Running A

FOOD HUB
ASSESSING
FINANCIAL VIABILITY

3
VOLUME
Rural Development
Service Report 77, Volume III
Issued March 2016
Reprinted May 2018

This report was prepared for the U.S. Department of Agriculture by Matson Consulting of Aiken, S.C.,
with the assistance of James Barham of USDA Cooperative Programs. Funding was provided by
VAFAIRS, a nonprofit cooperative and small business development office in Richmond, Va., and by
USDA’s Cooperative Research Grant Program, administered by USDA Cooperative Programs.

For questions or additional copies of this report, contact:

[email protected] or call 202-690-1411.

This report and many others that may be useful to food businesses are posted on the USDA Rural
Development, Cooperative Programs website at:
http://www.rd.usda.gov/publications/publications-cooperatives

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Running a
Food Hub
Assessing
Financial
Viability
VOLUME THREE

By James Matson, Jeremiah Thayer, and Jessica Shaw

Matson Consulting, Aiken, S.C.

The authors thank James Barham of USDA Cooperative Programs for

his help in preparing this report. This manuscript and the financial models
it contains were reviewed by a number of peers, some of whom compared it
to their own experiences either running, or working with, food hubs. The
authors thank the following reviewers for their assistance and insights:

• Olivia Blanchflower — GrowNYC’s Greenmarket Co.

• John Fisk and Jeff Farbman — The Wallace Center at Winrock International
• Malini Ram Moraghan and Darrow Isaacman-VanWertz — Wholesome
Wave
• Kathy Nyquist and Saloni Doshi — New Venture Advisors
• Jesse Rye and Hannah Mellion — Farm Fresh Rhode Island
• Haile Johnston — Common Market Philadelphia
 Contents

Introduction...............................................................................................................7
Methods of Analysis.................................................................................................8

Operational Models: Wholesale Food Hubs........................................... 12

Annual Sales by Business Operational Periods...........................................13

Figure 1: Annual Sales Levels by Operational Periods................................13
Model Assumptions................................................................................................14
Product Lines......................................................................................................14
Table 1: Sales Distribution................................................................................14
Figure 2: Sales Seasonality..............................................................................14
Product Pricing..................................................................................................15
Payment to Producers......................................................................................15
Figure 3: Sales Needed To Reach Breakeven..............................................16
Certification Fees...............................................................................................16
Location...............................................................................................................17
Facility Operations and Delivery.....................................................................17
Table 2: Time Requirements.............................................................................19
Table 3: Hourly Labor Calculations.................................................................21
Table 4: Wholesale Labor Costs......................................................................21
Table 5: Salaried Labor Costs..........................................................................22
Figure 4: Sales Required for Breakeven Additional Labor..........................23
General Expenses..............................................................................................24
Equity and Financing.........................................................................................25
Wholesale Food Hub Results................................................................................26
Figure 5: Annual Sales by Operational Period..............................................26
Table 6: Wholesale Food Hub pro forma........................................................27

Operational Models: Direct-to-Consumer Food Hubs........................... 29

Annual Sales by Business Operational Periods...........................................30

Figure 6: Annual Sales Levels by Operational Periods................................30
Model Assumptions................................................................................................31
Product Line........................................................................................................31
Location...............................................................................................................31

4 RUNNING A FOOD HUB

 Table 7: Direct-to-Consumer Warehouse Lease..........................................31
Operations...........................................................................................................31
Table 8: Shares Sold..........................................................................................32
Table 9: Pickup Locations.................................................................................32
Table 10: Direct-to-Consumer Full-Time Employees....................................34
Table 11: Direct-to-Consumer Labor Costs...................................................35
General Expenses..............................................................................................35
Direct-to-Consumer Food Hub Results...............................................................36
Figure 6: Direct-to-Consumer Sales Levels and Operational Profit..........36
Table 12: Direct-to-Consumer Pro Forma......................................................37

Operational Model Comparisons..............................................................38

Table 13: Operational Model Summary Comparison...................................38

Figure 7: Prototypical Food Hub Expenses Comparison..............................39
Table 14: Breakeven Operational Period Pro Forma Comparison.............40
Table 15: Growth Operational Period Pro Forma Comparison...................41
Table 16: Viability Operational Period Pro Forma Comparison..................42

Conclusion..................................................................................................... 43

Appendix........................................................................................................ 44

Supplemental Tables: Wholesale Model............................................................45

Table 17: Prototypical Wholesale Food Hub Balance Sheet......................45
Table 18: Wholesale Expense and Revenue Summary Figures.................46
Table 19: Wholesale Labor Summary.............................................................48
Table 20: Wholesale Transportation Summary.............................................52
Table 21: Wholesale Cash Flow.......................................................................56
Supplemental Tables: Direct-to-Consumer Model...........................................61
Table 22: Prototypical Direct-to-Consumer Food Hub Balance Sheet.....61
Table 23: Direct-to-Consumer Expense and Revenue.................................62
Table 24: Direct-to-Consumer Labor Summary............................................64
Table 25: Direct-to-Consumer Transportation summary.............................68
Table 26: Direct-to-Consumer Cash Flow......................................................72

Cover: Ilustration by Sharon Szegedy Graphic Design, Inc. Cover and book
design by Stephen Hall, Kota Design.

RUNNING A FOOD HUB 5

6 RUNNING A FOOD HUB
 Introduction

T his report is part of a multi-volume, technical report series

published by USDA under the over-arching title of Running a Food
Hub. This third volume in the series provides in-depth guidance on
assessing the financial viability of food hubs.
The purpose of this report is to provide benchmarks for
established and emerging food hubs to use as a comparison for
assessing their own financial viability and for making strategic
business decisions. The financial analysis can provide valuable
insight into how changes in major costs and revenue affect the
overall operations and profitability of food hub businesses.
There are many existing food hubs with operations that differ
from the assumptions used for this analysis. Food hubs may be more
or less efficient in key areas, such as size of operations, product cost,
transportation or other areas. For the sake of brevity, this report
attempts to focus on the most significant areas of concern that most
often affect business viability.
Economic analysis in this report is based on information from
industry research, discussions and interviews with key food hub
personnel from across the United States, and the knowledge of the
consultants. Sections presenting key assumptions for the analysis
are presented in narrative form to aid in understanding the logic
used during the construction of the analysis. This report has been
divided into these three major sections:
The “Methods of Analysis” section introduces the Operational
Model and Operational Period approach used for the construction
of the financial analysis and comparisons of the models.
The “Operational Models” section presents a closer look at
different components of each operational model. It provides the
details, narrative, and in-depth analysis of the assumptions that
U. S. Department of Agriculture photo

underpin the report. Readers can find the food hub type that most
resembles their venture and compare points of similarity.
The “Operational Models and Periods Comparison” section
concludes the body of the document by juxtaposing some key
financial and operational results of each operational model and
operational period to compare the various types of entities. It is
here that hub operators can learn lessons, compare results, and see
the benefits and obstacles unique to the various food hub types.

RUNNING A FOOD HUB 7

 Methods of Analysis

C ategorizing common financial issues across a variety of

food hubs is difficult because of the differences in operations. Some
food hubs may enjoy advantages or resources in certain areas of op-
erations, personnel, or business that enable them to perform more
successfully than others, or achieve greater sales levels in a shorter
period of time. Each food hub is unique and operates with a distinc-
tive combination of expenses. There are also often environmental
circumstances affecting the food hub’s ability to remain in opera-
tion.
Even with these variations in organization, many food hubs still
encounter common issues at similar points in their development.
This financial analysis uses a prototypical approach and provides
points of comparison to create detailed financial operation
statements. It is not intended to represent any specific food hub.
Rather, the operational income and expenses for the food hub in the
viability analysis are based on an amalgamation of several food hub
examples. This information was subsequently vetted with a USDA
review process to ensure numbers were representative of actual
revenue and expenses experienced by similarly structured food hubs.
Further, this analysis assumes that food hubs have access to a
variety of producers and members, and is located within 50 miles
of customers. It assumes that food hubs sell a mix of products that
primarily include produce, but also may include dairy or other
products, depending on the food hub’s operational model.
This analysis is based on two common food hub Operational
Models (Wholesale and Direct-to-Consumer) operating in three key
Operational Periods (Breakeven, Growth, and Viability).Where
applicable, considerations of a food hub’s Startup period is also
discussed.

Business Operational Models

Food hubs function under a variety of business operation
models, which differ based on how and where the food hub sells its
products. This document examines two models: a Wholesale Food
Hub and a Direct-to-Consumer Food Hub. There are different
types of the Direct-to-Consumer food hub model; we have chosen
to use the Community Supported Agriculture (CSA) type. While

8 RUNNING A FOOD HUB

there are numerous types of food hubs in existence, these two business
operational models seem to be the most widely used among food hubs.1

Wholesale food hub

In general, wholesale food hubs often have the following characteristics:
• May be more focused on retailers as the main customer base.
• Product offerings may include more of a variety of items that aid in
expanding the seasonality of sales.
• Delivers products to end customers and does not rely on volunteer
labor, instead relying on dedicated labor to repack items and deliver
product.

The term “wholesale food hub” is an umbrella term that can apply to
food hubs with a variety of target markets. Local restaurants, individual
or regional grocery stores, large-scale grocery chains, and institutions —
such as schools, hospitals, and corporate cafeterias — can all be considered
“wholesale” markets.

Direct-to-Consumer Food Hub

In general, direct-to-consumer food hubs often have the following
characteristics:
• Sales tend to focus on fresh produce.
• Distribution is made directly to end consumers, with pick-up locations
at customer residences, workplaces, or other designated sites.
• They are operated by a mix of staff and volunteer labor.
• They usually charge retail prices for their products.

The direct-to-consumer model highlights the use of an intermediary

service provider to connect farmers with community members. For the
purposes of our financial analysis, the direct-to-consumer model reflects
what is commonly known as a Community Supported Agriculture (CSA)
hub, though there are numerous ways to operate a direct-to-consumer-
based food hub. The goal of this approach is to provide the most profit to
the producers while also generating income needed for the continuation of
the business. As an operation with low overhead, the sales levels needed to

1
More information on the different types of food hub operational models can be found in Volume 2
of this series: Running a Food Hub: A business operations guide. This and other USDA reports can
be downloaded at http://www.rd.usda.gov/publications/publications-cooperatives.

RUNNING A FOOD HUB 9

achieve the various operational periods are lower than those exhibited by
the wholesale food hub model.

Business Operational Periods

Year-long snapshots, or operational periods, were chosen based on sales
level and corresponding costs and activities to provide as broad a picture
of a food hub’s typical operations as possible. While the analysis presents
1-year pictures of a food hub’s operations, they do not necessarily represent
consecutive years. It is likely that a food hub will experience several years
of growth with neutral cash flow, then experience a loss that will cause the
food hub to only cover its operating expenses. The operational periods,
therefore, are meant as a guide and correspond to a snapshot of operations
and sales levels at a particular period in time, along with corresponding
expenses.
This financial analysis focuses on the core food hub commercial
activity of procuring food from producers and selling it to buyers, or food
aggregation and distribution. The analysis does not incorporate costs for
other important mission-based food hub activities. The costs of providing
additional services may increase the amount of sales necessary to achieve
specific operational periods from those presented in the financial analysis.
Likewise, the analysis does not include any grant funds or donations. The
income from these sources would decrease the amount of sales necessary to
achieve a specific operational period presented in the financial analysis.

