Building Successful Food Hubs - Home - …

1 Building Successful food hubs A Business Planning Guide for Aggregating and processing Local food in Illinois Illinois Department of Commerce and Economic Opportunity University of Illinois Business Innovation Services Illinois Department of Agriculture January 2012. Contact Timothy C. Lindsey, Jim Slama Director, Energy and Sustainable Business Programs Founder and President University of Illinois Business Innovation Services 807 S. Wright Street 7115 W. North Ave. #504. Champaign, IL 61820 Oak Park, IL 60302. (630) 505-0500 (708) 763-9920. Building Successful food hubs A Business Planning Guide for Aggregating and processing Local food in Illinois Building Successful food hubs A Business Planning Guide for Aggregating and processing Local food in Illinois CONTRIBUTORS.

2 This planning guide is the collaboration of the Illinois Illinois Department of Agriculture Department of Commerce and Economic Opportunity Tom Jennings, Director (DCEO), University of Illinois Business Innovation Services (BIS), Illinois Department of Agriculture Delayne Reeves, Bureau of Marketing and Promotion (IDOA) and Funding for this report was provided through grants from the Illinois Department of Agriculture and Illinois Department of Jim Slama, Founder and President Commerce and Economic Opportunity. Kathy Nyquist, Consultant and Principal, Illinois Department of Commerce New Venture Advisors LLC. and Economic Opportunity Megan Bucknum, food Systems Planning Consultant Warren Ribley, Director Saloni Doshi, Student Intern, Northwestern University Therese McMahon, Deputy Director, Kellogg School of Management Bureau of Workforce Development Holly Haddad, Associate Director University of Illinois James Pirovano, Forager Business Innovation Services Tim Lindsey, Director, Energy Conor Butkus, Office Administrator and Sustainable Business Programs Jenie Farinas, Program Assistant Bob Sheets, Director, Resource and Development Copyright 2012 3.

3 Building Successful food hubs A Business Planning Guide for Aggregating and processing Local food in Illinois About DCEO About The Illinois Department of Commerce and Economic Since 1999, has been committed to Opportunity raises Illinois' profile as a global business developing markets for local food through trade shows destination and nexus of innovation. It provides a and farmer development and training, as well as political foundation for the economic prosperity of all Illinoisans, advocacy. assists the largest regional through the coordination of business recruitment and wholesale buyers in securing local produce Whole retention, infrastructure Building and job training Foods Market, Chipotle Mexican Grill, Sysco, Compass efforts, and administration of state and federal grant Group, Goodness Greeness, and other large-scale buyers.

4 Programs. To accelerate job creation and worker In collaboration with New Venture Advisors, a business readiness moving out of the Great Recession, DCEO development consultancy, has has targeted investments to high-growth sectors such expanded into the planning and development of food as agriculture, healthcare, high-tech, manufacturing, hubs , produce aggregation businesses that develop new advanced materials, and life sciences. Entrepreneurs in markets for farmers selling into local food wholesale any sector can find assistance at their nearest Illinois markets. In 2011 helped to launch three Small Business Development Center. operating food hubs , one in Virginia and two in Illinois.

5 Also provides technical assistance and training for farmers and published Wholesale Success: A. About BIS Farmer's Guide to Selling, Postharvest Handling and Packing For the past 28 years, University of Illinois - BIS has Produce. The 255-page manual includes comprehensive established a powerful track record of success helping sections on issues such as Building Relationships with to build hundreds of high-performing organizations in Buyers, On-Farm food Safety and Calculating Return On manufacturing, agriculture, healthcare, municipalities, Investment. It also includes over 100 crop profiles that and financial services. Our goal is to promote a give specific harvesting, cooling, storage, and packing robust economy helping organizations compete information on most of the fruits and vegetables grown globally, profitably, and sustainably.

6 Organizations are in the United States. It is the basis for our Wholesale rapidly discovering that environmental and business Success farmer workshops that have trained more than performances are intricately linked. Wasteful practices 2,000 farmers. In 2011, partnered with are not sustainable and are not only bad for the USDA Risk Management Agency to train over 600 farmers environment, they are bad for the bottom line as well. in California, Florida, Virginia, Indiana, and New York. BIS works with organizations to improve both their also facilitates Meet the Buyer events environmental performance and overall competitiveness to link local producers face-to-face with wholesale buyers.

7 By reducing wastefulness associated with energy, food , To further support family farmers, materials, and water utilization. has created the On-Farm food Safety Project. This pioneering work helps farmers create free on-farm food safety plans. Accessing it at , About IDOA farmers can also learn about best practices in produce The Illinois Department of Agriculture works to regulate food safety. various aspects of the agriculture industry in an effort to protect consumers, assist farmers, and foster new Project Funders agribusinesses throughout the state. Ensuring sound Lead funders for this guide were the Illinois Department environmental practices are followed, promoting the of Commerce and Economic Opportunity and the production and consumption of local foods and food Illinois Department of Agriculture (through a USDA.)

8 Products, and providing up-to-the-minute market Specialty Crop Block Grant). Other funders supporting reports are also key elements of the Department's s work to develop food hubs include: mission. The Department promotes and regulates Chipotle Mexican Grill, Compass Group, Ellis Goodman agriculture in a manner that encourages farming and Family Foundation, Gaylord and Dorothy Donnelley agribusiness while protecting Illinois' consumers and Foundation, Goodness Greeness, Liberty Prairie natural resources. Foundation, Lumpkin Family Foundation, USDA Risk Management Agency, and Whole Foods Market. 4. Building Successful food hubs A Business Planning Guide for Aggregating and processing Local food in Illinois TABLE OF CONTENTS Shared-Use Kitchen for Others food Business Incubator 29.

9 30. Workforce Development 30. Contributors 3. Other 30. Welcome 6. Glossary 7 Business Services 31. Core Services 31. Canning 31. INTRODUCTION 8. Assembly 31. food Systems Background 8. Baking and Confection 32. Current Industry Structure 8. Dehydration 32. Emerging Role of food hubs 9. Freezing 32. Economic and Social Opportunity 10. Chopping 33. food Hub Planning Guide Overview 12. Business and Technical Services 33. Ancillary Services 33. PART ONE: AGGREGATION CENTERS 13. Business Models 13 Regulatory Environment 35. Aggregation Facility 13. Revenue Models 37. Membership Fees 37. Packing House 14. Hourly Rental 37. Web-Based Aggregator 14. Storage Rental Fees 37.

10 Business Services 14. Services Fees 37. Core Services 14. Project Quote 37. Aggregation 14. Payment in Kind 37. Washing 15. Incubator Model 38. Cooling 15. Grading, Sorting & Packing 16. Additional Business Entities 38. Governmental 38. Re-packing 17. Educational / Institutional 38. Storage 17. Sales and Marketing 17. processing Center Profiles 39. Distribution 17. Ancillary Services 18. PART THREE: BUSINESS DEVELOPMENT PROCESS 41. Regulatory Environment 19. Overview 41. food Safety Certification 19. Opportunity Identification 42. GAPs 19. Feasibility Assessment 43. GHP 20. Elements of a Feasibility Study 43. HACCP 21. The Due Diligence Process 43. Certified Organic 21.