects for renderings.
-For clarity, our balance sheet reflects equity from Owners minus expenses such as insurance.
-Profit and Loss statement- we’re generally in the negative since we don’t currently bring in much income besides Pop Ups. Income is unrelated to Owner Equity.
-We now have a small surcharge to help cover credit card fees.
-We should expect legal expenses soon for our real estate attorneys.
New Board orientation:
-Can’t be accomplished in one sitting. Grant would like to spend a few minutes at meetings going forward talking about various onboarding topics.
-Tonight’s topic: process for discussion in person and on Basecamp. We strive to have rich discussions and come to consensus on decisions, holding votes were total consensus isn’t possible. Dissent and differing opinions are valued. Each person is representing 953 people, not just themselves. Base your viewpoint on research and due diligence.
-Grant reviewed “Defining Board-level Discussions”. Lee pointed out that we strive to empower individual teams to make decisions so that not everything is decided at the Board level.
-Our recent decision to hire a marketing consultant was a good example of a team being empowered to research and put forth a recommendation.
-After decisions are made, we must speak with one voice as an organization.
Marketing consultant - Anthony:
-One of the problems we’ve had since day one was struggling with long term strategizing, despite our talented and energetic marketing team.
-Anthony, Jen, and Hillary met with Kinship and got a scope of work and a quote that came in dramatically more competitive than competitors. They’re going to take over social media, eblasts and newsletters, and media communication. They’ll be getting us a lot of data and analytics that will inform how we’re doing. Anthony has recused himself from reviewing the contract as Kinship is a client of his.
-We had a big “download” meeting with them where they learned about Chicago Market. They will officially take control of our social media on September 8th.
-Anthony will be providing monthly reports on them and will track their progress.
-We look forward to all our social media channels being fully utilized.
-Jen, who specifically had marketing experience, was blown away by their approach and enthusiasm.
-Bill wants to make sure we have a positive ROI. Bill wants 60 new Owners in the next three months. Anthony thinks it will be way above that. We can opt out of the contract after the first two months ($3k oper month).
-Anthony thinks it will take them a little while to get off the ground, which is to be expected. Kinship thinks they can get us to 1500 Owners by the end of the year, though we remain skeptical of that number. Owner growth is their one and only goal.
-Jen: they already gave us suggestions for ways we can improve our current communications. They can get us many more emails than we currently have access to. We need to keep in mind that our NationBuilder costs are directly related to how many emails we have in our database.
-Our finance contingency says we will get to 1500 Owners, so we need to do what it takes to get there.
NCG Development Co-operative update:
-Dave Blackburn has reached out to us and is available on September 8th.
-The prep for that meeting includes building a question list, which we’ve already started. (Consultants, UNFI pricing, GM search and launch help, etc.)
-Re-read existing questions and documents. Grant will point everyone to those.
-Co-ops that use them tend to be more successful.
-We have heard some concerning things about the DC from other co-ops that we need to explore. We don’t have any concrete terms from the DC, only general information.
-Would Sugar Beet let us look at their contract? We should ask Cheryl and Jacqueline what questions we should ask.
-Do we know of any successful co-ops that DIDN’T use the DC?
-They would be choosing us as much as we’re using them.
-Are there any alternatives to using the DC? We could use their consultants independently of the DC, or we could choose our own. There are costs and benefits to using consultants that specialize in co-ops.
-NCG’s goal is to make co-ops competitive with conventional grocery stores.
-We don’t want a “cookie cutter” store.
Org Dev consultant - Dan:
-While we recognize we’ve made accomplishments, we struggle to delegate tasks and communicate between teams.
-LT talked to a couple of consultants to facilitate Board organizational development, especially as the Board moves from a working Board to a governing Board. 
-LT has chosen consultant Joe to help identify where our dysfunctions lie, develop a code of conduct and better lay our expectations.
-Joe will review Board surveys and develop a set of tools to improve Board function.
-Cost will be $5-$6k. That includes a separate assessment of Board members as individuals on a chart.
-When this originally came up, Anthony was opposed to it and thought it was going to be a retreat type event. But given Joe’s explanation, he thinks it will be useful to us. It is broken up into a series of workshops and process. The costs are broken up and we can end the engagement at any time.
-It would include in person assessment of current and former Board members to gather data,
-Sunny is concerned that this is “personality driven”, as Board members change in and out, is it not useful?
-Anthony: short term might be somewhat personality driven, but the long term results should provide us with structure we don’t have now.
-He would attend our meetings as available.
-He sees this as a long term, ongoing process, not a project that gets finished. He would work as many hours as it takes. We should ask him for information about how we can continue the process on our own.
-Jen thinks we should be intentional about how we include new Board members. 
-We should get referrals for Joe. Jen knew him previously, but not close enough to present a COI. He has worked with other non-profits on the north side.
-Bill feels that being “pegged” as a certain type may not be beneficial to the Board moving forward. Dana has personal experience with this, and feels that groups benefit from the awareness that such assessments provide- the awareness of how you work and how others may work differently.