Breakeven
Attaining the breakeven point represents a milestone for a food hub.
Prior to this point, the food hub loses money on every unit sold. Achieving
breakeven in this analysis indicates a hub is a workable business and is able
to satisfy the needs of its customers. It can begin to look toward future
financial stability.
While attaining the breakeven stage is necessary for a food hub to
achieve long-term sustainability, it is by no means an endpoint. Remaining
too long at this point presents serious risks to the hub because sufficient
profits are not being generated to cover items such as interest expenses,
depreciation, and taxes. Nor will there be a return from operations to the
owners. The food hub at this stage is still under tremendous risk from
unforeseen circumstances, such as equipment or other infrastructure failure.

Growth
Achieving the growth level means that not only are operational costs

10 RUNNING A FOOD HUB

being covered, but the entity is generating enough income to reach cash-
flow neutrality and to cover any additional expenses over the course of the
year (on a cash-flow basis). There is still a need for outside cash to cover
seasonal shortfalls, but, on an annual basis, the food hub would reach a level
of income generated that is sufficient to cover all expected needs. During
the growth operational period, the food hub is covering its fixed and variable
costs and is producing a profit on a net income basis. However, the focus
now shifts to covering the hub’s cash flow needs. The food hub shows a
positive net income for the first time at this point.
The growth operational period represents a tipping point. Next to the
startup period, the growth period is often the most dangerous crossroads for
the food hub. If the hub is not managed properly from a financial point of
view, it can easily slide back and progress can be reversed. If the hub is able
to continue its success, it can move to a viable level of operations that allows
it to begin expansion for future activities rather than merely sustaining its
current level of operations.

Viability
This level represents the hub’s ability to be sustainable in the long term,
where the organization is making enough net income to fund possible
expansion or additional operations. The food hub is a mature business that is
able to set aside reserves for unexpected problems and is better equipped to
weather bumps in the road. For our financial models, viability is defined as
the point at which the food hub retains about 5.5 percent of sales revenue as
operating profits over a year.
When the food hub becomes viable, no outside cash is needed to
maintain adequate cash reserves at any point during the year. At this level,
the hub is able to generate sufficient cash through operations to fund
expenses and normal equipment replacement, as well as generate reserves
for future activities.
If the food hub is a for-profit entity, it may consider beginning to provide
a return to investors or owners; if it is a nonprofit entity, it may begin to
expand its involvement in community activities or be able to internally fund
activities that have previously relied on outside funding sources, such as
grants or community funds.
Even at this level of sales, the food hub should continue to look toward
the future, as this represents only the cusp of long-term viability. The sales
level needed to reach viability may need to be higher to cover some non-
revenue-generating, mission-based activities of the food hub.

RUNNING A FOOD HUB 11

 Operational Models:
Wholesale Food Hubs

T his analysis outlines the scope and daily operations

of a prototypical wholesale food hub. The goal of this
section is to present an analysis that is as adaptable to
as many similar ventures as possible. Every attempt was
made to be realistic while still permitting ease in inter-
pretation and application. A more in-depth discussion of
the numerous factors for operating a food hub has been
included in volume 2 of this series, the Food Hub Opera-
tions Guide.2
This section begins by estimating annual sales by
business operational period based on the financial
modeling; it then continues by “unpacking” the model
assumptions or factors that result in the sales needed
to reach the breakeven, growth, and viability stages of
business development.

2
The food hub operations guide can be downloaded at http://www.rd.usda.gov/
publications/publications-cooperatives

12 RUNNING A FOOD HUB

Annual Sales by Business Operational Periods
To reach a breakeven level of operation, the typical wholesale food hub
would be required to generate an annual sales level of around $1.2 million.
During the time between breakeven and the food hub beginning to enter an
earnings level that leads to long-term financial viability, the venture would
need to generate around $1.75 million in sales in a year.
With about $2.4 million in annual sales, the food hub would begin
to earn sufficient revenue to provide longer term viability. Even at this
sales level, an unexpected expense could detrimentally affect growth and
operations. The food hub should strive to grow sales beyond this point to
reap profits that may be needed to cover unexpected costs.

Figure 1—Annual Sales Levels by Operational Periods

$3,000,000

$2,500,000

$2,400,000

$2,000,000

$1,750,000

$1,500,000

$1,000,000 $1,210,000

$500,000

$0
Breakeven Growth Viability

RUNNING A FOOD HUB 13

Model Assumptions
Product Lines
Product lines for wholesale hubs vary widely, often including a broad
mix of produce, meats, dairy foods, shelf-stable foods, and other items. The
typical wholesale food hub has three sales channels: a produce line, a dairy
line and an “other” line. This other line includes items such as meats, eggs,
jellies, and other shelf-stable items not categorized as produce or dairy.
Table 1 outlines sales distribution, by percent
of sales, included in the financial analysis.
A wholesale hub will assist farmers in crop Table 1
Sales Distribution
planning activities, which aids in expanding
the production season of produce and Fresh Produce 70%
helps ensure a consistent supply of produce Dairy Products 10%
throughout the growing season. Dairy Other 20%
and “other” product lines are typically less
impacted by seasonality than are produce
items, the latter being mainly available during the summer.
Fresh produce is the largest income generator for the food hub, but sales
of dairy foods and other products allow for a steady source of year-round
income, which is especially important during the slower winter months.
Additionally, products falling under dairy and other groups can be sold at
a higher markup percentage, generating more profit per pound of product
sold than does produce. Figure 2 outlines the annual seasonality for each of
the three product lines.

n Fresh Produce
Figure 2—Sales Seasonality n Dairy Products
n Other
16%
14%
12%
Percentage of Sales

10%
8%
6%
4%
2%
0%
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

14 RUNNING A FOOD HUB

 Though the hub strives to maintain a minimal amount of inventory at
any one time, loss of products during transport, storage, and delivery is
unavoidable. As a result, the hub will experience increased product losses
for both of these categories during the fall and winter months, as well as a
decline during the spring and summer.

Product Pricing
To account for the variety of products sold through the food hub, as well
as the price variation exhibited with product lines (lettuce versus spinach
versus cucumbers), a weighted average value for a 25-pound box of product
was determined for each product line. These products were combined to
provide an overall average for the value of the food box. This value increases
over the life of the project as demand grows and as a larger amount of higher
valued products — such as meats and shelf-stable items — are sold through
the food hub. On average, the price of the products sold through the food
hub will increase by around 7 percent per year.
A wholesale food hub should expect to work with buyers who wish to
purchase items on an account and pay a monthly invoice or statement.
The food hub should also accept credit card payments, which smaller
establishments, such as restaurants or local grocery stores, are likely to
prefer, rather than paying by cash or check. For each credit card sale, it
is assumed that the food hub will incur a 2-percent fee. While food hubs
dealing with smaller clients may encounter more credit card sales, we
dedicated about 10 percent of purchases to be made via credit card in the
financial analysis.
Once a customer has purchased items, the food hub should expect an
average lag of 23 days (typical range is 15-30 days) to receive payment. A
5.5-percent interest rate has also been applied to this accounts receivable
timeline to capture the carrying costs a food hub will experience. This
interest expense arises from a hub using short-term loans or a credit card
to cover production costs — including labor and packaging — until the
business is able to collect sales revenue.

Payment to Producers
Farmers and producers will require that payments they receive from the
food hub cover the cost of producing the items as well as generate a profit.
The wholesale hub will provide a 70/30 split, with 70 percent of sales dollars
collected from customers being returned to farmers and 30 percent being
retained by the food hub. These funds cover the costs of operating the
business.

RUNNING A FOOD HUB 15

 Figure 3—Sales Needed To Reach Breakeven

$3,500,000

$3,000,000

140%
$2,500,000 Increase

$2,901,000
$2,000,000

$1,500,000 42%
Increase

$1,000,000
$1,210,000
(23%)
$500,000 Decrease

$0
65% Baseline: 70% 75% 80%

There can be a slight variation from this 70/30 split. But based on the
scenario results presented in the chart above, for a food hub to retain 25
percent of sales revenue to cover operations, it would need to obtain about
$1.75 million in sales to achieve similar earnings before interest, taxes,
depreciation, and amortization (EBITDA) to reach the breakeven operations
level. To increase return to farmers only by 10 percent and continue to be
financially viable, the hub would have to more than double sales. In this
model, when the return to farmers increased to above 85 percent, the food
hub could not maintain enough residual revenue to cover costs and remain
in operation.
Correspondingly, reducing the price paid to producers would reduce the
sales necessary to achieve breakeven, but that may not be in line with the
food hub’s mission or be acceptable to the food hub’s producers.

Certification Fees
The wholesale hub discussed in this document will undergo a Good
Handling Practices (GHP) audit, while the farmers themselves will be
required to obtain and maintain Good Agricultural Practices (GAP)

16 RUNNING A FOOD HUB

certification. These requirements will provide access to customers
who prefer, or require, these certifications. Larger customers, such as
hospitals and school systems, also often require food safety and production
certifications prior to their initial purchases. Additionally, regulatory bodies
may require a food hub and its producers to receive certain certifications
before they are allowed to sell food items to the public. A portion of the
food hub’s sales will be used to pay for these necessary certifications.

Location
The food hub’s location is chosen to facilitate the transportation of
goods, both from producers to the hub, as well as from the hub to end
customers. The expenses related to transportation — such as the cost of
diesel fuel, driver wages, and the monthly lease or interest loan payments on
vehicles — results in a major cost category for the food hub.
For the purposes of this analysis, the food hub is situated in a semi-urban
area. This setting allows the hub to be centrally located between the hub’s
farmers and customers. If the hub is located in a rural area, some costs may
be reduced, such as lease rates and employee wages.
Using an average cost of leasing space in various semi-urban areas around
the country, we calculate an annual lease expense of around $22,000 for
a 6,500-square-foot facility. While this space seems to be large initially,
it provides the food hub with space for growth as business and inventory
increases.
The wholesale hub will operate with the least amount of “on-hand”
inventory possible by turning around products within 2 days of receiving
them from producers. Because there will not be large amounts of inventory
on hand, the food hub will not require an extensive storage area.

