Board of Directors:

• Sarina Otaibi, Chair
• Andrew Hodny, Vice Chair
• Mary Gillespie, Record Officer
• Tim Beckmann, Finance Officer
• Glenn Gelhar, Board Member

681 Prentice Street, Granite Falls, Minnesota 56241

info@bluenose.coop . www.bluenose.coop

Table of Contents

Executive Summary

Description of Business

Intended Audience

Document History

2. Co-op

History

Organizational Structure

Management Responsibility

Marketing and Distribution

Professional Support

Market Analysis

Marketing Analysis of Granite Falls and Surrounding Area

3. Location

Predicted Market Area

4. Products and Services

Beers

Other Great Beverages

5. The public house

7. Operations

Overview

Staffing

Initial Brewing and Inventory

Operational Reserves

Opening Expenses

8. Finances

Overview

Financial Plan

First Phase

Second Phase

Appendices

1. Executive Summary

Description of Business

Founded by local community members, Bluenose Gopher Public House is a member­ owned cooperative business that plans to open a public house in the riverside city of Granite Falls, MN, with a projected opening date in late in December of 2017. As of August 22, 2017, there are 212 member-owners.

The public house will feature Minnesota craft beer, wine, non-alcoholic beverages such as coffee and tea, and small local and seasonal food appetizer plates. At a later phase, a brewery and restaurant may be added.

The public house, under the supervision of the Board of Directors, will hire a manager to oversee the day to day business operations. The manager will have the right to hire additional restaurant and public house staff at his or her discretion.

Remodeling the existing building is anticipated to cost approximately $85,000. Approximately 71 seats will be available inside and 16 seats will be available outside (See: Architecture Plan). There will be space for music performances at the front of the building. Parking and space for larger events is available at the back of the building.

Bluenose Gopher Public House will focus not only beverages and food but also on providing a third space to the community in order to foster and encourage group meetings and facilitate creative projects. The public house, for example, will cater to the needs of community groups looking for wi-fi and technologically equipped areas to hosts meetings, to make presentations, and to collaborate with one another.

The public house further intends to facilitate local artists, authors, and musicians who seek opportunities to display their works, host readings, or perform their music. Due to the availability of outside seating and a riverfront location, the public house will further seek to host regular community events such as musical acts.                                                          

Intended Audience                

This document communicates the current vision of what Bluenose Gopher’s Board of Directors consider an ideal course for the Cooperative and is intended for member ­owners of the Cooperative, interested investors, and any parties with whom the Cooperative does business, including, but not limited to, financial institutions, legal counsel, commercial real estate representatives, landlords, etc.         

Document History

2. Our Cooperative Business

History

Bluenose Gopher Public House strives to be the best public house and restaurant in the western Minnesota Region. The public house will combine a commitment to great tasting ales and lagers and a prohibition style decor to create an atmosphere that will attract patrons from both near and far.

In October of 2013, Bluenose Gopher Public House (formerly known as Bluenose Gopher Brewery) organized to become a cooperative association. In June of 2014, the first memberships were offered at $150.21, and membership grew to over 150 within just a few months. In late 2016, the membership amended the Articles of Organization to allow the sale of nonpatron membership (Investor Class Membership). The sale of Investor Class Membership through MNVest or any other means is not currently being pursued. Funds raised by member loans will be used to build the public house and sustain the first year of operations until the public house becomes profitable.

Bluenose Gopher Public House is governed by a seven ­member Board of Directors (elected to two ­year terms) and broader member ­led committees.

Mission Statement: To create a space where community, creativity, and history collide with quality beverages and food. 

Organizational Structure

Bluenose Gopher Public House is organized as a Cooperative Association pursuant to Minnesota Statutes 308B. A Cooperative Association allows Bluenose Gopher to utilize the cooperative concept of patron members as its primary owners. For $150.21, any person over the age of 21 may apply to become a patron member (member-owner). Patron membership gives each member an equity stake in the public house itself. Each patron member holds the right to vote for members of the Board of Directors, which oversees the general operations of the public house. Each patron member is entitled to dividends in proportion to their patronage of the public house if and when profits are realized beyond that which is deemed necessary by the Board of Directors for operating funds and future growth. Bluenose Gopher will maintain the cooperative principle of one member, one vote, while striking a balance between the financial interests of patron members and outstanding member loans .

