Fair Trade Store Business Plan

Business Plan The Fair Trade Store Student Cooperative Supporting Fair Trade Practices Worldwide Submitted to: Martin Burt, Professor Global Center for Social Entrepreneurship University of the Pacific Stockton, California Submitted by: Fred Sconberg, Concept Designer The Fair Trade Store 269 Munroe St. Sacramento, CA 95825 (916) 759-9627 July 25, 2010 Table of Contents Executive Summary 3 Fair Trade Principles4 Need and Opportunity Definitions6 Social Impact Model12 ,[object Object]

Description of the Innovation14

Target Mission and Financial Returns14Implementation Strategy15 ,[object Object]

Installed Organizational Capacity 20

Current Financial Condition 20

Financial Plan 21Projected Mission and Financial Returns23 Risks, Risk Mitigation, and Exit Strategy24 Replication and Scalability25 Monitoring of Social Impact of Organization26 Business Plan Goals and Objectives with a Time Line26 Appendices28 Executive Summary The concept of The Fair Trade Stores was originally conceived by Kelly Walker, President of the Council for Social Entrepreneurship at the University of the Pacific in Stockton, California and Fred Sconberg, Entrepreneur from Sacramento, California. At issue was how could students in the United States support millions of small-scale producers of ethnic crafts, garments and food products in developing countries who do not generate enough income to provide a dignified life for their families. There are a significant number of people in the world living below the poverty level. Of the world’s 2005 population of 6.46 billion people, 5.15 billion or 79.7% earned less then $10.00 per day. (World Bank Development Indicators, 2008). This same report features the number of people earning below $1.25 per day, was 1.4 billion people. These people are primarily living in developing countries. Developing countries are not defined on poverty levels alone. They are those countries, which are improving or need to improve, household, community, societal and various other aspects of life. The direct action of the Fair Trade Store is purchasing ethnic crafts, garments and food from poor producers in developing countries at a price high enough for the producer to earn her / his way out of poverty. The systems-changing social impact will come with scaling the organization. As the Fair Trade Stores grow they will be able to purchase and sell more products, in turn increasing the income of more poor producers. For each item sold through a Fair Trade Store the producer benefits with a higher price per-piece and the seller, the college student, earns an income to support her / his college expenses. The third beneficiary is the recipient of the community development funds, which is democratically chosen each year. The Fair Trade Store’s principal innovation is the use of a college student owned consumer cooperative to purchase and sell ethnic crafts, garments and food produced in developing countries by people living below the poverty level. The direct purchase removes the importer and wholesaler, which increase the income to the producer. The college campus location takes advantage of the college student’s need for additional income. College students have been the leaders in the Fair Trade movement. Educating the students on Fair Trade principles, having them promote Fair Trade on campus and in their communities and learning entrepreneurial skills all are part of the innovation. The Fair Trade Stores will purchase and sell products from small-scale producers of ethnic crafts and food products in developing countries, according to 9 Fair Trade Principles established by the Fair Trade Federation. College students are leaders of the Fair Trade movement in the United States. One student organization has already been formed. The Fair Trade Stores believes in their objectives. The United Students for Fair Trade, (USTF) has over 150 active student Fair Trade organizations, they list as their core objective to support an economic system, which empowers producers so that they may work towards economic, social, and environmentally sustainability. They do this by raising awareness of and expanding demand for Fair Trade alternatives, both on campus and in communities. Through the process, they refine relationships between producers and consumers, and engage in the ongoing struggle to build people’s power. Their second core objective is to expand student empowerment by working together as students to cultivate the consciousness, capacity and creativity that will proactively shape a global economy based on equity, justice and integrity. (United Students for Fair Trade, 2009) Student organizations have been targeted to be owner / members of The Fair Trade Stores due to the raising cost of college education and the decreased availability of financial aid in the United States. For the 2008 – 2009 academic year, annual prices for undergraduate tuition, room, and board were estimated to be $12,283 at public institutions and $31,233 at private institutions (National Center for Educational Statistics, 2009)(table 334). Financial aid was provided for 66% of all undergraduates in 2007 – 08. For those students who received financial aid, the average amount received was $ 9,100. Fifty-two percent received grants averaging $4,900, 38% took out an average of $7,100 in student loans and 7% received aid through work-study jobs averaging $2,400 in wages. (National Center for Educational Statistics, 2008) The net impact of these statistics is college students need jobs. The Fair Trade Stores will create jobs on college campuses for college students. The Fair Trade Stores will support millions of small-scale producers of ethnic crafts, garments and food products in developing countries who do not generate enough income to provide a dignified life for their families, through purchasing their products and selling them to consumers in the United States. In the process, college students will earn an income; promote the Principles of Fair Trade and learn socially and environmentally responsible entrepreneurship. Fair Trade Principles ,[object Object]

Development Transparent and Accountable Relationships – Fair Trade involves relationships that are open, fair, consistent and respectful. Members show consideration for both customers and producers by sharing information about the entire trading chain through honest and proactive communication. They create mechanisms to help customers and producers feel actively involved in the trading chain. If problems arise, members work cooperatively with fair trade partners and other organizations to implement solutions.