Facility Operations and Delivery

The food hub facility will operate 6 days per week and conduct deliveries
3 days per week. This allows a day of prep time between deliveries, while
still frequent enough that customers receive sufficient product in a timely
manner. While the number of delivery days included in the analysis remains
constant at 3 days per week, the number of stops per delivery will increase
over time.
Producers are required to drop off their product appropriately packaged
and ready for sale. Prior to being sent out for delivery, products are
grouped to fulfill orders. A 5-cent packaging cost for every $25 of product is
included, covering the cost of boxes and for general handling and storage.
All 3 years of operations in the analysis also assume an expense for

RUNNING A FOOD HUB 17

forklift rental of about $800 per month. Leasing the forklift allows the food
hub to mitigate some risks for a more specialized piece of equipment and
covers the more specialized maintenance and upkeep that may be required.
The financial models assume that delivery trucks were purchased and in
operation at the start of the breakeven period; there is not a significant
difference between leasing and purchasing in the average costs over the
lifetimes of the vehicles.

Truck Costs
We assume that the food hub will be replacing vehicles during the
breakeven period of operation. The model food hub for this study will
purchase a used 20-foot refrigerated truck for about $45,000 and a used
supplementary delivery truck for $40,000. This assumes that increased
sales will provide the funds to qualify for loans. The second truck, slightly
smaller than the first, allows the food hub to have a second vehicle on hand
during times of peak sales and to serve as a backup if the primary truck has
mechanical issues. The financing section of this document includes details
on the loan acquired to purchase these vehicles.
The hub has an established customer base at this point. Since
dependability is key to retaining customers, vehicles must be properly
maintained. An annual repair and maintenance contingency allotment of
$2,500 has been budgeted. During the life of the food hub, maintenance cost
will increase as higher sales levels and product volume will place additional
strain on the equipment.
An additional overhead charge of about 30 cents per mile driven is
included in the economic analysis to cover additional expenses — such as
insurance and wear — associated with owning a vehicle. Because of the
nearby urban setting and assumed population density, it is not anticipated
that mileage will significantly increase to accommodate additional stops
as the hub seeks to “in-fill” its delivery routes, rather than increasing the
geographic delivery area. During the peak sales season, the average miles
traveled per truck is 80 miles round trip, increasing to 100 miles during the
growth period and 120 miles by the end of the viability period.

Fuel Costs
Based on the average price of diesel fuel during the winter of 2014, the
food hub will pay about $3.30 per gallon. If the trucks average 10 miles per
gallon, the hub will spend between $300 and $700 monthly on fuel. The
variation in fuel prices accounts for lower sales months when the food hub
will not require the use of both trucks and will be driving slightly fewer
miles.

18 RUNNING A FOOD HUB

 Fuel is an extremely volatile cost category, as indicated by the 60-cent-
per-gallon decline in diesel cost from the spring to winter of 2014. If the
food hub were to pay the higher spring price, total fuel costs would grow to
$8,000 in the first year, compared to $6,800 if the cost of fuel remained at
$3.30 per gallon. The food hub should have a contingency plan in place to
counteract unexpected changes in fuel prices.

Driver and Delivery Costs

Deliveries are conducted by drivers employed by the food hub who
unload and deliver the products to individual customers along established
routes. Hours often have to be limited during portions of the year when
sales and deliveries are lower, and the wholesale hub limits driver hours to
part-time during these periods. The number of hours required to deliver the
food hub’s products will increase and necessitate a second driver during peak
seasons. The driver positions are hourly and are paid $13.50 per hour during
the first year, with small pay increases each following year.
During the breakeven period, the food hub will employ one driver during
the first and last 2 months of the year. For the remaining 8 months, two
dedicated drivers will be required for deliveries. In total, the food hub will
spend about $22,000 on driver wages during this period. Beginning in the
growth period, the hub will employ two year-around drivers at a cost of
about $28,000, increasing to $38,000 during the viability period.
While product delivery is constrained by the capacity and load
capabilities of the delivery vehicles, the analysis shows that the main
constraint for deliveries is the time available for drivers to deliver product,
assuming they work an 8-hour shift. The following table shows the time
requirements for transporting
product from the food hub to the
Table 2 customer.
Transportation Time Requirements Total truck capacity is assumed to
Load Time (Hours) 0.67
be about 22,500 lbs. A single driver
Drive time (Hours) 2.29 delivering to smaller wholesale
Delivery Admin. (Hours) 0.50 customers would likely not be able
General Admin./Driver (Hours) 1.00 to deliver this amount of product
in one day. This is an understood
inefficiency in operating a medium-
scale food hub. By contrast, a larger commercial-size venture can better
maximize truck capacity for bulk deliveries.
Consider the example of a driver who unloads 450 lbs. (about 18 boxes
of product at 25 lbs. each) per stop and makes 3 stops in 1 hour. This
would result in an average delivery amount of 675 lbs. per half hour. After

RUNNING A FOOD HUB 19

deducting time spent driving a roundtrip of 80 miles at an average speed
of 35 mph (2.29 hours) and taking care of miscellaneous activities such as
paperwork (.5 hours), the driver only has about 5.21 hours left of actual
delivery time (during an 8-hour shift).
Actual delivery time of 5.21 hours, multiplied by the 3 deliveries per
hour, allows for about 15 deliveries of 450 lbs. each, resulting in a total
of 6,750 lbs. per day delivered by 1 driver in an 8-hour shift. For our
calculations, this was rounded to an average of 7,000 lbs. An additional cost
per delivery equal to one-half hour of pay per delivery day has been added
to account for time spent in administration (such as for paperwork and
customer interaction) during the deliveries.
While some inefficiency is to be expected, changes in efficiency can
directly impact a food hub’s profits, because transportation costs can account
for a significant portion of an entity’s expenses. Decreasing the efficiency
of delivery stops by reducing the number of pounds of product delivered
per half hour by just 20 percent (equal to 540 lbs. per half hour) can require
additional sales of more than $16,000 at the breakeven point, more than
$22,000 for the growth level, and more than $29,000 in the viability level to
reach similar EBITDA and net income figures.3

Labor Requirements
The wholesale hub approaches its labor requirements from a more
functional view, as opposed to dedicated employees’ positions. This analysis
considers that individual hub employees often fulfill multiple roles. While
an individual may earn a specific wage while fulfilling the responsibilities
of multiple positions, such as a general manager or sales manager, the same
individual may also aid in other activities.
The “full-time equivalent” (FTE) chart in the following table provides a
comparison point when assessing the role-based labor approach; it translates
staff-hours required to fulfill each role into a number of FTEs. To calculate
the FTE, it is assumed full-time employees work 40 hours per week.
For example, in the table below, the general manager will become a
full time employee during the viability operation level, when the food hub
requires a full-time employee to adequately fulfill this role. Across all labor
positions in the first year, the food hub will require staff-hours equivalent to
three and two-thirds full-time employees. By the end of the viability period,
this figure will increase to around six and a quarter full-time employees.
The general, sales and production managers are salaried positions.

3
A detailed table outlining transportation costs can be found in the appendix.

20 RUNNING A FOOD HUB

 Table 3
Hourly Labor Calculations

Full-time Equivalent (FT E) Calculator

Growth Gen. Sales Prod. General Line Book- Total

Phases Mgr. Mgr. Mgr. Driver Labor Super. keeper FTE

Breakeven 0.65 0.40 0.50 0.68 0.48 0.79 0.17 3.67

Growth 0.85 0.50 0.65 0.91 0.51 0.77 0.36 4.55
Viability 1.00 1.00 0.85 1.19 0.83 0.80 0.61 6.27

The remaining four labor categories are hourly. Office and administrative
labor is considered fixed and does not vary directly with sales, while driver,
general labor, and line supervisor hours are directly determined by sales
levels.
Salaried labor will transition over the 3-year period from part-time to
full-time jobs. This is a result of the role-based approach. In years when
management positions are considered part time, these individuals will
likely be fulfilling other roles, such as delivering or receiving packaging.
The following table shows the annual costs for hourly and salaried labor,
including the overhead expense for salaried labor.
For the purposes of the analysis, staff is paid on the last day of the month,
and fringe benefits and overhead is directly calculated as 30 percent. Fringe
and overhead on salaried
employees is included
Table 4 as part of the fixed sales
Annual Wholesale Labor Costs
and marketing expenses
Breakeven Growth Viability reported in the expense
Hourly $60,765 $76,952 $106,324 and revenue portion
Salary $98,475 $127,075 $180,700 of the model. Figures
for various positions
were chosen based on
information taken from
Bureau of Labor Statistics average wage figures, then adjusted when specific
positions/roles were not available. Actual food hub wage and salary rates will
vary based on a variety of factors.
The hub employs a general manager who is responsible for organizing,
overseeing, and directing all food hub operations, as well as coordinating the
supply of products for orders that have been placed. He or she also addresses
customer service issues and, in some cases, assists in delivering product
during the slow months of operation. This role reaches a full-time basis

RUNNING A FOOD HUB 21

 Table 5
Salaried Labor Costs

Salaried Labor

General Manager Salary $55,000

% Involvement Breakeven 65% $35,750
% Involvement Growth 85% $46,750
% Involvement Viability 100% $55,000

Sales Manager Salary $50,000

% Involvement Breakeven 40% $20,000
% Involvement Growth 50% $25,000
% Involvement Viability 100% $50,000

Production Manager Salary $40,000

% Involvement Breakeven 50% $20,000
% Involvement Growth 65% $26,000
% Involvement Viability 85% $34,000

during the viability period.

The hub also employs a sales manager to oversee the acquisition of new
customer accounts and related activities in order to grow the sales of the
food hub. A production manager coordinates farmers with each other and
the food hub to maximize their ability to meet the demand of customers and
to prevent the oversupply of products during the peak growing season and
to minimize waste during slower periods. This role is critical for interacting
with producers and establishing solid, trusting relationships.
General laborers will conduct daily activities, including product
reception, storage, packaging, and handling. They also assist the delivery
driver by loading the truck on designated days. A warehouse manager is
needed full-time, year-round, to oversee the daily warehouse operations.
This is a more senior role than the general labor positions and is responsible
for overseeing other laborers without the direct oversight of management.
Finally, a part-time office worker assists with any administrative and
accounting duties not handled by an outside accounting firm.
Salary and wage rates vary, based on the location of the food hub, the
local labor market, and labor costs. They are another major factor affecting
the food hub’s profitability. For example, a driver position (Standard
Occupational Code (SOC) 53-3031) has a national mean wage of $13.33 per
hour, while the same position in California has a mean wage of $15.27 per
hour. While overtime has not been used in the analysis, the food hub will

22 RUNNING A FOOD HUB

likely have to address this issue at some point in its growth and expansion.
Hourly paid personnel will receive overtime equivalent to time and a half for
any pay period in which their work hours exceed 40 hours per week.
If the food hub is faced with higher labor costs, it will require substantial
additional sales to cover these costs. The following chart shows how adding
$40,000 in annual labor costs can affect the sales levels required for the
wholesale hub to achieve breakeven. It would require more than $180,000 in
sales to cover this cost. Doubling this annual labor figure to $80,000 would
require an additional $370,000 in sales to cover the extra costs. Adding
$120,000 of increased labor costs requires acquiring more than $560,000 in
additional sales to reach breakeven.4

Figure 4—Sales Required for Breakeven Additional Labor

$1,800,000
$1,773,508
$1,600,000

$1,580,748
$1,400,000
$1,392,347
$1,200,000

$1,000,000 $1,210,000
Sales ($)

$800,000

$600,000

$400,000

$200,000

$0
Baseline $40,000 $80,000 $120,000

4
A detailed table outlining labor costs can be found in the appendix.

RUNNING A FOOD HUB 23

General Expenses
The following section outlines some of the other general expenses that a
food hub of this size and sales strategy may incur in the course of operation.
For simplicity in reporting, some expense categories have been grouped
together.
Food hubs need a promotional campaign to create awareness. But many
wholesale food hubs do not use traditional promotion and marketing
campaigns. Instead, they focus on lower cost efforts — such as word-of-
mouth or social media — to build customer awareness. About $5,000 is
needed annually to cover this cost.
The analysis includes a fixed expense of $250 per month for business
insurance. Insurance premiums for the food hub were based on costs paid
by a food hub of similar size and scope to the typical food hub. The policy
includes occurrences, general aggregate, product liability, and combined
single-limit auto insurance coverage.
The reporting of non-cash expenses can vary; the analysis incorporates
some information regarding taxes but does not outline specifics, such as the
Federal income tax liabilities.