Why a Cooperative?

Bluenose Gopher Public House organized under the cooperative model out of need to serve a gap in the market. Cooperatives serve market niches when there is sufficient consumer demand for a service or product, but no single or small group of entrepreneurs with sufficient capital resources to enter the market.

Our founding members recognized a need for a third space, preferably along the Minnesota River, to serve as a meeting and social space where people can enjoy an evening out and exchange ideas. Breweries, beer halls, pubs, and taprooms have served this function in communities in Minnesota and around the world. Our founding members also noted a change in beer consumption, with more consumers preferring beers that offer unique experiences over the most recognizable brands such as the flagship products of Anheuser-Busch InBev NV. Given Granite Falls unique historical role in prohibition, inspiration for a cooperatively owned public house was born.

A co-operative offers many market advantages. The company stays focused on the consumer because many of the consumers have an ownership stake in the company. Because dozens, hundreds, or even thousands of consumers own a stake in the company, the company’s profits are spread widely. Nationally recognized cooperatives include REI Co-op, which sells high quality outdoor gear and Mutual of Omaha insurance company.

Management Responsibility

The Bluenose Gopher Board of Directors is responsible for the long-term strategic vision of the public house, financial oversight, and support for staff. The Board of Directors is also responsible for hiring outside professional support and hiring the position of Manager.

Marketing and Distribution

Bluenose Gopher public house will sell products to customers at retail prices. This retail outlet will allow us to receive retail price on the sale of beer. Beer, wine, food, nonpatron memberships, and promotional merchandise such as glassware and clothing, will also be sold to increase Bluenose Gopher’s public exposure and profit margin.

Professional Support

The following personnel will be used as needed.

Attorney: Jeffrey O’Brien, Chestnut Cambronne PA, Minneapolis, MN

Architects: Engan Associates, Willmar, MN.

Accountant: Sarah B. Budenske, CPA, 7205 Ohms Lane, Suite 200, Edina, Minnesota 55439

Public House Manager: will be hired 1 to 2 months before opening.

Market Analysis

Granite Falls is the hometown of Andrew Volstead, author of the Volstead Act, enacted to carry out the 18th Amendment, as well as the Capper/Volstead Act forming the framework of cooperatives.  This history is integral to our marketing plan.  The 100th anniversary of Prohibition is coming up in 2020 with laws passed in 1918 and 1919.  These dates and the local prohibition story will be used in our marketing and events.  

The public house will promote Minnesota breweries and wineries. Breweries and wineries have increased in popularity in recent years and are often mentioned in articles defining a successful town such as this one in The Atlantic, “Eleven Signs a City Will Succeed.”  

Bluenose Gopher Public House will be advertised in local and regional print media, social media, and our website http://www.bluenose.coop.  Our facebook page, twitter and website have been operating for two years with increasing followers and member updates.

Plans to develop the riverfront and Memorial Park are important parts of our marketing and business plan.  A whitewater park located in a section of the existing dam is in the development stages through the City of Granite Falls, Minnesota DNR, Granite Falls EDA, and Granite Falls Riverfront Revitalization. Preliminary architectural ideas have been submitted and the project is currently in the 2nd step of development with a Economic Feasibility Study being conducted by the University of Minnesota in Mankato.  Along with the rest of downtown Granite Falls, our public house will be in a perfect position to benefit from the increased tourism and activity which will take place right outside our back deck and gazebo.  We already have plans to include a kayak rack in the back of the building to encourage river activity and appeal to the outdoorsy customer.  A whitewater park would increase our customer base and orientate our marketing strategy more toward the Minnesota River. It would increase commercial property values located along the river.  