Build Capacity – Fair Trade is a means to development producers’ independence. Members maintain long-term relationships based on solidarity, trust and mutual respect, so that producers can improve their skills and their access to markets. Members help producers to build capacity through proactive communications, financial and technical assistance, market information and dialogue. They seek to share lessons learned, to spread best practices, and to strengthen the connections between communities, including producer groups.

Promote Fair Trade – Fair Trade encourages an understanding by all participants of their role in world trade. Members actively raise awareness about Fair Trade and the possibility of greater justice in the global economic system. Members demonstrate that trade can be a positive force for improving living standards, health, education, the distribution of power, and the environment in the communities with which they work.

Pay Promptly and Fairly – Fair Trade empowers producers to set prices within the framework of the true costs of labor time, materials, sustainable growth, and related factors. Members take steps to ensure that producers have capacity to manage the process. Members comply with or exceed international, national, local and Fair Trade minimum standards for their employees and producers. Members seek to ensure that income is distributed equally at all times, particularly equal pay for equal work by women and men. Members ensure prompt payment to all of their partners. Producers are offered access to interest-free pre-harvest or pre-production advance payment.

Support Safe and Empowering Working Conditions – Fair Trade means a safe and healthy working environment free of forced labor. Throughout the trading chain, members cultivate workplaces that empower people to participate in the decisions that affect them. Members seek to eliminate discrimination based on race, caste, national origin, religion, disability, gender, sexual orientation, union membership, political affiliation, age, marital status or health status. Members support workplaces free from physical, sexual, psychological or verbal harassment or abuse.

Ensure the Rights of Children – Fair Trade means that all children have the right to security, education and play. Throughout the trading chain, members respect and support the UN Convention on the Rights of the Child, as well as local laws and social norms. Members disclose the involvement of children in production and do not support child trafficking and exploitative child labor.

Cultivate Environmental Stewardship – Fair Trade seeks to offer current generations the ability to meet their needs without comprising the ability of future generation to meet their own needs. Members actively consider implications of their decisions on the environment and promote the responsible stewardship of resources. Members reduce, reuse, reclaim and recycle materials whenever possible. They encourage environmentally sustainable practices throughout the entire trading chain.