• Business Personal Property Tax is assumed to be expensed at a rate

of 55 cents per $100 valuation. This tax rate applies to real estate and
personal property.

• Due to variations in tax handling strategies, income taxes are not dealt
with in the analysis. Tax strategy may be quite important as the food
hub approaches viability.

Depreciation expenses are accounted for using the straight-line method.

The food hub will take out a $150,000 loan during its initial startup year for
operating equipment with a collective salvage value of $15,000 and a useful
life of 15 years. A second loan of $55,000 will be taken during the third
year of this analysis to fund the purchase of additional equipment with a
collective salvage value of $5,500 and a useful life of 7 years.
The following cost categories are included to represent the remaining
general costs that most businesses will incur over the course of operation.
This category includes allocation for items such as office supplies, software
maintenance, phones and other telecommunications equipment, legal and
accounting fees, certification fees for Good Handling practices (GHP) or
other annual food safety certifications, as well as for unforeseen and bad debt
expenses. See the appendix for more details.

24 RUNNING A FOOD HUB

Equity and Financing
The financial analysis includes a $150,000 carryover loan from the start
of business operations used to purchase equipment. The terms of this loan
are for 10 years at an interest rate of 6.5 percent, which is a “loaded rate”
that includes interest and fees charged by the lender. Examples of equipment
are tables, pallet jacks, cooling systems, fire extinguishers and other safety
equipment, as well as office and breakroom items. The hub continues to
make principal and interest payments on this loan over the course of all
three operational periods.
Additional equipment, such as two refrigerated trucks, will be purchased
at the start of the breakeven phase. Equipment needs vary depending on
the type of product handled, customer and producer requirements, and
services offered by the hub. A term loan for $75,000, of which 75 percent
(or $56,000), will be financed, will be carried over 6 years at a 7-percent
financing rate.
In addition to the equipment loan, the food hub will also take out and
repay three short-term loans to assist in covering expenses and to provide
adequate cash reserves during the first breakeven and growth periods.
During the viability phase, sales have grown to a point where the business
no longer requires outside funding to supplement the cash generated by the
food hub itself. The following are the details of these loans; all three loans
are assumed to be for 1 year at 7-percent interest.

• A line of credit for $89,000 obtained in January of the breakeven phase.

• A second short-term loan of $15,000 in October of the breakeven phase.
• A final $80,000 line of credit in January of the growth phase.

In addition to lines of credit,

the food hub will require about
$100,000 in owner equity to
cover cash flows and allow for
adequate amounts of cash on
hand. It is assumed that equity
will be provided by the owners,
although it could originate
from various sources, including
grants or third-party capital
investments.

Photo courtesy of
Fifth Season Cooperative

RUNNING A FOOD HUB 25

 Wholesale Food Hubs
RESULTS

n  Sales of $1.21 million result in the food hub’s ability to reach a

breakeven level, meaning that it can cover all its variable and fixed
expenses, including management salaries. However, at this level the
food hub does not have residual money to produce a profit. Once
depreciation and interest have been subtracted from EBITDA, the
food hub will experiences net losses.

n A
 t the growth level – based here on annual sales of $1.75 million —
the venture is able to produce an operational profit of around $67,000,
or 3.8 percent of annual sales.

Figure 5—Annual Sales by Operational Period

n Annual Sales
n Operational Profit
$2,500,000

$2,000,000 $2,400,000

$1,750,000
$1,500,000

$1,000,000 $1,210,000

$500,000
$429 $67,220 $132,604

$0
Breakeven Growth Viabilty

n T
 he food hub reaches a sales level that would indicate long-term
economic viability, with annual sales of about $2.4 million. This point
of viability is based on about 5.5 percent of sales being retained as
profits.

26 RUNNING A FOOD HUB

A s a reminder , the figures for each operational period represent revenue
and corresponding costs for a typical food hub at a particular point in time,
not for consecutive years of operation. Food hubs in specific regions of the
United States will experience variations in costs that are unique to their
location. In addition, operations and the types of product costs will also vary,
based on a food hub’s product line.
The analysis shows that the main costs influencing profitability are food
costs, labor, and transportation expenses. These expenses are highly variable,
depending on the food hub’s location and levels of service. A portion of
these costs may be mitigated through careful planning of transportation
logistics and by optimizing labor efficiency.

Table 6
Wholesale Food Hub pro forma

Breakeven Growth Viability

Revenue $1,210,000 $1,750,000 $2,400,000

Total Variable Operating Costs ($950,252) ($1,351,977) ($1,857,308)
Variable Margin (Loss) $259,748 $398,023 $542,692

Total Equipment Costs ($34,377) ($38,649) ($44,693)

Total Facilities Costs ($43,280) ($44,578) ($45,916)
Total Selling and Marketing Costs ($5,000) ($5,150) ($5,305)
General and Administrative Expenses ($128,263) ($172,425) ($218,175)
Unforeseen and Contingency Expenses ($48,400) ($70,000) ($96,000)
Wholesale Baseline Earnings EBITDA (Loss) $429 $67,220 $132,604

Interest Expense ($4,252) ($6,149) ($8,433)

Depreciation Expense ($9,000) ($9,000) ($16,071)
Net Income (Loss) ($12,823) $52,071 $108,099

The above pro forma shows the individual components that comprise
the summary figures, presented above. Greater detail can be found in the
“Expense and Revenue” table in the Supplemental Tables section of this
report.
The breakeven level only generates enough revenue to cover operational
costs. But because it is operating at a negative net income basis, a food hub
at this stage would need to continue to grow to maintain viability for any
period of time. On a cash-flow basis, the hub would require outside cash of
about $70,000 to maintain positive cash flows and adequate cash reserves.

RUNNING A FOOD HUB 27

 At the growth level of operation, a food hub is able to cover operational
as well as other costs — including depreciation and interest expenses —
and generates enough net income to provide a small return to owners.
Additionally, on a cash-flow basis, the food hub is reaching a breakeven level
of cash on hand by the end of this period. Outside cash of $50,000 is still
required for necessary cash reserves.
The viability level of operation is the minimum point at which a typical
food hub becomes a sustainable business. This includes generating enough
net income to make investments needed to grow the business and to provide
a significant return to the owners. Even at this stage, the food hub may well
require more funding, especially if higher costs are experienced than were
used for our analysis.

Photo courtesy of Red Tomato

28 RUNNING A FOOD HUB

Operational Models:
Direct-to-Consumer Food Hubs

T he direct - to - consumer hub model involves the

use of an intermediary service provider to connect farm-
ers with community members. The goal of this model
hub is to provide the most profit to the producer-farm-
ers while also generating enough income to remain in
business. As an operation with low overhead expenses,
the sales levels needed to achieve the various operational
levels are lower than those needed for wholesale food
hubs.
This section begins by estimating annual sales for
business operational periods, then “unpacks” the model
assumptions (or factors) that impact the sales levels
needed to reach the breakeven, growth, and viability
phases of the business.

RUNNING A FOOD HUB 29

 Annual Sales by Business Operational Periods
To reach a breakeven level, a typical direct-to-consumer food hub needs
to generate annual sales of around $314,000. In the time between breakeven
and long-term financial viability, the venture would need to generate around
$422,000 in annual sales.
With annual sales of about $566,000, the food hub would begin to earn
sufficient revenue to provide longer term viability. It should be noted that
even at this sales level, an unexpected expense could detrimentally affect the
business. The food hub should strive to grow beyond this point of annual
sales to achieve the higher profits that could be needed to cover unexpected
costs.

Figure 6—Annual Sales Levels by Operational Periods

$600,000

$566,604
$500,000

$400,000
$422,710

$300,000
$314,400

$200,000

$100,000

$0
Breakeven Growth Viability

30 RUNNING A FOOD HUB

Model Assumptions
Product Line
One primary factor that allows a direct-to-consumer food hub to operate
at a smaller volume level is that produce is the only “product line” carried.
Many small food hubs grow past the startup phase, but have not begun to
sell other product lines that require significant capital investment in items
such as coolers and delivery trucks.
For the direct-to-consumer hub used for our model, the produce growing
period falls into a median “seasonality range,” rather than the longer or
shorter growing seasons of some regions of the country.
As a result of this median growing season, sales will occur from March
through October, with the majority of sales taking place in June. A direct-
to-consumer hub will usually cease operations from November through
February, resuming sales in March. The exception to this is during the
viability phase, when growth in sales necessitates a longer season to pay
for additional products available outside of the typical spring and summer
seasons.

Location Table 7
Unlike the wholesale Direct-to-Consumer Warehouse Lease
model, the direct-to-
Expected Rent (per square foot) $2.20
consumer model hub Estimated Size of Warehouse (sq. feet) 1,000
needs a minimal amount Rent (per month) $183
of warehouse space. Rent (per year) $2,200
The facility used for our
analysis is a 1,000-square-
foot warehouse, located in a suburban area and leased for $2.20 per square
foot annually. The warehouse will simply serve as the central point where
produce is received and repacked into boxes for delivery to consumer pickup
points. The business employs a just-in-time method for inventory, so it will
only hold product long enough to aggregate and repack for delivery.