-Yani mentioned 16personalities.com (Meyers-Briggs) as a free alternative. Or at least as a step before we choose to spend the money on the consultant. Dana is certified in Meyers-Briggs, thinks the test is not as important as the coaching and what we do with the results, is willing to get on a phone call with Joe to learn more about the work he’s done.
-Greg sees many things pointing towards the importance of Board development, which we largely haven’t done.
-On a positive note, Joe was impressed with many of the things we are already doing.
-Next steps: LT will share info with the group, will organize a phone call with Dana.
Executive session + Edward Collins-Fanning
Pro forma - Greg and Edward:
-Pro forma contains all known and projected numbers (rent, square footage, construction costs, current bank balance, employee wages, utilities, sales, etc.), all linked via complex excel formulas. Based on all the inputs, the pro forma calculates cash flow. We need it to calculate our financial viability given changes in any one area.
-Current pro forma includes Gerber staircase in total square footage.
-Greg outlined the various parts of the pro forma- sources and uses, sales projections, scenario planning
-We will have to do another market study to secure bank funding.
-Bill Gessner believes you should discount your projected sales by 15% and then another 15%. We chose to forgo that additional discount.
-Scenario planning is the heart of how we assess financial viability.
-Greg and Edward used paying for parking as an example to show how changes to the pro forma can inform the Board’s decision-making.
-EBITDA is a “true” cash figure, accounting not only for sales and expenses, but non-cash transactions such as depreciation and amortization.
-Lee- some of the weirdness in years 1-3 is due to a dramatic increase in costs of good sold.
-Year 1 also includes one-time startup costs.
-86D in the financial statements tab shows low rent- abatement period? * Gregory Berlowitz Gregory  needs to review*
-Market studies used to be good for 2-3 years, but now it’s really only 1-1.5 years. Gerber study is 14 months old- will banks accept it?
-Original market study cost $7k and takes a couple of weeks. Dakota only guarantees market studies for 1 year.
-Worth asking if it’ll be cheaper for just one building. Dan thinks we should get our other two sites in the market study.
-Personnel costs- how are they calculated? 25% of 9.1MM in gross sales
-What the Board needs to do with this document is use it to assess number changes during negotiations.
-We need a better grasp on what all the variables are and how to scenario plan by combining them (parking, taxes, abatement, etc)
-A spring version of the pro forma with multiple complex scenarios - wasn’t super clear to the Board
-Lee: we need to use the proforma to ask for more than we need, knowing that we won’t get everything we need.
-Greg: we need to make a chart that outlines every question we have and every concession we want.
-Sprinkler - ask that they cover, taxes - ask that they cover, parking and basement - ask for zero
-Abatement- we think we need 10 months (one month per lease term), but what should we actually ask for? We changed the language in the lease to “the later” of 180 days or when the store opens (so that could be longer than 10 months).
-The “permitted used” can dramatically alter our numbers. We’d have to say no if, for example, we couldn’t sell alcohol or coffee.
-Our redlines are probably more than the CTA is expecting. 
-We compared Scenario 1 to Scenario 6 ($18psf to $23psf)
-The big question is “how long should we expect/how long can we handle being in the red?”. *What is the standard for our industry???* Gregory Berlowitz Gregory to ask.
-Edward instructed us to look at the EBITDA line as a better reflection of financial viability, not the profits and losses.
-We need someone from the industry to tell us what is a reasonable timeline for profitability.
-Greg says we can talk to Brian from NCB for free. We could ask Bill but it will cost an hourly rate and could take a while. We could ask Jacqueline. Steve from Self Help.
-We feel comfortable moving forward sending the redline and continuing the research process in the meantime.
-Our brokers and lawyers are good council but we need to remember that they represent us and the decision is ultimately ours.
Executive session:
Next steps with new Board:
-Co-op world recognizes different stages of developing co-ops. We’re in 2a/b.
-We have some big projects on the horizon that teams need to start on- GM search, OLC, policy governance, lease negotiations, bank loans.
-Could we just block off a weekend to knock out policy governance? Lots of examples exist, we could find some and tailor to our Board.
-The point of this conversation is to get folks to start raising their hands and moving forward with these things.
-Some OLC materials are done. We need the website to be ready. Anthony and Greg know what the website needs to support. Lee will coordinate that conversation.
-Cash flow planning document is critical. It should be on the dashboard. Greg started one with Esther that Bill can use as a base. We need to figure out what we can afford and when, and if we need gap loans.
-We have a structure now, but we have to be  open to restructuring if need be.
-Ankit will take the lead on Policy Governance. Dana wants to move forward with the GM team, along with Grant and Greg’s wife Laura.
-The dashboard isn’t well-loved, but is critical for LT and the whole Board.
-Dana will add a GM tab.
-Linn reminded all the Board members to reach out to their networks as part of Owner Recruitment.
-Emily will send a Doodle for a social hang out.

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