Respect Cultural Identity – Fair Trade celebrates the cultural diversity of communities, while seeking to create positive and equitable change. Members respect the development of products, practices, and organizational models based on indigenous traditions and techniques to sustain cultures and revitalize traditions. Members balance market needs with producers’ cultural heritage.(Fair Trade Federation)Need and Opportunity Definitions Market Need Millions of small-scale producers of ethnic crafts, garments and food products in developing countries do not generate enough income to provide a dignified life for their families. There are a significant number of people in the world living below the poverty level. Of the world’s 2005 population of 6.46 billion people, 5.15 billion or 79.7% earned less then $10.00 per day. (World Bank Development Indicators, 2008). This same report features the number of people earning below $1.25 per day, was 1.4 billion people. These people are primarily living in developing countries. They are those countries, which are improving or need to improve, household, community, societal and various other aspects of life. To serve millions of people the Fair Trade Stores are going to have to enlist thousands of people to buy and sell the products from these marginalized producers. One such large group of people is college students. College students need jobs to earn income to pay for the rising cost of college tuition and related college expenses. In addition, student organizations on college campuses do not earn enough funds to make charitable donations, and student financial aid is underfunded. Current Trends The social, political, legal and economic trends affecting poverty in developing countries vary by country. People are not in poverty because they are lazy, or lack industriousness, or because they don’t save, or because of political corruption or a lack of democracy. People are in poverty because they don’t have enough money to buy food, housing, healthcare and education. People in poverty cannot purchase private property and cannot accumulate wealth. They remain poor because they lack the means of production. They cannot buy land, machines, supplies and technology without money. Poor farmers are allowed to farm half-fertile land without access to water, electricity and proper tools. Their quality is low, production is low and the cost to farm is high. This is complicated when developed industrialized countries offer free or subsidized food below market prices. In an effort to support hunger in developing countries are donating food to the undernourished. While these donations aid many it is actually undercutting the local farmers, who cannot compete with the free or subsidized product donations and are driven out of work and into poverty. In developing countries traditional small artisans, weavers, and tailors are competing with large international corporations. The economies of scale within large corporations includes automation and access to natural resources, which allow the large corporations to sell products at prices well below the hand crafters, no mater how cheaply they are prepared to work. These local artisans lack access to efficient means of production and struggle to compete. Most lack an education and are living on the outskirts of society. They also have little representation or voice in public and political debates, making it harder to escape poverty. Anther complicating factor is the developing countries governments desire and need to attract foreign investments. These governments are competing for foreign corporations to place new factories in their countries. They are competing at such a level that they are providing lower standards, reduced wages and cheaper resources. The effects are damaging to their economies. For those crafters and farmers currently producing products they are finding difficulties selling their products for a fair price. The Fair Trade Principles have evolved over the past ten years to provide a structure for organizations to follow worldwide. Even with these principles in place the crafters, garment workers and food processors have struggles. “Mom and pop importers have a lot of expenses and the big fair trade companies take profit margins beyond the norm in the ordinary local commercial industry.”(Alaniz, 2010) Maria Alaniz wrote these words in response to a request from a Ugandan Woman, Alexander McDonnell: How do you sell your ethnic crafts? The discussion followed Maria’s experience selling rural women’s jewelry to U.S. markets through various buyers. She mentioned the difficulties of communication in foreign languages, USA Customs, Mexico Customs, export paperwork requirements, shipping charges and getting paid. Her experience had been in working with fair trade importers and wholesalers and local consolidators. The local consolidator makes 20% – 30%, and the fair trade companies are selling the product at 400%. The consolidator and customer are determining what the producer will receive. She also mentioned the volume business, to put lots of product in the market at low prices, generated by the big fair trade wholesalers did not keep producers working 52 weeks per year. To fill these larger orders the jewelry makers worked hard for a short time, earned low pay for hard work and then had no work. Root Causes There are various reasons why small ethnic crafters, garment workers and farmers in developing countries are not able to earn a decent income. For example, a very small percentage of the money a consumer spends on an item actually gets to the producer. Most people living in developing countries do not have enough money. For survival they need to work hard and earn their money, anyway they can. Many have turned to entrepreneurship and are making crafts or growing food. Others have become merchants, wholesalers and exporters. All share in the available income from the sale of the crafts and food items. The Principles of Fair Trade are intended to be sure each person the product cycle, from production to sale to the consumer, is treated with respect and earns a fair amount of money for their work. Small producers have limited choices in which to sell their products. They generally lack the ability to communicate. There are language barriers. Phone and Internet service is poor or non-existent. There are transportation barriers. They do not have cars, trucks, rail cars or airplanes to move their products to market. Their choice to sell their wares is limited to those who visit their villages and buy from them in their communities. Most of these buyers are also poor and cannot pay much for the products. Selling to the American consumer offers the poor producers access to consumers with more cash, who are accustomed to paying more for handcrafted items. In selling to the American consumer the producers have faced unique problems. Mom and pop importers have a lot of expenses so they cannot pay ethnic crafters and farmers a fair price. Large fair trade companies take profit margins beyond the norm compared to the local commercial industry. This is a result to their buying patterns. The large companies, even Fair Trade Companies, want to buy in large quantities. First to negotiate a lower price per piece, second to fill a container to reduce the per piece shipping charges and third USA customs, the