Operations
The direct-to-consumer hub operates by sourcing product from a group of
farmers who agree to provide a variety of produce during a certain period
of the year. Their shipments to the food hub are scheduled by the farm
coordinator, who assists with production planning and logistics.
The direct-to-consumer hub collects subscription orders from individuals
who pay an upfront fee to receive produce during a set period. Consumers

RUNNING A FOOD HUB 31

have the option of purchasing a full share for $420 in the spring, or $540
in the summer. The price of shares will grow in later years as the summer
season expands to include additional weeks. Individuals may also buy
smaller half shares, which contain less produce and may be more suitable for
individuals or smaller families. These half shares cost $210 for the spring
season and $270 for summer.
Securing an adequate number of subscriptions is, of course, vital. Because
customers pay an upfront fee, the hub needs to pay special attention to
managing this “up-front” revenue. It must ensure that the funds are not
exhausted before services are complete.
Over time and from season to season, the hub may find that it must
work harder to maintain a steady level of subscribing customers; previous
members may not renew. New subscribers may only replace those who
have dropped out, requiring even more effort to actually increase total
subscriptions.
This analysis assumes that 60 percent of subscribers will pay for
full shares, the other 40 percent for half shares. In rural areas, a higher
percentage of subscriptions will typically be for a full share, while half shares
may be more common in urban and suburban areas.
The balance of full versus half shares greatly affects the food hub’s
profitability. Reversing the percentages used above (so that 40 percent buy
full shares and 60 percent half shares) will reduce revenue by nearly $40,000
during the breakeven phase. This would require an additional 70 spring and
70 summer customers to generate
the same profits as are predicted the
original model. Table 8
Number of Shares Sold
For our projection, the food hub
maintains a healthy member base, Breakeven — Spring 370
selling slightly more summer shares Breakeven — Summer 440
each season than spring shares. The Growth — Spring 510
table below provides the numbers Growth — Summer 565
Viability — Spring 605
of subscribers assumed at each
Viability — Summer 685
operations period.
Pickup locations are operated
mostly by volunteer labor, with hub
employees handling some of the Table 9
Number of Pickup Locations
more heavily trafficked sites. The
food hub will partner with local Breakeven 10
organizations, such as churches and Growth 15
schools, to use their facilities for the Viability 25
pickup sites. These partners will be

32 RUNNING A FOOD HUB

compensated through donations from the food hub, which are calculated as
3 percent of sales.
Because the direct-to-consumer food hub relies on pickup locations to
distribute boxes of produce, establishing reliable, convenient locations is
critical. Fostering good-will within the community and forging a long-
term relationship with the pickup site hosts can help a food hub gain a solid
reputation in the community and contribute to the hub’s long-term success.
To progress to the growth period, sales need to increase, requiring a
corresponding increase in pickup locations. At this point, the hub will
likely begin to exhaust initial market advantages for its core customer base.
Greater creativity in attracting and retaining customers will be necessary
during this important period. The viability stage will require significantly
greater number of pickup locations, increasing to 25, and the number
of delivery days will increase to 4 times per week. The hub’s unique
circumstances and the size of the community served will determine if this
goal is achievable.

Labor Requirements
Similar to the wholesale food hub, the direct-to-consumer hub’s human
resource needs are based upon functional roles, with individual employees
often fulfilling multiple roles. Each employee is assigned tasks, but will also
likely aid in other activities.
Our direct-to-consumer food hub model incorporates the use of
volunteer labor as well as paid staff. Volunteers primarily help with general
(less skilled) labor and typically can help reduce labor costs. Because
volunteers can lack consistency and may not be available when needed, they
are not always a reliable source of help and can often lead to greater costs
in other areas of operation. A volunteer coordinator is generally required to
oversee these individuals and coordinate training activities and schedules.
Though this study primarily focuses on the cost factors, there are
multiple reasons a food hub may decide to use volunteer labor. These
may include finding individuals with a specific skill set that would not be
available for hire. Volunteer labor also gives the food hub a stronger tie to
community.
Finding a qualified general manager and farm coordinator is key to the
success of a food hub. The general manager oversees the overall operation,
while the farm coordinator deals with the producers. All non-driver
employees should be available to assist the part-time driver in making
deliveries, as needed.
A volunteer-driven workforce has obvious advantages in terms of
cost savings, but it may create disadvantages, especially in the area of

RUNNING A FOOD HUB 33

organizational challenges. These issues may become more apparent during
the growth stage as the scale of operations increases. Without community
support and proper management of volunteers, a food hub will struggle to
succeed.
With enough reliable volunteers, a direct-to-consumer hub can rely on

Table 10
Direct-to-Consumer Full-time Employees

FT E Calculator

Gen. Farm Prod. Retail General Drive Total

Year Mgr. Cord. Mgr. Labor Labor Labor FTE

Breakeven 0.40 0.00 0.25 0.19 0.10 0.10 1.04

Growth 0.50 0.15 0.30 0.19 0.21 0.16 1.52
Viability 0.60 0.20 0.40 0.20 0.21 0.20 1.81

part-time, as opposed to full-time, paid staff. The table above presents the
FTEs required for the various operational levels. The general manager will
come closest to a full-time job, reaching 60 percent of full-time work during
the business viability phase.
Because the direct-to-consumer food hub is a substantially smaller
business, compared to the wholesale model, the amount of FTEs for the
former will be lower. At viability, the direct-to-consumer hub will need the
equivalent of 1.81 full-time equivalent workers. This results in each FTE
earning around $33,000 annually.
The managers and volunteer coordinator are salaried positions, all others
are hourly. Driver, general labor, pick-up point labor, and volunteer labor
hours are all directly based upon sales levels. The pick-up point laborers are
employees of the hub, while volunteers are unpaid community members
who want to aid the food hub.
Volunteer labor is especially helpful in reducing labor costs during the
startup period. Volunteer programs can help food hubs gain community
involvement and be a source for permanent staff. However, volunteer
laborers can be less reliable than paid staff. There are indirect costs in
using volunteers that should not be overlooked. As the food hub grows, the
availability of volunteer labor becomes less important to overall profitability.
The following table shows the annual costs for hourly and salaried labor,
including the overhead expense for salaried labor. Drivers working for our
model food hub will use their personal vehicles to move product; they will
be compensated at the standard mileage rates, as set by the U.S. Internal

34 RUNNING A FOOD HUB

Revenue Service. The number of miles driven will increase over time as
the food hub adds new pick-up locations. The number of delivery days also
increases from 2 days in the breakeven period to 4 days during the viability
phase.

General Expenses
Our direct-to-consumer hub model will operate on as lean a basis as
possible, meaning that many of the costs included in the wholesale food
hub model have been reduced or eliminated. For example, this hub will
require substantially less sales to reach the three profit phases of business
development. The promotional budget has thus been reduced to $4,000 per
year, versus $5,000 for the wholesale hub model.
The direct-to-consumer food hub strives to provide returns to farmers,
allowing them to receive dividend income or patronage (in the case of a co-
op) above wholesale prices for their crops. For each full share sold, which is
produced over about an 18-week time span, the hub pays the farmer $360.
A half share is purchased from the farmer for $180, or half the cost of a full
share, and the farmer provides product for 14 weeks. Each year, the business
spends around 67 percent of its sales revenue to purchase produce from
farmers, making this the hub’s single largest expense.

Photo courtesy of Common Market Philadelphia

 Direct-to-Consumer Food Hub
RESULTS
n I n order to reach the breakeven stage — when the food hub is able
to cover its variable and fixed expenses — the hub must generate
about $314,000 from sales. Even then, it will report a net loss (as will
the wholesale hub).

n I n the growth phase, the hub’s sales grow to about $423,000, yielding
an operational profit of just under $7,800, or around 1.8 percent of
sales. The food hub also produces a small net income of $2,900. At
this point, the business reaches cash-flow neutrality.
n W
 hen the venture is able to reach viability, it is generating more
than $566,000 per year in sales and producing an operational profit
(EBITDA) of more than $24,000, or 4.4 percent of sales. The venture
also generates a positive net income of nearly $19,000.

Figure 7—Direct-to-Consumer Sales Levels and Operational Profit

n Annual Sales
n Operational Profit
$600,000
$566,604
$500,000

$400,000 $422,710

$300,000 $314,400

$200,000

$100,000
$627 $7,780 $24,742
$0
Breakeven Growth Viabilty

36 RUNNING A FOOD HUB

 O ur direct - to - consumer model hub will not require farmers
to become members in order to sell to the venture, which reduces the
amount of equity flowing to the business. However, because this is a low-
cost business for which funds are obtained at the beginning of the season,
additional equity from outside sources is not required to maintain positive
cash flows. Business growth in the growth and viability phases provides
enough cash to maintain adequate reserves without the use of additional
equity.
This business has substantially smaller sales than does the wholesale hub
model examined earlier. Thus, less sales revenue is required to achieve the
breakeven, growth, and viability business stages. The hub is able to cover
operational costs during the breakeven phase with annual sales of $314,000,
about $896,000 less than required for the wholesale hub to reach the same
point.
To generate about $8,000 of operational profit during the growth phase,
the food hub would need annual sales of about $423,000. At the viability
stage, the business is generating a profit of more than $24,000, equivalent to
4.4 percent of sales of $566,000. At the viability stage, sales are about $1.8
million less than for the wholesale hub model.

Table 12
Direct-to-Consumer pro forma

Breakeven Growth Viability

Revenue $314,400 $422,710 $566,604

Total Variable Operating Costs ($255,524) ($341,005) ($451,705)
Variable Margin (Loss) $58,876 $81,705 $114,899
Total Equipment Costs ($6,957) ($9,902) ($14,033)
Total Facilities Costs ($12,420) ($12,793) ($13,176)
Total Selling and Marketing Costs ($4,000) ($4,120) ($4,244)
General and Administrative Expenses ($28,585) ($38,656) ($47,372)
Unforeseen and Contingency Expenses ($6,288) ($8,454) ($11,332)
EBITDA* (Loss) $627 $7,780 $24,742
Interest Expense ($1,707) ($2,296) ($3,077)
Depreciation Expense ($2,549) ($2,549) ($2,549)
Net Income (Loss) ($3,630) $2,935 $19,116

* Earnings before interest, taxes,

depreciation, and amortization

RUNNING A FOOD HUB 37

 Operational Models Comparisons
T able 13 summarizes the major differences between the whole-
sale and direct-to-consumer food hub models.
This analysis shows that the wholesale food hub provides the
most return — as a percent of sales dollars — to farmers. But the
wholesale operation also requires the highest sales levels to reach
the breakeven or long-term viability stages. It also requires the most
resources to achieve these sales levels, including the need to lease a
larger warehouse and procure two delivery trucks.
While the direct-to-consumer model provides lower returns to
farmers than does the wholesale model, it also requires lower annual
sales to attain long-term viability and does not require owner equity
during the breakeven stage to prevent negative cash flows. The use
of volunteer labor helps offset the lower sales.

Table 13
Operational Model Summary Comparison

Wholesale Direct-to-Consumer

Products Produce, Dairy & Other Produce

Facility (Ft. )
2
6,500 1,000
Delivery Vehicles Pruchase Two Trucks Personal Vehicles
with Mileage
Reimbursement
Staff Levels at Viability (FTE*) 6.3 1.8
Breakeven Sales $1.21 Million $314,000
Viability Sales $2.4 Million $567,000
*Fulltime Equivalent

As the single largest expense for both hub operational models,

payments to producers will have the greatest impact on whether
a food hub can progress through the operational phases used in
this analysis. Figure 7 compares the product-cost variable to other
typical expenses.

