(This is the personal opinion of Richard C Burton)
Here's what we know based upon reviewing BP's published records for 2007-08,and interviews with persons knowledgeable with their former finances; BP has lost $850,000+ in 2007, and we are being told by their financial manager that such losses were anticipated ,so don't worry. Yet in their Oct/Nov 07 publication BP projected a loss for the year of $500,000! BP appears to blame the loss on not enough sales, and claims a 2% drop may have been due to negative publicity in the press.They had lost $345,000 in the first 6 months of 2007, so in reality the loss is getting more and can not be attributed to start up costs!
At the Brunswick store, under the tutelage of the then finance manager Warren Zimmerman, they had been able to turn around a situation where they were originally so far behind in bills(aprox $100,000) that Mountain People's Warehouse was insisting on cash, plus $1000 per order.Thanks to a loan from Michael Funk, that was resolved, and over the years BP-Brunswick started earing $100,000 per year, and prior to the move had amassed nearly $1,000,000 in savings! BP now is nearly $4,000,000 in debt, its losing money at the rate of between $25,000-$70,000 per month, and it is clearly no longer significantly cheaper than any other health food store. It has gone from a small,easily accessible grocery store, to a large combination grocery/restaurant store, in a location not handy for many. Many people have noticed how the deli appears to be overstaffed , especially in the evenings, and full time employees now have health, dental, and vision coverage, plus massage and chiropractic! In addition, employees get 15% off regular purchases, and 30% off deli food .
The markup on most food items at the old store was approximately 38%, and the cost of labor was kept to between 21-22%. Their current financial manager claims that the markup has not changed, and from their published financial data the cost of labor is now between 26-28%.(a 25% increase).Given the current high cost of food at BP(which often is as much or more than Calif Organics) its hard to believe that the markup has not changed, or that the buyers are not being very innovative in light of a changed market. At Brunswick, competition in the health food arena was much lighter. Now Raley's and Safeway have their own house brands of organic foods, and SPD too has a good selection of organic foods at competitive prices.
BP has moved away from low-medium cost healthy foods to the higher end-witness steak and ahi tuna being featured at BP recently for $16-$20 per pound! And the deli/restaurant....a notoriously risky business, one which BP knew nothing about, is undoubedly contributing to the financial problems, although BP cleverly doesn't break out the losses by department. It is a high end food bar, with potentially the ability to have losses due to spoilage, etc- and one wonders how they can break even giving employees a 30% discount, unless it is carefully monitored so as to sell off food before it spoils.
Another concern; how can BP be experiencing utility costs of $10,000 more per month than anticipated, when this was built as a "green store". Apparently the heating/air is not functioning properly, some sensors aren't working properly, and apparently BP is not insisting that the original contractor/manufacturer fix the problem, but has instead, disconnected part of the system, and has turned to another contractor. What?! Why the heck would they not insist that the original installer/contractor, or the manufacturer fix the problem right??
As a starting point, BP needs to totally open up their books to their fellow board members, without restriction. Secondly, their finance manage needs to report directly to the Board, and not to their general manager. Thirdly, they immediately need to bring in an outside consultant savvy of running a deli/grocery combo,and give that person walking orders that nothing is sacrosanct, and get beyond their bickering to getting on top of a floundering ship!
My personal opinion,not necessarily that of others. Richard C Burton
3 comments:
As a member of the board of directors, speaking for myself and not other board members, I wholeheartedly agree with your recommendation that:
"BP needs to totally open up their books to their fellow board members, without restriction. Secondly, their finance manager needs to report directly to the Board, and not to their general manager."
The advocated operable phrase must be TRANSPARENCY, FINANCIAL ACCOUNTABILITY, AND A POLICY OF GOOD BUSINESS ETHICS THROUGHOUT BRIARPATCH!
Katz
Dear Friends of the Patch,
I will try to answer as many of the questions and criticisms that have been raised by Richard and Ken. My information is what I have gathered and is not necessarily the latest or most factual but I think it is more accurate than the blog postings so far.