developing country’s customs, export paperwork requirements, shipping charges, foreign currency and collecting payment all cost money. Handling items in bulk reduces the per-piece cost and increases the profit margin for the importer. The impact on the small producer is they often work very hard for a lower price per-piece and then have no buyer for a long period of time. The producer desires to have a higher per-piece price and a more frequent buyer, so they can have an income 52 weeks a year. In many cases the importer is determining what the producer will receive. They push for the lowest price they can get. This puts the producer is in a desperate position. They need money and most often accept what the buyer offers. Most producers act independently and are not organized into cooperatives or producer unions so they are acting alone, desperate for money. The public awareness of Fair Trade products in the Unites States is extremely low. U.S. per capita consumption of fair trade products in 2007 was $2.98. Compare this to the European leading $25.87 in Switzerland and $14.21 in the UK. (Krier, 2008) Increasing public awareness of Fair Trade products through The Fair Trade Stores on college campuses will certainly impact U.S. consumer awareness. Environmental Landscape There are a variety of factors, which affect the amount of payment, which eventually reaches the hands of the small artisan, garment worker and farmer. While the Fair Trade Principles are in place and many organizations have adopted them, the Fair Trade movement is still young. According to the Fair Trade Labeling Organisations International (FIO) and the International Fair Trade Organisation (IFAT) as of August 2008 there was no association bringing together specialized retailers.(Krier, 2008) Without a common voice it has been difficult to get the Fair Trade message out to the United States consumer. Of those who have opened a number of fair trade specialized shops, many of them are directly linked to larger importers. Many of these are importers who run one or two retail stores see themselves as importers plus Fair Trade shops where in European countries have retailers have dissociated from the importing business and concentrated on retailing.(Krier, 2008) This trend is important to note as the U.S. per capita consumption of fair trade products in 2007 was $2.98. Compare this to the European leading $25.87 in Switzerland and $14.21 in the UK.(Krier, 2008) An increase in availability of fair trade products at market prices will undoubtedly have a dramatic increase in the U.S. consumption of fair trade products. It is with this larger U.S. consumption that The Fair Trade Stores will have a positive impact on the millions of small-scale producers of ethnic crafts, garments and food. Examples of the current Fair Trade market in the United States are fair trade products, primarily coffee, are being sold through supermarkets, organic food shops, whole food shops, cafes, restaurants, on-line, on airlines, in Starbucks, McDonalds and most major retailers. Each of these organizations chooses to sell a limited quantity of products. Even though they are selling a limited quantity of products they are making an impact. Together in 2007 the United Kingdom and the United States generated over $1.75 billion in net retail sales of fair trade labeled products.(Krier, 2008) Fair Trade retailing and wholesaling in the United States has three major players, all located on the Eastern part of the country. Ten Thousand Villages began it all in 1946. In 2007 they had 20 shops of their own and sold their products through 160 more shops, 57 of which are operated under a franchise agreement. Ten Thousand Villages sells handicraft products from over 100 producers in more then 30 countries. SERRV International recently changed its name to A Greater gift. Started in 1949, A Greater Gift now wholesales to more then 200 fair trade or gift shops nation-wide and mailed out over 975,000 catalogs in 2007. The third major player is Equal Exchange, which was founded in 1986. They concentrate on a food only assortment. Equal Exchange is a worker cooperative, owned and democratically controlled by its employees.(Krier, 2008) These organization are having an impact, however combined they operate less then 400 Fair Trade shops. By placing a Fair Trade Store on 4300 college campuses The Fair Trade Store can grow retail Fair Trade shops tenfold. Additional players in the United States marketing of fair trade products are: World of Good, Inc in cooperation with eBay. They have established a significant on-line connection between the producers and the consumers. TransFair USA has licensed over 760 partners, as of 2007, to sell Fair Trade Certified labeled products. Global Exchange runs three Fair Trade shops to support their international human rights organization. Other highly specialized fair trade business include, A different Approach, Baskets of Africa, Bridge for Africa, Economic Development Imports, Global Goods Partners, Handmade Expressions, Peacecraft and WorldCrafts.(Krier, 2008) While analyzing the above problems which artisans, garment workers and poor farmers in developing countries face, as well as conditions surrounding the marketing of the goods they produce, the team preparing this business plan has pinpointed several opportunities to solve the problem of meager incomes. Opportunity The opportunity for the Fair Trade Stores is to increase per capita consumption of $2.98 in the United States to the 2007 level of $14.21 in the United Kingdom. College students’ word of mouth advertising and the opening of Fair Trade Stores on college campuses will accomplish this. The current leaders in the United States for retail sales of Fair Trade products, Ten Thousand Villages and A Greater Gift have only 400 shops combined. The U.S. consumer does not have access to fair trade products. The over 4000 college campuses will open up the U.S. availability of fair trade products. Additionally, the largest importer, Ten Thousand Villages only works with 100 producers from 30 countries. The Fair Trade Store’s mission is to purchase directly from 1000 producers to allow them to earn their way out of poverty. Working together to spread the message of Fair Trade, these organizations listed in this section and The Fair Trade Stores, will create a higher U.S. awareness and generate a U.S. market for the millions of small-scale producers of ethnic crafts, garments and food products from developing countries. The Fair Trade Stores will provide a market for small-scale artisans and farmers in developing countries to sell their products directly to U.S. consumers. The Fair Trade Store will raise the standard of living for poor producers from developing countries through small and frequent purchases and sale of their crafts and food products. By purchasing frequently, the producer has a steady income and can buy supplies and materials in smaller quantities. This will allow them to change designs as rapidly as trends change. Smaller orders also tie up less cash. Storage and warehousing costs are reduced with smaller orders. Each of these small order benefits is unique to The Fair Trade Store model. Plus the income generated by the producers can be used to purchase basic needs such as: water, food, shelter, clothing, health care and education for