38 RUNNING A FOOD HUB

 Figure 8—Typical Food Hub Expenses Comparison

Payments to Producers
76%

A LL O T H E R P A Y M E N T S
All Other
Payments
24%

General and
Administrative
37.4%

Operational Models at “Breakeven”

Increasing sales to achieve the
breakeven business stage will often
require an accompanying increase Other
in equipment, human resources, Variable
Costs
or other resources. While some 30.4%
food hubs may be able to bear
the cost of addressing these needs
simultaneously, acquiring these Unforseen
resources will create a cash-flow or and
Bad Debt
financing constraint for other hubs, 16.3%
which will instead have to prioritize
the needs.
While an increase in subscribers Infrastructure
Costs
is necessary for the direct-to- 14.9%
consumer hub to achieve breakeven,
far less revenue will be needed
Marketing Costs
than for the wholesale hub. The 1.2%
wholesale hub requires a substantial
amount of additional staff hours
compared to the smaller direct-to-
consumer hub.

RUNNING A FOOD HUB 39

 Table 14
Breakeven Operational Period Pro Forma Comparison

Wholesale Direct-to-Consumer

Revenues $1,210,000 $314,400

Total Variable Operating Costs ($950,252) ($255,524)
Variable Margin (Loss) $259,748 $58,876
Total Equipment Costs ($34,377) ($6,957)
Total Facilities Costs ($43,280) ($12,420)
Total Selling and Marketing Costs ($5,000) ($4,000)
General and Administrative Expenses ($128,263) ($28,585)
Unforeseen and Contingency Expenses ($48,400) ($6,288)
Baseline EBITDA* (Loss) $429 $627
Interest Expense ($4,252) ($1,707)
Depreciation Expense ($9,000) ($2,549)
Net Income (Loss) ($12,823) ($3,630)

*Earnings before interest, taxes, depreciation, and amortization

Operational Models at “Growth”

At this stage, the food hub will likely be faced with “trade-off” issues.
Many will need to increase personnel. But because of sales and production
seasonality, it is difficult to decide whether to retain employees year-round
or continue with seasonal or part-time help.
Because they have achieved significant sales at this point, the hubs will
need to formalize operational procedures and processes. Activities that
were improvised during startup and breakeven, or cost-cutting measures
in areas such as marketing and branding, will need to be re-examined and
more strategic plans implemented. Supply or sales arrangements that were
previously conducted “on a handshake” basis will need to transition to legal
contracts.
The increase in sales and need for reliability and consistency at this stage
will likely require additional investment for technology or training for the
hub’s employees or producers. At this point, the hub will also likely need
to institute business systems and fix some operational concerns that were
improvised during startup or breakeven. Such steps will be necessary to
progress to the business viability phase.
Because of the need to diversify and attract new customers, wholesale
food hubs are attracted to the higher gross margins of direct-to-consumer
sales. These hubs then begin to engage in activities that move them closer
to a hybrid operational model. In general, hybrid food hubs incorporate

40 RUNNING A FOOD HUB

some of the characteristics of both wholesale and direct-to-consumer hubs.
Direct-to-consumer operations often achieve a scale and capability that
makes them attractive to wholesale customers, and they too may evolve into
a hybrid hub operation.
A direct-to-consumer food hub usually serves a smaller area or region,
so it does not necessarily require the use of large trucks nor (if only selling
produce) a refrigerated truck; a wholesale hub likely would need such
equipment.
Though this financial analysis does not consider income from grants
and donations, hubs that have previously benefited from donations or
other outside funding may begin to experience “donor fatigue.” The hub
will appear to be of sufficient size and scale that it does not appear to need
further community support, or supporters simply move on to other projects.
It is also important to note that many nonprofit and mission-driven food
hubs purposely remain at a smaller operational stage. A hub that chooses to
remain at the growth phase of operation may need continued donor support.
At the growth stage, the wholesale hub may have an advantage, because
its customers are more likely to remain loyal. Direct-to-consumer hubs
often experience customer loss from season to season, and must strive
just to replace these losses, rather than actually grow the customer base.
Though they may be harder to attract at first, wholesale customers, with
their increased focus on price and reliability, often stay with their suppliers
longer.

Table 15
Growth Operational Period Pro Forma Comparison

Wholesale Direct-to-Consumer

Revenues $1,750,000 $422,710

Total Variable Operating Costs ($1,351,977) ($341,005)
Variable Margin (Loss) $398,023 $81,705
Total Equipment Costs ($38,649) ($9,902)
Total Facilities Costs ($44,578) ($12,793)
Total Selling and Marketing Costs ($5,150) ($4,120)
General and Administrative Expenses ($172,425) ($38,656)
Unforeseen and Contingency Expenses ($70,000) ($8,454)
Baseline EBITDA* (Loss) $67,220 $7,780
Interest Expense ($6,149) ($2,296)
Depreciation Expense ($9,000) ($2,549)
Net Income (Loss) $52,071 $2,935

*Earnings before interest, taxes, depreciation, and amortization

RUNNING A FOOD HUB 41

 Each of the food hubs will see increases in human resources, either in
number of employees or in wage rates. This is especially true of salaried
employees.
Even during the growth stage, additional delivery equipment will likely
not be needed by direct-to-consumer hubs, and their paid staff will continue
to be minimal, with most labor performed by volunteers.

Operational Models at “Viability”

With higher gross margins and a focus on lean operations and use of
low-cost resources, direct-to-consumer hubs can achieve viability at a much
lower sales level than the wholesale model.
The hub models also differ in their ability to acquire and maintain
customers, especially at the viability level. While a concern during any
operational phase, this is a major concern for direct-to-consumer hubs at the
viability stage, which is often a period of high customer turnover. The hub
will need to find a way to keep current customers engaged and returning,
while simultaneously attracting new customers. Because of the nature of
wholesale operations, these hubs are much more likely to have an easier time
maintaining customers, providing that the hub’s commitment to quality and
customer service remains high.

Table 16
Viability Operational Period Pro Forma Comparison

Wholesale Direct-to-Consumer

Revenues $2,400,000 $566,604

Total Variable Operating Costs ($1,873,858) ($451,705)
Variable Margin (Loss) $526,142 $114,899
Total Equipment Costs ($44,693) ($14,033)
Total Facilities Costs ($29,366) ($13,176)
Total Selling and Marketing Costs ($5,305) ($4,244)
General and Administrative Expenses ($218,175) ($47,372)
Unforeseen and Contingency Expenses ($96,000) ($11,332)
Baseline EBITDA* (Loss) $132,604 $24,742
Interest Expense ($8,433) ($3,077)
Depreciation Expense ($16,071) ($2,549)
Net Income (Loss) $108,099 $19,116

*Earnings before interest, taxes, depreciation, and amortization

42 RUNNING A FOOD HUB

Conclusion

I t is clear from the analysis conducted in this report that various

operational model food hubs can be viable businesses. Sufficient
sales can be achieved at reasonable levels to provide enough revenue
to cover the costs of supporting activities, personnel, and infrastruc-
ture.
Regardless of the operational model, each venture must carefully
consider the details of its operations. Small changes in costs can
have a large impact on the finances of a food hub, due to the
relatively low operating margins inherent in such ventures.
Product expenses are the largest single cost category. Changes
in prices paid to producers can significantly affect profitability and,
in some cases, even impact the hub’s ability to remain in operation.
Based on scenarios presented in this analysis, labor costs can also
impact the sales levels required to achieve the various operational
phases outlined in this report.
Outside financial support (e.g., grants, low-interest loans,
community funds) can be critical to helping food hubs achieve
success. Such outside funding can greatly reduce the sales revenue
required to achieve financial stability.
Increasing the amount of money financed for purchasing
equipment or investing in infrastructure produces little effect on the
entity’s overall finances. Food hubs often find it difficult to qualify
for loans and financing, particularly when they are just beginning.
Each food hub will face different circumstances and goals, based
on its unique mission. From a financial viewpoint, there is no “best”
hub operational model. As food hubs grow, they typically begin
to expand activities that more closely resemble other operational
models, including hybrid operations which engage in both
wholesale and direct-to-consumer sales. Regardless the evolution
of the model, food hubs should seek to organize — including their
operational and financial activities — around their core mission, and
then strive to make sound financial choices.

RUNNING A FOOD HUB 43

 Appendix

Supplemental Tables: Wholesale Model................................................................... 45

Table 17: Prototypical Wholesale Food Hub Balance Sheet.................................... 45
Table 18: Wholesale Expense and Revenue Summary Figures............................... 46
Table 19: Wholesale Labor Summary........................................................................... 48
Table 20: Wholesale Transportation Summary........................................................... 52
Table 21: Wholesale Cash Flow..................................................................................... 56

Supplemental Tables: Direct-to-Consumer Model................................................... 61

Table 22: Prototypical Direct-to-Consumer Food Hub Balance Sheet................... 61
Table 23: Direct-to-Consumer Expense and Revenue............................................... 62
Table 24: Direct-to-Consumer Labor Summary.......................................................... 64
Table 25: Direct-to-Consumer Transportation summary........................................... 68
Table 26: Direct-to-Consumer Cash Flow.................................................................... 72

Photo courtesy of New North Florida Cooperative

44 RUNNING A FOOD HUB

n Supplemental Tables
Wholesale Model

Table 17
Prototypical Wholesale Food Hub Balance Sheet

Breakeven (B/E) Growth (GR) Viability (VI)

Assets
Cash and Equivalents ($9,818) ($7,039) $100,007
Accounts Receivables $77,306 $111,806 $153,333
Total Current Assets $67,487 $104,766 $253,341
Buildings And Equipment, Net $141,000 $132,000 $123,000

Total Assets $208,487 $236,766 $376,341

Liabilities and Members’ Equity

Current Liabilities
Accounts Payable and Accrued Expenses ($11,999) ($24,568) ($33,693)
Accrued Interest $4,252 ($6,149) ($8,433)
Current Maturities of Long-Term Debt ($4,463) ($3,939) ($3,382)

Total Current Liabilities ($12,210) ($34,657) ($45,508)

Long-term Debt
Senior Debt $60,607 $52,027 $42,889
Less Current Maturities of Long-Term Debt ($4,463) ($3,939) ($3,382)
Members’ Equity
Member Equity and Equity Equivalents $327,377 $171,265 $274,243
Retained Earnings (Losses) ($162,823) $52,071 $108,099

Total Liabilities & Members’ Equity $208,487 $236,766 $376,341

RUNNING A FOOD HUB 45

n Supplemental Tables: Wholesale Model

Table 18
Wholesale Expense and Revenue Summary Figures
Percent
Annual Total of Revenue
Wholesale Baseline Breakeven Breakeven
Income
Fresh Produce ($) 847,000 70.00%
Dairy Products ($) 121,000 10.00%
Other ($) 242,000 20.00%
Grant Funds ($) 0 0.00%

Total Sales All Types 1,210,000 100.00%

Variable Costs
Product Lost in Transport/Handling & Returns (38,557) (3.2%)
Revenue to Farms (0.7) (844,600) (69.8%)
Credit Card Processing (2,420) (0.2%)
Packaging Material Expense (2,881) (0.2%)
Variable Labor & Delivery Expense (61,794) (5.1%)
Total Variable Costs (950,252) (78.5%)

