Phoenix Earth Food Co-op (PEFC)
Minutes, Board Meeting 8/28/2013

Location: Third-Space Community Center, 137 N. Michigan St. Toledo; Present: David Bohon, Shelly Boraby, Thomas Fine, Sandor Halasz, Anita Levin, Sean Nestor, Hermann von Grafenstein, Lisa Blake (General Manager, GM). Absent: Stephen Vines. Resolutions are numbered R1–R6.

The meeting began at 5:37 pm.

1. The minutes of the 7/24/2013 board meeting were approved with amendments (R1, 7/0/0 for/against/abstentions).
2. A motion was passed to invite Heather Fox to speak at a future board meeting about the Luca County Farm Bureau (R2, 7/0/0).
3. Health inspection report
   Lisa reported progress in addressing the concerns of the Lucas County Health inspector. However, moisture due to condensation on the doors of the coolers was a continuing problem. Strause Refrigeration estimated that it would cost ~$100.0 to replace each of the door gaskets. H&F Refrigeration might be cheaper, but had not been asked yet to provide a quote.
4. Evaluation of the General Manager
   Sean reported that a meeting of the Executive Committee had been convened. The Executive Committee would spearhead the evaluation process and all board members were welcome to contribute. The Register of Policies will be used as a source of criteria for evaluation. Hermann mentioned that he had prepared a rubric for evaluation based on the Policy Register.
5. Meeting with Bill Wersell of the Toledo Regional Chamber of Commerce
   Sean reported that the Executive Committee had met with Bill Wersell. The purpose of the meeting was to review the Co-op’s finances in the light of a possible move to a new location. Major points of Mr. Wersell’s recommendations were (as reported by Sean and Hermann’s notes from the meeting):
   • The depletion of the Co-op’s equity account is a major impediment for obtaining financing for a move. The Co-op owes ~$25,000 to its members. Equity will have to be re-built.
   • The Jackson loan is not a major impediment, as it can be easily explained that the loan is void.
   • Relocation will cost about $150,000–$200,000. Bill recommended raising as much money as possible ourselves and minimizing the amount of a loan.
   • The break-even point for the Co-op is ~$50,000 of monthly sales with the current number of employees. This has been reached only recently and needs to be met consistently. No lender would lend to an organization that is merely breaking even. To obtain a loan of $150,000–$200,000 at 6% interest, the Co-op should reach sales of >$60,000 with the same number of employees.
   • Lisa's salary needs to be reflected in payroll accounting. Payroll checks that have not yet been cashed need to be accounted for in the Co-op's books.
   • Most lenders require a 20% down-payment ($30,000–$40,000), which the Co-op needs to raise.
   • Many lenders will require that board members sign off personally to cover the debt.
   • Bill recommended seeking advice from a professional fund raiser (e.g. Stockard Consulting Group tel. 419-344-9626).
   • The Toledo Chamber of Commerce is willing to prepare a free market survey for the Co-op.
   • The current membership drive should be expanded to show growth of membership.
   • Bill recommended against taking out a loan from the City.

   During a subsequent discussion, Tom suggested that the Co-op could sell preferred shares, which was allowed by Ohio law. Lisa mentioned that the Great Lakes group (Chris Dilley) had funded marketing studies in the past. Anita suggested forming a fundraising committee. Sean suggested that this should be among the first items to be addressed by the next board.

6. Negotiations with Landlord Royce Haddad
   Tom reported that his negotiations with Royce Haddad were ongoing. Royce had suggested a 3-year lease, but everything was still negotiable, including some form or rent abatement. During his negotiations, Tom felt that Royce might provide money for repairs of the basement, but not the coolers. Shelly emphasized that the negotiation power was in our hands, as it was difficult to rent out the space to another tenant. Sean suggested offering a one-year lease at ½ rent. The savings (~$300/mo. × 12mo = $3,600) should be used to repair the floor and other deficiencies. If Royce did not accept a one-year lease, we should offer a two-year term, but not a longer term.

7. General Manager's (GM) report and Finance Committee report

   • The Co-op had been approached by Huntington bank regarding a short-term line of credit. A fee of $150 was necessary to re-open this line of credit.
   • Lisa presented The GM's financial report. August sales were ~20% over last year's August. Margin was 31% (low), average time in inventory was 40-45 days. Inventory turnover ratio was 8.2 (it had been 12 in the past). Sales were $300/sq. ft. (desirable ~$1200/sq. ft.).
   • Tom presented an analysis of the financial report. His critique focused on the large size of the inventory. Lisa mentioned that the NCGA had also criticized the large size of our inventory, recommending a 30-day inventory. Lisa explained that the small size of the Co-op reduces our flexibility to adjust the inventory and to address cash-flow problems. Her points:
     1. A higher inventory was necessary to avoid the appearance of empty shelves.
     2. Purchases cannot be decreased without also reducing sales.
     3. Lisa expressed her concern that the Co-op is not in a position to afford a general manager.
     4. However, from September onwards, the 4% volume discount will start on UNFI purchases. This should add another 4 margin points.
   • Tom commented that the biggest problem was that despite increasing sales, equity was decreasing.
   • Tom suggested that a cash-flow analysis be done before the September board meeting to identify the origin of this discrepancy. Lisa agreed to provide this analysis for the next meeting.

   Shelly Boraby left the meeting at 19:15

8. Lisa's report on the recent NCGA meeting
   Lisa reported on the NCGA meeting she had attended. For the next meeting a questionnaire needed to be filled out by the Board (meeting preparation form). This information was required by the 13th of September. A motion was passed to let the executive meeting fill out the questionnaire (R3, 5/0/1).
9. Board attendance: A motion was passed to remove Stephen Vines from the board (R4, 6/0/0).
10. Annual meeting: A motion was passed to move the date of the annual meeting to Oct. 6th (R5, 6/0/0).
11. The meeting was adjourned at 7:34 pm (R6, 6/0/0).
    Date of next meeting: September 25 at 5:30 pm if not decided otherwise.

__________________________(signed)_______________

Submitted 9/25/2013 by Hermann von Grafenstein, Secretary