themselves, their families and their community. The Fair Trade Store would be owned and operated by students. A Fair Trade Store operating on a College campuses in the United States will provide students an income to assist with their college expenses, and in the process educate a generation of future leaders on the value of entrepreneurship and the power of the consumer dollar in eradicating poverty and sustaining our environment. The location on the college campus also allows for a built in market. Spending by college students in the United States exceeds $60 billion annually. This amounts to an average of $13,000 for each student. Of this amount 19% is on discretionary spending. College students spend most of their discretionary spending on food, which exceeds $11 billion on snacks and beverages alone. Hundreds of dollars per student per semester is spent on coffee. It is estimated over $5 billion is spent on clothes and shoes. For the college student quality products, a positive message and a clear value drive their spending. All of these are characteristics of the products, which abide by the Fair Trade Principles. Additionally, College students are found to be loyal purchasers and active word-of-mouth advertisers.(Martindale, 2008) Word of mouth has been found to be an important introduction to fair trade products. (Alter Eco Fair Trade , 2008) Placing Fair Trade Stores on or near College campuses will increase exposure of Fair Trade products. These talkative students will promote to the millions of college students and the communities in which these schools are located the principles of Fair Trade. Lower competitive prices will be accomplished by removing the importer and the middleman from the supply chain. Purchasing direct from the producer will allow local artisans and farmers in developing countries to earn more for their work and the consumer to pay less for the items. Locating Fair Trade Stores on college campuses and being operated, as a consumer cooperative will reduce overhead. Store design and layout will be inexpensive and comprised of recycled and reused furniture and store fixtures. The enrollment in United States degree-granting institutions in 2007 was 18.2 million students(National Center for Educational Statistics, 2009, p. Chapter 3). This enrollment is projected to grow to 20.1 million students by 2017. (National Center for Educational Statistics, 2009, p. table 188) These statistics demonstrate the growing enrollment on college campus, the increased potential purchasing potential, the increased word-of-mouth marketing plus the need for more student jobs due to the increased costs and limited financial aid. Placing Fair Trade Stores on or near college campuses would provide jobs for students, while educating students on Fair Trade principles. The Fair Trade Store would become the sales agent for the crafts and foods produced by the poor crafters and farmers in developing countries. Students would learn ethical, social and environmental sustainable skills while financially supporting people earning their way out of poverty. These social business skills will position them well for the future. Fair Trade Stores on college campuses would provide market opportunities, less complicated import-export mechanisms, and less expensive market access for producers of ethnic crafts and fair trade food products. Barriers There are many challenges that organizations face when trying to solve the problem of low income for small-scale artisans; garment workers and farmers such as, interpretations of fair trade vary widely with many misinformed consumers. It is an involved set of principles, which comprise Fair Trade standards. The problem is U.S. consumers have so many product options many do not take time to learn all the standards required for a product to be labeled fair trade. The consumers tend to look at quality, design, function and price when making their buying decision. For The Fair Trade Stores to be successful they need to educate the consumer that humans are valued at every level of the supply chain. At the same time the Fair Trade Stores will work with the producers to educate them on design trends and choice of materials so appropriate retail prices can be maintained. Another barrier is the lack of knowledge about Fair Trade. Awareness of fair trade is fairly widespread with two-thirds of respondents familiar with the term. Their interpretations of fair trade, however, vary widely, and indicate that many consumers are misinformed or uninformed about the concept. (Alter Eco Fair Trade , 2008) A consistent message from all the Fair Trade advocates, importers, retailers and The Fair Trade Store will have a positive impact on U.S. consumers awareness of Fair Trade products and the Fair Trade Principles. This lack of knowledge affects the small-scale artisan and farmer as it keeps the market in the United States low. Growing the market will increase the number of marginalized people who can earn their way out of poverty. After consumer awareness, price and availability are the biggest barriers to fair trade consumption. It is believed consumers will generally not pay a premium for fair trade items, however they will pay a premium for brands they trust. Currently there is no dominant Fair Trade brand in the minds of consumers. The Fair Trade Stores aim to change this by providing product consistency and branding. At present the majority of people have not seen Fair Trade products where they normally shop. (Alter Eco Fair Trade Study, October 2008) While the availability of fair trade items is still limited, the opening of The Fair Trade Store on colleges will increase Fair Trade product availability ten fold. Social Impact Model Mission The mission of The Fair Trade Store is to help artisans and food producers from developing countries earn an income, which is above the poverty line, by marketing their goods in Fair Trade Stores on college campuses across the United States. A secondary mission of the Fair Trade Store organization is to provide income for college students and their student organizations through the sale of Fair Trade products from low-income producers. An extra benefit of The Fair Trade Store is the education on social entrepreneurship; social enterprise and the impact individuals can have on poverty around the world through the use or their consumer dollars. Vision of Success We envision a day when – by selling through The Fair Trade Stores on college campuses across the United States, artisans and producers of fair trade food products in developing countries will be able to earn an income which allows their families to live in dignity. Value Proposition The Fair Trade Store’s greatest value is to those small-scale ethnic crafters, garment workers and farmers in developing countries. These people, who have struggled to earn an income through their hard work, will now have a market of U.S. consumers to buy their products. This earned income will provide them with money to buy food, water, clothing, healthcare and education for their children and themselves. With these enhancements to their lives they can live a life of dignity. To the students at America’s colleges, they will earn an income selling products from small-scale ethnic crafters, garment workers and farmers in developing countries. This income will be useful to them to help