The BP was begun in 1976 and run originally as an outgrowth of the Grub Club. My wife, Eddy, was part of that original group. Each move and transition required risk and debt. The history of each site will show that it took time and many mistakes and learnings before sustainability occurred. That is also true now with our new green store.
BP Debt and anticipated losses: As reported by the general mgr and financial mgr at BP meetings, losses and debt were projected and anticipated. The debt is fully backed by BP members and Citizen Bank loans. The monthly losses average about $25,000/month and are not insurmountable. Management is actively working on ways to attack the bottom line, such as the member promotion that is now going on. I have been assured full board reports are coming. Stay tuned.
At Will hiring and firing: Heather Wright, HR mgr, presented a full report at a recent meeting on this issue. At will firing requires a long and detailed documentation of poor employee performance or violation of work-place practices. This is the most common and established practice at Coops. Discussion of these violations is absolutely forbidden in public meeting and must be held confidential in closed sessions due to litigation risks.
Staff benefits and discounts: As mentioned in Richard’s blog, the staff benefits and discounts are huge. Heather presented comparisons with other markets here and coops elsewhere. BP is competitive with employees’ wages and more generous with benefits and discounts. BP Management is underpaid and we are fortunate to have such dedicated personnel devoting way more hours than required. Keeping specific salaries confidential is also common practice among Coops.
BP a high-end store? BP has been accused of being a high priced, high-end store. The general mgr has responded to this by describing the process by which BP regularly compares prices with all local stores. BP does offer high-end goods but does not specialize in these goods. Remember, BP is attempting to be a one-stop market where people won’t need to go elsewhere. It is committed to providing a diversity of goods for a much more diverse clientele. Low-end Basic Buys are provided throughout the store. Richard and Ken questioned the viability of the deli. Management regularly reports profits. If you have any doubts, go in at mealtime and look at the eating areas. They are packed and often extend into the community room. I have also observed many employees in the Deli, but I am sure that the Deli and general mgrs are keeping a keen eye on this.
Openness vs. confidentiality; The board has struggled with this. Meetings have lasted 5 to 6 hours in the board’s attempt to listen to members and work through issues. The room is a pressure cooker with meetings that exhaust people and turn them irritable. Meetings must be shorter and more productive. Other board meetings are typically 1.5 to 2 hours in length. The board must be permitted to do its business. The legal issues of confidentiality must be respected but openness is to be encouraged on all other matters. Do look at this issue and others and remember to focus on priorities with limited meeting time in mind.
Ethical standards. I look at each board member and BP owner/member and assume they have the best interests of BP in mind. Getting to know many of the board members personally has assured me that they are honest and trustworthy. There was little question of the board’s or mgr’s competence at the old store. Since the new move, suspicion and distrust have taken over. We have to ask ourselves, why? It is a much bigger job now that challenges all. Time is needed to resolve issues. Finances need to be our focus and not be distracted into petty squabbles. The audit was moved up to 2008 due to member pressure but this comes against advice both from Citizens Bank and McSweeney and Assoc, a local accounting firm.
Finance Mgr does report to the board but is hired by the general mgr and reports to the general mgr and then to the board. We do not have a CFO that is hired by the board. We also need to recognize that until the board gets its own house in order, it is brutal for management/staff to absorb attacks at board meetings. That is not their job nor their skill set.
Outside consultants; BP management is constantly bringing in outside consultants. Just this week, a marketing specialist from the national coop movement came and others from Sacramento and Ashland Coop have been by to advise. The management is doing its job but the constant demands of owner/members and board take time and energy away.
Finally, we need to learn the balance between oversight and micro-management. It is clear to all what the urgent BP issues are. Let employees and staff do their jobs. Plans are to make a full accounting to owner/members in the March meeting and an open forum in the April meeting. Owner/Members must also respect the board’s attempts to run a business meeting. These board members are just like us, doing their best. Let’s help them out, not down-cycle into anger or distrust.
Just want to say thanks to Lew for coming over here and providing this information.
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