Marketing Analysis of the Granite Falls Area

The per capita income in Granite Falls is $44,432 and $64,688 in Yellow Medicine County. The average unemployment rate is 4%.                                                                 

Property Values:

The average median value of owner-occupied housing units in Granite Falls is $118,000. Property value of commercial real estate ranges from  $40,000 to as high as $250,000.                                                         

Retail and Food Services Sales:

The average retail sales per capita for Minnesota in 2007 was $13,751, while the national average was $12,990. Yellow Medicine County has a slightly lower average, while Renville County’s retail sales per capita is just half of the Minnesota sales average. The sales per capita for Chippewa County is slightly higher than the national average and slightly lower than the Minnesota average.

The accommodation and food services sales for 2007 are available for two of the counties that surround Granite Falls, Chippewa County and Yellow Medicine County. Chippewa County’s accommodation and food sales in 2007 were $11,559. The accommodation and food sales in Yellow Medicine County were three times higher than Chippewa County sales. This is most likely the case because Prairie’s Edge Casino and Resort is located in Yellow Medicine County.

Major Employers:

Major employers in Granite Falls include agricultural and engineering industry, healthcare industry, education sector, and the local government sector, both city and county. It is important to consider the type of employment available to people in the area in order to ensure a stable economic base.

Agricultural and Engineering Industry:

Fagen, Inc. is a major industrial employer in the area. Founded in 1974, the company built its first ethanol plant in 1988. Today, the firm is involved in the construction of wind farms and numerous green-energy projects throughout the United States. The company is headquartered in Granite Falls with a Southeast Regional Office in Greenville, South Carolina. Fagen Engineering LLC, a second company within Fagen Inc., was established in 1996. Their engineering experience covers biofuels including ethanol and biodiesel, agricultural processing, food processing, power, grain handling, cogeneration, water treatment, wind turbines, and many other heavy industrial projects.

Specialty Systems Inc. (SpecSys Inc.) was founded in 1997 and has grown to be a premier engineering design firm. SpecSys Inc. specializes in design and development of machinery and mobile equipment for original equipment manufacturer clients across North America and throughout the world. The firm is comprised of 150 employees consisting of a mix of Engineers, Designers, Drafters, Purchasing, Production Planning, Administrative, Technical Publication, and Production Technicians. The manufacturing facility is located in Granite Falls with its headquarters in nearby Montevideo.

The Granite Falls Industrial Park consists of 240 acres of land zoned specifically for industrial use. Incentives including JOBZ, Tax Increment Financing (TIF), local Revolving Loan Fund (RLF) loans, Regional Revolving Loan Funds and State Revolving Loan Funds are available for qualifying companies. Some of the companies located in the industrial park are MARR Valve Company in the dental industry, Ryer Plumbing and Heating, Kosen Feedlot, Par Piping and Fabrication, Inc.

Healthcare Industry:

The Granite Falls Municipal Hospital and Manor has three family medicine physicians, a nurse practitioner and a physician assistant. They serve the 25-bed Granite Falls Municipal Hospital and neighboring 57-bed Medicare certified skilled care Granite Falls Manor. Cardiologists, surgeons, dermatologists, ENT and other specialists provide outreach to Granite Falls. In addition, there are a number of nursing homes and assisted living homes that are located around downtown Granite Falls in residential neighborhoods.                         

Education:

The Minnesota West Community and Technical College has a Granite Falls campus, which is one of their five southwestern campuses.

The Yellow Medicine East School District is located in Granite Falls, MN and includes 2 schools that serve 895 students in grades PK through 12. The school district employs about 68 teachers and support staff.

Local Community Organizations:

There are several local organizations that have a presence in downtown Granite Falls and they are: Granite Falls Riverfront Revitalization, Clean Up the River Environment, Yellow Medicine Historical Society, Granite Falls Historical Society, Granite Falls Area Community Foundation, Granite Falls American Legion, Lady Slipper Garden Club, and the Granite Falls Lions Club. There are eight churches in Granite Falls: Granite Falls Lutheran Church, Rock Haven Church, St. Paul Lutheran Church, Granite Falls United Church of Christ, Pejuhutazizi Presbyterian Indian Church, First Baptist Church, St. Andrew Catholic Church, and Assembly of God. These community organizations provide some of the social capital needed to implement changes and improvements to the historic downtown.

