Consignment Application for "Chip Development Project"

Applicant:	Chip Development Project contact person Heather Margaret PO Box 198 Quarters 13 McKenzie Circle Fort Meade SD 57741 heather.margaret@alumnae.brynmawr.edu, (605)206-0168 Chip Development Project (CDP) is a not for profit group seeking to increase the financial stability and growth of Breadroot Natural Foods Cooperative through consignment sales of packaged chips, crackers, cereals, cookies, and cereal bars. CDP members are current Breadroot members who are serving on BoD and committees of Breadroot. CDP members have a history of previous involvement in natural foods cooperative development and personal and/or professional interests in natural and organic foods and natural health.
(Include name of individual or group, legal status, and any relationships to Breadroot, cooperatives, natural and organic foods, etc)
Goods to be consigned:	CDP inventory will focus on Chips, Ready to Eat cereals, cereal bars, cookies and crackers. Inventory will be purchased through Breadroot from Rainbow Natural Foods. This section of inventory was chosen as a focus because of the current sparse selection of these types of items at Breadroot, and because these items are believed to have a high turnover, good level of shelf stability, minimal maintenance concerns and ease of inventory tracking. The actual items selected from each category will have attention both to maximal value for the shopper, and to various nutritional merits, such as organic ingredients, whole grains, special diets (gluten free, wheat free, low salt, high fiber), and companies which support the ideals of natural and organic foods consumers.
(Include description, source, and what merits the goods offer to Breadroot in terms of uniqueness, quality, cost, etc.)
Services entailed in consignment relationship:	The anticipated display space will involve 2-3 large shelves, plus additional storage space for backstocked inventory. One large shelf is currently in use by CDP inventory, the second shelf may need to be constructed. It would be preferred that Breadroot be the owner of the shelf and provide for its construction, though monetary loan from CDP would be considered if there was no other way to get the shelf available for use in a timely manner. CDP would plan to use the Breadroot general mailing list to provide information about the products offered and special promotional pricing and sales (via "NewsBytes"). CDP will also use the Breadroot webspace to further educate Breadroot members and others about consignment sales.
Describe requirements for shelf space, refridgeration, locked display, and how those services will be provided (by Breadroot or by applicant)
Describe process and responsibility for maintaining inventory and accounting, including whether these services will be provided by applicant or by Breadroot:	CDP will provide direct supervision of the inventory, including unpacking, shelving, pricing, promotional displays and materials. CDP will complete an inventory review on a weekly to two-weekly basis, with spreadsheet recording the change in number of each item on the shelf and in storage. Items not present at time of counting will be presumed sold. CDP will submit to Breadroot a description of the items sold, and the recorded cost of the items. CDP will expect reimbursement of 1.2COG for items no longer present in the inventory. Until repayment or buy-out is completed such that Breadroot becomes to owner of the department CDP retains discretion over the selection of inventory and the timing of purchases.
Describe expectations regarding pricing of goods and reimbursement of goods sold under this agreement:	CDP offers a simple economic model for transactions. Aware of the ethic of Breadroot to offer food at a fair price, and aware of the current standard of 1.5COG representing that fair price, CDP proposes to purchase through Rainbow and will then price their itmes at 1.5COG. The current economic structure of Breadroot allows for discounts of shoppers who provide direct service to Breadroot up to 20%, in the case of a 1.5COG item this represents 0.3COG potentially discounted from a sale of item. CDP proposes that 0.3COG represents the overhead of Breadroot which is currently paid by all members through money or service to the co-op. CDP proposes that Breadroot maintain 0.3COG on all CDP sales, and leaves it to the discretion of Breadroot whether to collect that portion of the sale from members or to continue exempting payment of the 0.3COG from eligible members. CDP desires to expand the section of inventory they have chosen to focus on until a market saturation has been reached, and then will seek repayment of their initial cash investment. To achieve initial growth and then allow for sustainable repayment CDP expects reimbursement on inventory at 1.2COG. It is planned that 1.2COG will be reinvested in additional inventory until a maximum desirable growth has been obtained, at that time reinvestment will continue at the level of 1.0COG and 0.2COG will be applied to repayment of the initial investment of CDP. On completion of the repayment phase Breadroot will become the owner of the inventory and it will be at the discretion of the BOD how to further manage and invest the inventory.
Describe liabilities involved with the display and sale of the consigned items and how they will be allocated and minimized:	CDP believes that an immediate increase in the amount of inventory available at Breadroot, along with an increase of sales and cash flow, is necessary for the financial stability and growth of Breadroot. CDP members have previously invested in Breadroot through no-interest loans which are currently awaiting repayment, however excessive debt burden and uncontrolled repayment of certain portions of Breadroot debt make secure, certain and timely repayment of the current loans elusive. CDP members wish to provide additional finincial support to Breadroot, but are reluctant to increase their non-secured loans. The proposed solution is to offer sale of inventory currently in limited supply at Breadroot on a consignment basis. This allows CDP members to secure their investment by maintaining ownership of the inventory until such time as it is purchased. The inventory remains separate from the assets of Breadroot until it is paid for. Until Breadroot has an operational point of sale inventory record system therisk of inventory lost through theft or other means falls to Breadroot. Items no longer in the CDP inventory will be presumed sold and reimbursement will be expected at the usual rate. The pre-pay account system currently in use at Breadroot presents a risk for CDP inventory being depleted without actual cash for reimbursement. To prevent this problem Breadroot will provide an identifying mark for items of CDP inventory to provide for the easy recognition of these items by Breadroot staff and shoppers. It is currently planned that the identifying mark will be an orange colored pricing sticker, and the current policy at Breadroot is that items with this orange sticker may not be applied against a pre-pay account. It is according to the discretion of Breadroot whether to enforce this system, though the CDP will expect reimbursement as cash regardless of the currency accepted for the transaction by Breadroot. The inventory has limited potential of causing damage to the store or to the staff, and should not require any additional maintenance beyond shelving the items. The items selected for inventory will be standard manufactured food items without any identifiable unusual risk of disease or injury to the consumer. Within this arrangement the risk of items outdating before they are sold is a risk assumed by CDP. CDP will minimize this risk through judicious ordering and record keeping with attention to rotation of stock. Items with an encroaching date of expiration may be discounted by CDP. The discounted price will be indicated with black permanent marker and will reflect 1.0COG. On these items it is recommended Breadroot extend no further discounts. On these items CDP will accept a 1.0COG reimbursement in order to refresh the inventory.
(Potential liabilities include loss, damage, expiration of dates, injury to consumers, staff or Breadroot property)
Describe the expected duration of consignment and the circumstances and methods under which this agreement will be altered or discontinued:	It is expected and desired that Breadroot will become sole owner of this inventory as soon as financial stability of the co-op has improved. CDP will keep an updated log of the current shelf value of the inventory and the amount of initial investment awaiting repayment to CDP members this invested amout shall equal the buy-out price. Buy-out may take place at any time Breadroot deems the arrangement to have met its goals or become a detriment to the future of the co-operative. CDP does not have any current plans to interrupt this agreement other than at the completion of buy-out by Breadroot. CDP is however the owner of their own inventory and do maintian the right to cease the agreement and remove the inventory at their discretion. CDP will not hold Breadroot liable for failure to maintain business operations under which the CDP inventory may be sold, however if Breadroot should cease business operations CDP will retireve inventory owned by them from the genreal assets of the store.
Signature of Applicant:
date:
Acceptance of BoD with/without ammendments
date:
Signature of Applicant acceptance of ammendments (if applicable):
date:
Entered into the BoD minutes (date):