with the increasing cost of their college expenses. The college costs are continuing to increase while financial aid and work-study programs are decreasing. College students need jobs, which The Fair Trade Stores will provide. To the recipients of the democratically selected community development funds, The Fair Trade Stores will provide 5% of annual gross sales to support their programs. These community development funds will support those producers in the developing countries with training and the advance purchase of supplies. An additional value of The Fair Trade Stores is the education of a generation of college students on the Principles of Fair Trade. With this education, when these students mature into their careers, they will be able to influence large populations on the ethical and dignified treatment of people and the land. Value Creation The value created is the dignified life the artisans and farmers live due to their capacity to buy water, food, clothing, sanitation, healthcare, and education. The students will leave college with less debt as they begin their careers. The recipients of the community development funds will have a steady source of income to serve the beneficiaries of their programs. The future of treating people and the land with dignity and respect will be well served by a generation of educated, compassionate leaders. Description of the Innovation The Fair Trade Store’s principal innovation is the use of college students’ owned consumer cooperative to purchase and sell ethnic crafts, garments and food produced in developing countries by people living below the poverty level. The direct purchase removes the importer and wholesaler, which increase the income to the poor producer. The college campus location takes advantage of the college student’s need for additional income. College students have been the leaders in the fair trade movement. Educating the students on fair trade principles, having them promote fair trade on campus and in their communities and learning entrepreneurial skills all are part of the innovation. Customers and Beneficiaries The beneficiaries of the direct action of the Fair Trade Store’s purchasing ethnic crafts, garments and food are the poor producers in developing countries who are paid a price high enough to earn her / his way out of poverty. The systems-changing social impact will come with scaling the organization. As the Fair Trade Stores grow they will be able to purchase and sell more products, in turn increasing the income of more poor producers. For each item sold through a Fair Trade Store the producer benefits with a higher price per-piece and the seller, our second beneficiary is the college student who earns an income to support her / his college expenses. The third beneficiary is the recipient of the community development funds, which is democratically chosen each year. The initial customers of The Fair Trade Store will be college students. Spending by college students in the United States exceeds $60 billion annually. This amounts to an average of $13,000 for each student. Of this amount 19% is on discretionary spending. College students spend most of their discretionary spending on food, which exceeds $11 billion on snacks and beverages alone. Hundreds of dollars per student per semester is spent on coffee. It is estimated over $5 billion is spent on clothes and shoes. Quality products, a positive message and a clear value drive college student spending. (Martindale, 2008) As The Fair Trade Stores grow additional customers will be local business, other retailers wishing to stock an assortment of fair trade products, individuals and the University. The student sellers of the Fair Trade products will conduct direct sales in their community as well as selling at local farmers markets. Target Mission and Financial Returns The Fair Trade Stores target mission return is to pay 30% of the total retail sales dollars directly to 500 ethnic crafters and 500 fair-trade producing farmers in developing countries. With a financial plan of gross retail sales of $1,250,000 in the third year of operations the Fair Trade Stores plan to purchase $375,000 in goods from these crafters and farmers in 2013 and increasing thereafter. This represents an increase of $375 annually to each producer. The Fair Trade Store’s secondary target mission return is to pay 30% of total retail sales to United States College students in the form of wages, salaries and commissions. With total retail sales projected to be $1,250,000 in 2013 this will provide $375,000 of income to 165 students in the third year of operations. This is calculated to be $2,250 per student, which amounts to $250 per month for 9 months. The Fair Trade Stores third target mission return is 5% of total retail sales to Student organizations to donate to charities of their choice. The charities may be in their college communities or in a developing country. This would amount to $62,500 in 2013 and growing each year thereafter. The target annual retail sales volume per Fair Trade Store is $100,000 per campus. To achieve $1,250,000 in annual sales there will be 12 college campuses operating Fair Trade Stores by December 2013. Implementation Strategy Strategy to Serve the Market Provide a market for entrepreneurs in developing countries to sell their products directly to U.S. consumers. The Fair Trade Store will raise the standard of living for poor entrepreneurs from developing countries through the purchase and sale of their crafts and food products. The income generated by these individuals can be used to purchase basic needs such as: water, food, shelter, clothing, health care and education for themselves, their families and their community. A Fair Trade Store operating on all College and University campuses in the United States. The Fair Trade Store would be owned and operated by students. The ethnic crafts and food purchased by Fair Trade Stores will provide an income to entrepreneurs in the developing world. This income will help the producers earn their way out of poverty. For the U. S. based students it will provide an income to assist with their college expenses, and in the process educate a generation of future leaders on the value of entrepreneurship and the power of the consumer dollar in eradicating poverty and sustaining our environment. Spending by college students in the United States exceeds $60 billion annually. This amounts to an average of $13,000 for each student. Of this amount 19% is on discretionary spending. College students spend most of their discretionary spending on food, which exceeds $11 billion on snacks and beverages alone. Hundreds of dollars per student per semester is spent on coffee. It is estimated over $5 billion is spent on clothes and shoes. Quality products, a positive message and a clear value drive college student spending. They are also found to be loyal purchasers and active word-of-mouth advertisers. (Martindale, 2008) Word of mouth is an important introduction to fair trade products. (Alter Eco Fair Trade , 2008) Placing Fair Trade Stores on or near College campuses will increase exposure of Fair Trade products and the Fair Trade principles to the millions of college students and the communities in which these schools are located. The availability and price was a significant barrier to fair trade consumption, with