Variable Margin 259,748 21.5%

Fixed Costs
Equipment Loan Interest Pmnts (8,401) (0.7%)
Business Personal Property Tax (554) (0.0%)
Tools, Dies, Fixtures, Maint/Repairs (10,100) (0.8%)
Fixed Vehicle Expenses and Forklift Rental (15,322) (1.3%)
Total Equipment Costs (34,377) (2.8%)
Facilities
Rent Expense (22,100) (1.8%)
Facility Expenses and Insurance (5,580) (0.5%)
Utilities (15,600) (1.3%)
Total Facility Costs (43,280) (3.6%)
Fixed Sales and Marketing
Promotional Costs (5,000) (0.4%)
Total Selling and Marketing Costs (5,000) (0.4%)
General/Administrative
Mgmt./Admin. Support/Fringe and Ovhd. (105,963) (8.8%)
General Expenses & Fees
(Software, Legal, Phone, OFC Supplies etc.) (22,300) (1.8%)
Total General/Administrative Costs (128,263) (10.6%)
Unforeseen/Contingency
Unforeseen Expenses and Bad Debt (48,400) (4.0%)
Total Fixed Costs (259,320) (21.4%)

Wholesale Baseline EBITDA* 429 0.0%

Equipment Depreciation (9,000) (0.7%)

Receivables Interest (23 days @ 0.085) (4,252) (0.4%)

Net Wholesale Baseline Income (12,823) (1.1%)

* Earnings before interest, taxes, depreciation, and amortization

46 RUNNING A FOOD HUB

 Percent Percent
Annual Total of Revenue Annual Total of Revenue
Growth Growth Viability Viability

1,225,000 70.00% 1,680,000 70.00%

175,000 10.00% 240,000 10.00%
350,000 20.00% 480,000 20.00%
0 0.00% 0 0.00%

1,750,000 100.00% 2,400,000 100.00%

(56,913) (3.3%) (78,052) (3.3%)

(1,212,431) (69.3%) (1,670,875) (69.6%)
(3,500) (0.2%) (4,800) (0.2%)
(4,167) (0.2%) (5,714) (0.2%)
(74,966) (4.3%) (97,867) (4.1%)
(1,351,977) (77.3%) (1,857,308) (77.4%)

398,023 22.7% 542,692 22.6%

(7,326) (0.4%) (6,180) (0.3%)

(765) 0.0%) (1,020) (0.0%)
(18,128) (1.0%) (22,792) (0.9%)
(12,430) (0.7%) (14,701) (0.6%)
(38,649) (2.2%) (44,693) (1.9%)

(22,763) (1.3%) (23,446) (1.0%)

(5,747) (0.3%) (5,920) (0.2%)
(16,068) (0.9%) (16,550) (0.7%)
(44,578) (2.5%) (45,916) (1.9%)

(5,150) (0.3%) (5,305) (0.2%)

(5,150) (0.3%) (5,305) (0.2%)

(143,291) (8.2%) (187,662) (7.8%)

(29,134) (1.7%) (30,513) (1.3%)

(172,425) (9.9%) (218,175) (9.1%)

(70,000) (4.0%) (96,000) (4.0%)

(330,803) (18.9%) (410,088) (17.1%)

67,220 3.8% 132,604 5.5%

(9,000) (0.5%) (16,071) (0.7%)

(6,149) (0.4%) (8,433) (0.4%)

52,071 3.0% 108,099 4.5%

RUNNING A FOOD HUB 47

n Supplemental Tables: Wholesale Model

Table 19
Wholesale Labor Summary

Breakeven (B/E)

Jan Feb Mar Apr May

Driver # Emp. 1 1 2 2 2
Rate/Hr. Total Hrs. 62 75 103 142 168
$13.50 Cost $830 $1,015 $1,388 $1,922 $2,270
Admin Cost $174 $174 $347 $347 $347

Total Cost $22,469

General
Labor # Emp. 1 1 1 1 1
Rate/Hr. Total Hrs. 42 77 79 101 101
$10.50 Cost $441 $809 $833 $1,058 $1,058

Total Cost $10,433

Warehouse
Manager # Emp. 1 1 1 1 1
Rate/Hr. Total Hrs. 86 86 171 171 171
$15.50 Cost $1,329 $1,329 $2,657 $2,657 $2,657
  Overtime
Hours – – – – –
Cost $0 $0 $0 $0 $0

  Total Cost $25,575

Total Cost Production $2,600 $3,153 $4,878 $5,638 $5,985

Office/
Admin. # Emp. 1 1 1 1 1
Rate/Hr. Total Hrs. 30 30 30 30 30
$16.00 Cost $480 $480 $480 $480 $480

Total Cost $5,760

Total Labor Cost B/E $55,005

48 RUNNING A FOOD HUB

 Jun Jul Aug Sep Oct Nov Dec
2 2 2 2 2 1 1
174 151 141 120 117 86 69
$2,347 $2,039 $1,899 $1,614 $1,575 $1,159 $938
$347 $347 $347 $347 $347 $174 $174

1 1 1 1 1 1 1
101 101 101 101 79 56 56
$1,058 $1,058 $1,058 $1,058 $833 $584 $584

1 1 1 1 1 1 1
171 171 171 171 107 86 86
$2,657 $2,657 $2,657 $2,657 $1,661 $1,329 $1,329

– – – – – – –
$0 $0 $0 $0 $0 $0 $0

$6,062 $5,754 $5,614 $5,329 $4,069 $3,072 $2,851

1 1 1 1 1 1 1
30 30 30 30 30 30 30
$480 $480 $480 $480 $480 $480 $480

RUNNING A FOOD HUB 49

n Supplemental Tables: Wholesale Model

Table 19 (Continued) Wholesale Labor Summary

Growth (GR)

Q1 Q2 Q3 Q4
Driver # Emp. 2 2 2 2
Rate/Hr. Total Hrs. 311 661 556 362
$14.00 Cost $4,359 $9,257 $7,777 $5,073
Admin Cost $360 $360 $360 $360

Total Cost $27,907

General Labor # Emp. 1 1 1 1

Rate/Hr. Total Hrs. 220 302 302 236
$11.00 Cost $2,417 $3,325 $3,325 $2,593

  Total Cost $12,720

Warehouse Manager # Emp. 1 1 1 1

Rate/Hr. Total Hrs. 321 450 514 321
$15.50 Cost $4,982 $6,975 $7,971 $4,982
Overtime
Hours - - - -
Cost $0 $0 $0 $0

Total Cost $24,911

Total Cost Production $12,118 $19,917 $19,433 $13,009

Office/Administrative # Emp. 1 1 1 1
Rate/Hr. Total Hrs. 126 252 252 126
$16.50 Cost $2,079 $4,158 $4,158 $2,079

Total Cost $12,474

Total Labor Cost GR $64,478

50 RUNNING A FOOD HUB

 Wholesale Labor Summary

Viability (VI)

Q1 Q2 Q3 Q4
Driver # Emp. 2 2 2 2
Rate/Hr. Total Hrs. 398 874 729 470
$14.75 Cost $5,874 $12,893 $10,754 $6,937
Admin Cost $379 $379 $379 $379

Total Cost $37,975

General Labor # Emp. 1 1 1 1

Rate/Hr. Total Hrs. 425 431 495 367
$11.75 Cost $4,999 $5,062 $5,818 $4,307

Total Cost $21,904

Warehouse Manager # Emp. 1 1 1 1

Rate/Hr. Total Hrs. 321 386 514 450
$16.00 Cost $5,143 $6,171 $8,229 $7,200
Overtime
Hours - - - -
Cost $0 $0 $0 $0

Total Cost $26,743

Total Cost Production $16,395 $24,506 $25,180 $18,823

Office/Administrative # Emp. 1 1 1 1
Rate/Hr. Total Hrs. 252 378 378 252
$17.00 Cost $4,284 $6,426 $6,426 $4,284

Total Costs $21,420

Total Labor Cost VI $106,324

RUNNING A FOOD HUB 51

n Supplemental Tables: Wholesale Model

Table 20 Business
Per Summary
Wholesale Transportation

Transportation Expense for Breakeven (B/E) ($)

Jan Feb Mar Apr May

Number of Delivery Days per Week 3 3 3 3 3
Number of Delivery Days per Month 12.9 12.9 12.9 12.9 12.9
$ Value of Produce Per Delivery Day $1,976 $2,635 $4,282 $7,247 $9,223
$ Value of Dairy Per Delivery Day $471 $565 $706 $894 $894
$ Value of Other Per Delivery Day $941 $1,318 $1,506 $1,694 $1,976
Lbs. of Product Per Delivery Day 3990 5274 7710 11867 14573
Total Truckload Capacity 22500 22500 22500 22500 22500
% of Total Truck Capacity Utilized Per Load 18% 23% 34% 53% 65%
Number of Trucks Required 1.0 1.0 2.0 2.0 2.0

Total Average Miles Traveled per Delivery-All Trucks 80 80 160 160 160

Variable Vehicle Expenses

Diesel Expense/Month $339 $339 $679 $679 $679
Mileage Expense Per Mile Driven $0 $0 $0 $0 $0
Reefer Unit Expense $0 $0 $0 $0 $0

Total Variable Vehicle Expense $339 $339 $679 $679 $679

Fixed Vehicle Expense

Overhead Expense $298 $298 $597 $597 $597

Total Fixed Vehicle Expense $298 $298 $597 $597 $597

Personnel Expense
Load Time (hr.) (Gen Labor) 6.9 7.3 8.6 8.6 8.6
Drive Time (hr.) (Driver) 23.5 25.0 29.4 29.4 29.4
Unload Time (hr.) (Driver) 38.0 50.2 73.4 113.0 138.8
Delivery Admin (hr.) (Gen Labor) 5.1 5.5 6.4 6.4 6.4

Total Time (hr.) 73.5 88.0 117.9 157.4 183.2

Driver Pay $993 $1,188 $1,591 $2,126 $2,473

Driver Overtime Pay $0 $0 $0 $0 $0
Loader Pay $120 $128 $150 $150 $150

Total Personnel Expense $1,113 $1,316 $1,742 $2,276 $2,624

Total Delivery Expense $1,751 $1,954 $3,017 $3,551 $3,899

52 RUNNING A FOOD HUB

 Jun Jul Aug Sep Oct Nov Dec Total
3 3 3 3 3 3 3
12.9 12.9 12.9 12.9 12.9 12.9 12.9
$9,882 $7,905 $6,917 $5,270 $5,270 $3,294 $1,976
$847 $847 $941 $941 $847 $753 $706
$1,788 $1,882 $1,882 $1,694 $1,506 $1,318 $1,318
15166 12774 11685 9470 9166 6392 4671
22500 22500 22500 22500 22500 22500 22500
67% 57% 52% 42% 41% 28% 21%
2.0 2.0 2.0 2.0 2.0 1.0 1.0