3. Location

Figure 1: Photo of back of building from porch of the large parking lot and Minnesota River

Bluenose Gopher Public House is located in downtown Granite Falls, Minnesota, at 681 Prentice Street. The building is on the west side of the Minnesota River in Yellow Medicine County. Views of the Minnesota River and the Granite Falls rapids are visible from the west facing side of the building. Birds such as pelicans are often in the area.

A medium sized parking lot divides the east side of the building from the Minnesota River. The City of Granite Falls allows for outdoor music and other events with permits obtained in advance. It is anticipated that the public house will regularly be able to host community events that utilize the parking lot and the river with a modest degree of advanced planning.

Location Considerations:

The building itself is two levels with a first floor and full basement. At time of the assignment of the contract for deed, the basement remained unfinished with an 8.5 foot height ceiling. The first floor has vaulted ceilings. For the public house, only the first level will be rehabbed and the basement will remain unfinished. The architectural plans below will be used as a guide for the building the public house.

Predicted Market Area

The predict a market area for Bluenose Gopher Public House is 3,529 square miles, which includes larger cities in the surrounding area of Granite Falls including Willmar, Marshall, Dawson, Montevideo, Redwood Falls, and Olivia (see Figure 2).

The sale of alcoholic beverages in the public house’s predicted market area is $15,525,108 per year (see Figure 4). Our most likely scenario sales estimate is that Bluenose Gopher Public House will be able to capture a market share of 1.5%.

Figure 2: Map of predicted market area for Bluenose Gopher Public House

Figure 3: Disposable Income Profile for predicted market area of Bluenose Gopher Public House

Figure 4: Retail Goods and Services Expenditures for Bluenose Gopher Public House predicted market area.

4. Products and Services

Beers and Wine

The public house will strive to feature Minnesota beers and wines. According to the Brewer’s Association, Minnesota currently hosts over 100 breweries and ranks 16th in the nation in terms of breweries per 100,000 adults over 21. Many of Minnesota’s best products are not currently in stock in the Granite Falls area.

The wine enthusiast will not be forgotten. Bluenose Gopher public house will feature a variety of wines from around Minnesota. The purpose of the wine selection will be to feature red, white, and dessert wines desired by the patron members.  

5. Operations

Overview                                        

As we prepare to open and operate the public house, we will:                

●  Hire a General Manager and Staff        

●  Fund the first three to six months of opening our doors

●  Strive towards sustainability

Staffing

We will hire a General Manager approximately 1 month ahead of opening. Staff ­level positions will be hired just ahead of opening.                                        

Opening Expenses

In the weeks prior to opening our doors to the public we will incur the following approximated expenses. A more detailed breakdown of expected costs is available in the Appendix.         

6. Finances

Overview

The Bluenose Gopher Public House will incorporate a two phase financing plan. Each phase of the plan will seek to recognize the member-owners as the core of the public house. In the first phase, Bluenose Gopher will accept applications for $150.21 for patron-membership. In the second phase, Bluenose Gopher will obtain member loans from its patron members to fund the rehab of the building. In its third phase, Bluenose Gopher will obtain a secured loan from a bank or other gap financing entity to fund the remaining balance needed to open our doors.

Financing Plan

First Phase

Patron Members: In exchange for $150.21, patron-owners will hold a lifetime ownership interest in the cooperative public house. The Patron-members are the cornerstone of the public house. The first 150 patron-members will be rewarded with not only an ownership interest in the public house, but with a beer mug with their name and member number held in the public house for perpetuity. The public house will host member events and promote itself through community engagement. The Bluenose Gopher endeavors to have $20,000 cash on hand at the time when it has achieved 150 members.  Architectural plans were created and a lawyer and accountant were hired with the funds raised.The building was purchased with those funds on a contract for deed.

Second Phase

Member Loans

In the second phase of the financing plan, Bluenose Gopher will contact its members and obtain Member Loans in the form of Promissory Notes. The minimum loan amount is $500. The terms are flexible with an interest rate of 3%.

Third Phase

Secured Loans

In its third phase, Bluenose Gopher will obtain a secured loan from a bank or other gap financing entity to fund the remaining balance needed to open its doors.

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Appendices

Board Member Resumes

Sarina Otabi, Chair

Sarina’s love for community building, historic preservation and rural downtown development helped to propel the idea for a small public house infused with history and community to be located in downtown Granite Falls, right along the Minnesota River.