availability factoring as the larger issue for existing fair trade purchasers, and price being more of a concern for non-fair trade buyers. (Alter Eco Fair Trade , 2008) Increasing the accessibility of fair trade products to the 4352 degree-granting institutions. (National Center for Educational Statistics, 2008, p. table 5) will dramatically increase availability of fair trade products. The price of fair trade products purchased through The Fair Trade Stores on or near college campuses will be competitive. Lower competitive prices will be accomplished by removing the importer and the middleman from the supply chain. Purchasing direct from the producer will allow them to earn more for their work and the consumer to pay less for the items. Locating on college campuses and being operated, as a consumer cooperative will reduce overhead. Store design and layout will be inexpensive and comprised of recycled and reused furniture and store fixtures. Fair Trade Stores on college campuses would provide market opportunities, less complicated import-export mechanisms, and less expensive market access for producers of ethnic crafts and fair trade food products. The enrollment in United States degree-granting institutions in 2007 was 18.2 million students (National Center for Educational Statistics, 2009, p. Chapter 3). This enrollment is projected to grow to 20.1 million students by 2017. (National Center for Educational Statistics, 2009, p. table 188) These statistics demonstrate the growing enrollment on college campus, the increased costs and limited financial aid. Placing Fair Trade Stores on or near college campuses would provide jobs for students, while educating them on Fair Trade business principles. The Fair Trade Store would become the sales agent for the crafts and foods produced by the poor crafters and farmers in developing countries. Students would learn ethical, social and environmental sustainable skills while financially supporting people earning their way out of poverty. These social business skills will position them well for the future. The national average of high school gradates in 2006 was: male $30,000 and female $24,000. For those students with a Bachelor’s degree or higher the annual income rose to male $50,000 and female $41,000 (table 21-1) (National Center for Educational Statistics, 2008) The direct action of the Fair Trade Store is purchasing ethnic crafts, garments and food from poor producers in developing countries at a price high enough for the producer to earn her / his way out of poverty. The systems-changing social impact will come with scaling the organization. As the Fair Trade Stores grow they will be able to purchase and sell more products, in turn increasing the income of more poor producers. For each item sold through a Fair Trade Store the producer benefits with a higher price per-piece and the seller, the college student, earns an income to support her / his college expenses. The third beneficiary is the recipient of the community development funds, which is democratically chosen each year. Idea Generation Process and Selection of Proposed Venture The initial idea came after Kelly Walker; President of the Council for Social Entrepreneurship at the University of the Pacific in Stockton, CA asked his advisor if the Council could donate money to the Afghanistan Dental Relief Project. The advisor replied, “No! The money to run your organization is the University’s and cannot be donated.” The Kelly Walker and Fred Sconberg were sitting at the table and started discussing small businesses, which the student organization could operate to earn income to then donate to causes of their choice. The first thought was a copy center / print shop. This was dropped when the student did not show much enthusiasm. The student then stated he and other members of the Council had discussed a Fair Trade Store on campus. Paul Rice of TransFair USA is an advisor to the Council and had spoken to them many times. The Council’s students respected the Fair Trade Principles and liked the idea of a Fair Trade Store. It was this discussion, which lead to brainstorming what a Fair Trade Store on college campuses might look like. It began with an exploration of the level of poverty in the world and the efforts of ethnic crafters and food producers in developing countries to earn their way out of poverty. The difficulties these people have getting a fair price for their products and the problems getting their products to United States markets became immediately apparent. Buying fair trade products from United States importers and wholesalers of Fair Trade products was studied. Most due not have a good reputation. They are not paying fair prices to the producers and add large markups before selling to United States consumers. This channel was rejected due to high costs of products and low pay rates to the producers. Working with producers from a single country or selling a single product was investigated. This was rejected due to lack of market appeal in the United States. The U.S. consumer wants a quality product, a positive message and a clear value. They also want selection. This concept was rejected, as it did not provide enough choices for the U.S. consumer. The business structure of sole-proprietorships, corporations and traditional nonprofit was researched in-depth. The consumer cooperative was chosen for its democratic management, shared ownership and defined purpose to sell goods at the lowest possible price while distributing accumulated capital to social objectives and generating higher returns for the producer members. Sustainable advantage The direct action of the Fair Trade Store is purchasing ethnic crafts, garments and food from poor producers in developing countries at a price high enough for the producer to earn her / his way out of poverty. The systems-changing social impact will come with scaling the organization. As the Fair Trade Stores grow they will be able to purchase and sell more products, in turn increasing the income of more poor producers. For each item sold through a Fair Trade Store the producer benefits with a higher price per-piece and the seller, the college student, earns an income to support her / his college expenses. The third beneficiary is the recipient of the community development funds, which is democratically chosen each year. Team and Governance The organization will require an Executive Director to oversee all facets of the Fair Trade Store. The Executive Director will be supported by a Chief Financial Officer, who will oversee all financial and human capital, a Cultural Relations Manager, who will conduct the purchasing and monitor fair trading practices and a Retail Store Operations Manager, who will oversee all retail stores. The Fair Trade Store will engage an external auditor to collect measurement data and produce sustainability reports for the Board of Directors and the members of the cooperative. Management Structure Operations Plan The Fair Trade Stores will help ethnic craft and farmers from developing countries reach consumers in the United States. The products will be purchased in the developing country and imported to the United States. The Cultural Relations Manager will arrange purchases directly in the developing country. The individual products and first developing country to begin from has not been