• Works with cities around the state to help them reinvigorate their downtown districts as the Minnesota Main Street Statewide Coordinator at the Preservation Alliance of Minnesota.
• Serving her second four-year term as a Granite Falls City Council Member.
• Bachelors of Business Administration in marketing from Stetson University in Florida and a master’s degree in historic preservation from the University of Maryland, College Park.
  

Andrew Hodny, Vice Chair

Andrew is passionate about developing opportunities for cultural and social engagement in rural America and preserving and exploring southwestern Minnesota’s unique history. He wants to help Granite Falls return to its origins as a vibrant river community.

• Works as an attorney at Stermer & Sellner, Chtd. in Montevideo, Minnesota.
• Secretary of Montevideo Industrial Development Association.
• J.D. Hamline University School of Law, B.A. Augustana College.
• Beer culture enthusiast and homebrewer.
  

Tim Beckmann, Board Member

Tim is a Product Development Engineer with 10 years of experience in the Aerospace and Medical Device industries.  Tim utilizes a hands-on approach to reach tangible and profitable outcomes with an emphasis on quality, manufacturing efficiencies, and exceeding customer expectations.  In his free time, he continues to explore unique and sustainable food production technologies including hydroponics and mycelium/mushroom production.

• Product Development Engineer at Ametek - Engineered Medical Components
• Bachelors of Science in Mechanical Engineering from the University of Iowa

Mary Gillespie, Records Officer

Mary is the go-to person for all things relating to Granite Falls. She has experience in nearly every capacity of municipal life and experience in business, marketing, community development and fundraising.

• Works as the Granite Falls Chamber of Commerce Director
• Graduate Studies in Education
• Bachelor of Arts in Small Business Management and Photography

Glenn Gelhar, Financial Officer

Glenn moved back to his family farm near Clarkfield, MN, from Seattle, WA, a few years ago. Currently, he is raising chickens, growing barley, and sustainably caring for his farm land. He has had a lifelong passion for the water and has sailed solo across and around the Pacific.

• Retired healthcare administrator
• Homebrewer for over 35 years

Seven Cooperative Principles

Cooperatives around the world generally operate according to the same core principles and values, adopted by the International Cooperative Alliance in 1995. Cooperatives trace the roots of these principles to the first modern cooperative founded in Rochdale, England in 1844.

1. VOLUNTARY AND OPEN MEMBERSHIP

Cooperatives are voluntary organizations, open to all people able to use its services and willing to accept the responsibilities of membership, without gender, social, racial, political or religious discrimination.

2. DEMOCRATIC MEMBER CONTROL

Cooperatives are democratic organizations controlled by their members—those who buy the goods or use the services of the cooperative—who actively participate in setting policies and making decisions.

3. MEMBERS' ECONOMIC PARTICIPATION

Members contribute equally to, and democratically control, the capital of the cooperative. This benefits members in proportion to the business they conduct with the cooperative rather than on the capital invested.

4. AUTONOMY AND INDEPENDENCE

Cooperatives are autonomous, self-help organizations controlled by their members. If the co-op enters into agreements with other organizations or raises capital from external sources, it is done so based on terms that ensure democratic control by the members and maintains the cooperative's autonomy.

5. EDUCATION, TRAINING AND INFORMATION

Cooperatives provide education and training for members, elected representatives, managers and employees so they can contribute effectively to the development of their cooperative. Members also inform the general public about the nature and benefits of cooperatives.

6. COOPERATION AMONG COOPERATIVES

Cooperatives serve their members most effectively and strengthen the cooperative movement by working together through local, national, regional and international structures.

7. CONCERN FOR COMMUNITY

While focusing on member needs, cooperatives work for the sustainable development of communities through policies and programs accepted by the members.

Start-up Costs

Breakdown of Costs

Bar and Equipment

Salaries and Benefits

Cost of Goods Sold

General and Administrative

Breakdown of Sales

Alcohol Sales Breakdown Using Market Area Profile

Other Sources of Revenue

Break Even Scenario

Analysis

Estimated Scenario