established. These matters will be determined when the management team and initial members get together for their first democratic decision. The products will be those with large sales potential to college students and residents of college communities. These purchases will provide economic opportunities for the producers. The products will be sold to United States consumers. The sales of these products will provide operating income for the Fair Trade Stores, which in turn will provide income for college students and student organizations. The Fair Trade Stores will have a community development component. Five percent of all retail sales will be allocated to community development. Students / members will democratically choose which projects to support. Emphasis will be on to providing training and financing for the producers. Purchasing the ethnic crafts and garments will ensure preservation of cultural heritage will be preserved in modern society. This style of business is called a social business venture or a social enterprise. The model will be that of a market intermediary. Cooperative Structure The Fair Trade Store business model is a consumer cooperative corporation. The consumer cooperative operates under the principal of Democratic control, or one member, one vote. The members (owners) would be students and their customers. Each campus store would be an individual cooperative with its own student Board of Directors. The board would be responsible for hiring, management and ensuring the cooperative meets its goals, both financial and mission. A consumer cooperative is a cooperative business owned by its customers for their mutual benefit. It is a form of free enterprise oriented toward service rather then financial profit. Most consumer cooperatives are retail outlets owned and operated by their customers. The primary difference from a for-profit business is the financial gain (profit) in the cooperative is retained as accumulated capital in common ownership, or distributed to meet the social objective, or refunded to the owner/consumer as an over-payment. There are many consumer cooperatives in the world. The University Co-operative Bookshop Ltd. is Australia’s largest consumer cooperative. It was established by students in 1958 and has grown to be the largest provider of educational, professional and lifelong learning resources in Australia. The Co-op Bookshop has over 1.3 million lifetime members. The COOP Group is the second largest retail group in Switzerland. The COOP operates over 1800 stores and employees close to 55,000 people to serve the 2,518,056 members as of December 31,2010. The COOP’s vision is: “Working together, we use sustainable protection of the environment as an entrepreneurial opportunity.” By sustainability, we mean achieving a better balance between environmental protection, social responsibility and regard for economic considerations and thus creating a basis for business success.(COOP Group, 2010) The largest consumer cooperative in the United States is the outdoor sporting equipment cooperative, Recreational Equipment Incorporated. (REI) The cooperative structure has been selected, as it is oriented toward service rather then financial profits. The consumer cooperative structure will allow the students to provide quality goods and services at the lowest possible cost, while selling these goods and services at a competitive market rate. The cooperative structure will allow retention of accumulated capital in common ownership, distribute the accumulated capital to meets its social objective or refund it to the member / owners as an over-payment. Installed Capacity required to successfully implement the venture and/or organizational capacity building required As of the writing of this business plan Fred Sconberg; Concept Designer is the only member of The Fair Trade Stores. All financial and human capital necessary to successfully implement the venture and build organization capacity needs to be acquired. Current Financial Condition The Fair Trade Stores is a start-up. At this time there is no cash on hand and no funding commitments. Financial Plan for Venture The financial projections for the first three years of operations of the Fair Trade Stores are included in Appendix A. They show a combined organization of the retail store operations and the management of the consumer cooperative. Sales revenue is projected to grow from an initial monthly goal of $2214 in January 2011 to $1,277,857 for the year ending December 31, 2013. The breakeven analysis demonstrates the monthly sales necessary to cover: producer and student incomes, operational expenses and contributions to the sustainability and community development funds is $104,167. The Fair Trade Stores believe they will first hit the monthly breakeven sales revenue in May 2013. Working capital to support the cash needs of the start-up and operations for the first 30 months is projected to be $200,000. This amounts to $144,843 to support the initial business loss until breakeven sales revenues are achieved. The remaining $56,000 is for start-up expenses including: initial inventory purchases, store design, store fixtures, security deposits, insurance, professional services, marketing materials, web site, phone and internet services. Funding for The Fair Trade Store will come from Cooperative Membership fees. Each member / owner will purchase a membership fee for $25.00. This is a lifetime membership. It is anticipated that membership fee will amount to $25,000 per Fair Trade Store per year. The membership fees will be used for capital expenditures and store maintenance. The initial $200,000 is being sought from social investors. The projected payback, with 2% interest will begin in May 2013. Full payback of all invested capital is anticipated to be on or before Dec 31, 2014. Payments on the original investment will begin as soon as monthly breakeven is achieved for 3 consecutive months. During the start-up phase all payments to the producers will be made in advance of purchase. This is to support them with purchasing the necessary supplies, training, arranging shipping and customs. Students will earn their income when the products are sold to United States consumers. The Fair Trade Stores project the producers will earn $121,000 by the end of the first 12 months of operations. This is the same amount being paid to college students for their efforts running the Fair Trade Store and selling the Fair Trade products. Each month there will be a contribution to the sustainability fund and the community development fund. The projections are to fund each of these accounts with $20,000 in the first year. By year-end 2013, The Fair Trade Stores will have purchased in excess of $750,000 from poor ethnic crafters and farmers in developing countries. In addition, college students will earn $750,000 in the first three years of store operations. The community development fund and the sustainability fund should receive contributions in excess of $130,000. This money will be availably for the members to democratically choose how much they will contribute to individual charities. Sources and Applications of Cash and Capital (including donations, if applicable) An Equipment List A List of Start-up Costs Start-up expenses of $56,000 include: ,[object Object]

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