160 160 160 160 160 80 80

$679 $679 $679 $679 $679 $339 $339

$0 $0 $0 $0 $0 $0 $0
$0 $0 $0 $0 $0 $0 $0

$679 $679 $679 $679 $679 $339 $339 $6,789

$597 $597 $597 $597 $597 $298 $298

$597 $597 $597 $597 $597 $298 $298 $5,966

8.6 8.6 8.6 8.6 8.6 7.3 7.3

29.4 29.4 29.4 29.4 29.4 25.0 25.0
144.4 121.7 111.3 90.2 87.3 60.9 44.5
6.4 6.4 6.4 6.4 6.4 5.5 5.5

188.9 166.1 155.7 134.6 131.7 98.6 82.3

$2,550 $2,242 $2,102 $1,817 $1,778 $1,332 $1,110

$0 $0 $0 $0 $0 $0 $0
$150 $150 $150 $150 $150 $128 $128

$2,700 $2,393 $2,253 $1,968 $1,929 $1,459 $1,238 $23,010

$3,976 $3,668 $3,528 $3,243 $3,204 $2,097 $1,876 $35,764

RUNNING A FOOD HUB 53

n Supplemental Tables: Wholesale Model

Table 20 (Continued)Business
Wholesale Transportation
Per Summary

Trasnportation Expense for Growth (GR) ($)

GR Q1 GR Q2 GR Q3 GR Q4
Number of Delivery Days per Week 3 3 3 3
Number of Delivery Days per Quarter 39 39 39 39
$ Value of Produce Per Delivery Day $4,288 $12,704 $9,687 $5,081
$ Value of Dairy Per Delivery Day $839 $1,270 $1,316 $1,112
$ Value of Other Per Delivery Day $1,815 $2,631 $2,631 $1,996
Lbs of Product Per Delivery Day 8,183 20,057 16,357 9,752
Truckload Capacity 22,500 22,500 22,500 22,500
% of Truck space Utilized Per Load 36% 89% 73% 43%
Number of Trucks Required 2.0 2.0 2.0 2.0

Total Average Miles Traveled per Delivery—All Trucks 200 200 200 200

Variable Vehicle Expense

Diesel Expense/Quarter $2,622 $2,622 $2,622 $2,622
Mileage Expense Per Mile Driven $0 $0 $0 $0
Reefer Unit Expense $0 $0 $0 $0

Total Variable Vehicle Expense $2,622 $2,622 $2,622 $2,622

Fixed Vehicle Expense

Overhead Expense $2,304 $2,304 $2,304 $2,304

Total Fixed Vehicle Expense $2,304 $2,304 $2,304 $2,304

Personnel Expense
Load Time (hr) 22.7 25.8 25.8 24.6
Drive Time (hr) 78 88 88 84
Unload Time (hr) 233.8 573.1 467.3 278.6
Delivery Admin (hr) 17.0 19.3 19.3 18.3

Total Time (hr) 351.1 706.4 600.6 405.3

Driver Pay $1,638 $9,889 $8,409 $1,891
Driver Overtime Pay $0 $0 $0 $0
Loader Pay $407 $463 $463 $439

Total Personnel Expense $2,046 $10,352 $8,871 $2,331

Total Delivery Expense $6,972 $15,278 $13,798 $7,257

54 RUNNING A FOOD HUB

 Trasnportation Expense for Vitality (VI) ($)

VI Q1 VI Q2 VI Q3 VI Q4
Number of Deliveries per Week 3 3 3 3
Number of Deliveries per Quarter 39 39 39 39
$ Value of Produce Per Delivery Day $5,880 $17,422 $13,284 $6,969
$ Value of Dairy Per Delivery Day $1,151 $1,742 $1,804 $1,524
$ Value of Other Per Delivery Day $2,489 $3,609 $3,609 $2,738
Lbs of Product Per Delivery Day 11,223 27,507 22,432 13,375
Truckload Capacity 22,500 22,500 22500 22500
% of Truck space Utilized Per Load 50% 122% 100% 59%
Number of Trucks Required 2.0 2.0 2.0 2.0

Total Average Miles Traveled per Delivery—All Trucks 240 240 240 240

Variable Vehicle Expense

Diesel Expense/Quarter $3,241 $3,241 $3,241 $3,241
Mileage Expense Per Mile Driven $0 $0 $0 $0
Reefer Unit Expense $0 $0 $0 $0

Total Variable Vehicle Expense $3,241 $3,241 $3,241 $3,241

Fixed Vehicle Expense

Overhead Expense $2,848 $2,848 $2,848 $2,848

Total Fixed Vehicle Expense $2,848 $2,848 $2,848 $2,848

Personnel Expense
Load Time (hr) 22.7 25.8 25.8 25.8
Drive Time (hr) 78 88 88 88
Unload Time (hr) 320.6 785.9 640.9 382.1
Delivery Admin (hr) 17.0 19.3 19.3 19.3

Total Time (hr) 437.9 919.2 774.2 515.4

Driver Pay $2,153 $13,558 $11,420 $2,534
Driver Overtime Pay $0 $0 $0 $0
Loader Pay $417 $474 $474 $474

Total Personnel Expense $2,570 $14,032 $11,894 $3,008

Total Delivery Expense $8,659 $20,121 $17,983 $9,097

RUNNING A FOOD HUB 55

n Supplemental Tables: Wholesale Model

Table 21
Wholesale Cash flow

Ongoing Jan Feb Mar Apr

Operating Activities
Net Income (loss) (11,349) (11,987) (10,906) 1,327 15,249
Non cash charges to net income (loss) 0 0 0 0 0
Depreciation 750 750 750 750 750
Tax Credit 0 0 0 0 0
(Increase) Decrease in current assets 0 0 0 0 0
Accounts receivable 10,761 (1,855) (11,132) (19,481) (32,932)
Inventories 0 0 0 0 0
Increase (decrease) in current liabilities 0 0 0 0 0
Accounts payable and accrued expenses 0 0 0 0 0
Accrued interest 145 153 204 293 444

Net Cash Provided by (Used in)

Operating Activities $306 ($12,940) ($21,084) ($17,110) ($16,489)

Investing Activities
Purchases of property and equipment (75,000) 0 0 0 0

Financing Activities
Member contributions (distributions) 18,750 0 0 0 0
Other contributions 0 153 204 293 444
Grants 0 0 0 0 0
Net borrowings (payments)
on short-term loans or notes 0 0 0 0 0
Principal payments on long-term loans 0 (1,327) (1,327) (1,327) (1,327)
Proceeds from long-term debt borrowings 56,250 0 0 0 0

Net Cash Provided by (Used in)

Financing Activities 0 (1,174) (1,123) (1,033) (882)

Net Increase in Cash $306 ($14,113) ($22,207) ($18,144) ($17,371)

Cash — beginning of period $20,000 $20,306 $6,193 ($16,014) ($34,157)

Cash — end of period $20,306 $6,193 ($16,014) ($34,157) ($51,529)

56 RUNNING A FOOD HUB

 May Jun Jul Aug Sep Oct Nov Dec B/E

Annual
18,158 13,864 626 52 (7,526) (3,774) (13,720) (14,187) (12,823)
0 0 0 0 0 0 0 0 0
750 750 750 750 750 750 750 750 9,000
0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0
(22,264) (4,175) 18,553 8,813 18,090 2,783 22,264 13,451 (7,885)
0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0
546 565 480 440 357 344 242 181 4,252

($2,809) $11,005 $20,410 $10,055 $11,671 $103 $9,537 $195 ($7,457)

0
0 0 0 0 0 0 0 0 (75,000)

0 0 0 0 0 0 0 0 0
546 565 480 440 357 344 242 181 4,252
0 0 0 0 0 0 0 0 0

0 (2,000) 0 0 (1,000) 0 (11,000) 3,000 (11,000)

(1,327) (1,327) (1,327) (1,327) (1,327) (1,327) (1,327) (1,327) (15,920)
0 0 0 0 0 0 0 0 56,250

(780) (2,761) (846) (887) (1,970) (982) (12,084) 1,854 (22,668)

($3,590) $8,244 $19,563 $9,168 $9,701 ($879) ($2,548) $2,049 ($30,125)

($51,529) ($55,118) ($46,874) ($27,311) ($18,143) ($8,441) ($9,320) ($11,868) $20,306

($55,118) ($46,874) ($27,311) ($18,143) ($8,441) ($9,320) ($11,868) ($9,818) ($9,818)

RUNNING A FOOD HUB 57

n Supplemental Tables: Wholesale Model

Table 21 (Continued)
Wholesale Cash flow

GR Q1 GR Q2 GR Q3

Operating Activities
Net Income (loss) (19,994) 87,520 16,982
Non cash charges to net income (loss) 0 0 0
Depreciation 2,250 2,250 2,250
Tax Credit 0 0 0
(Increase) Decrease in current assets 0 0 0
Accounts receivable (28,999) (95,258) 29,293
Inventories 0 0 0
Increase (decrease) in current liabilities 0 0 0
Accounts payable and accrued expenses 0 0 0
Accrued interest (941) (2,251) (1,848)

Net Cash Provided by (Used in ) Operating Activities ($47,684) (7,739) $46,678

Investing Activities
Purchases of property and equipment 0 0 0
Financing Activities
Member contributions (distributions) 0 0 0
Other contributions 941 2,251 1,848
Grants 0 0 0
Net borrowings (payments) on short-term loans or notes 0 0 0
Principal payments on long-term loans (4,248) (4,248) (4,248)
Proceeds from long-term debt borrowings 0 0 0
Net Cash Provided by (Used in ) Financing Activities (3,308) (1,998) (2,401)

Net Increase in Cash ($50,991) ($9,736) $44,277

Cash — beginning of period ($9,818) ($60,810) ($70,546)

Cash — end of period ($60,810) ($70,546) ($26,269)

58 RUNNING A FOOD HUB

 Annual Annual
GR Q4 VI Q1 VI Q2 VI Q3 VI Q4 Total GR Total VI

(32,438) (24,883) 133,914 36,612 (37,544) 52,071 108,099
0 0 0 0 0 0 0
2,250 4,018 4,018 4,018 4,018 9,000 16,071
0 0 0 0 0 0 0
0 0 0 0 0 0 0
53,667 (13,116) (130,640) 40,173 73,600 (41,298) (29,983)
0 0 0 0 0 0 0
0 0 0 0 0 0 0
0 0 0 0 0 0 0
(1,110) (1,290) (3,087) (2,534) (1,522) (6,149) (8,433)

$22,368 ($35,272) $4,205 $78,269 $38,551 $13,624 $85,754

0 0 0 0 0 0 0

0 31,000 0 0 0 0 31,000
1,110 1,290 3,087 2,534 1,522 6,149 8,433
0 0 0 0 0 0 0
0 0 0 0 0 0 0
(4,248) (4,535) (4,535) (4,535) (4,535) (16,994) (18,141)
0 0 0 0 0 0 0
(3,139) 27,755 (1,449) (2,001) (3,013) (10,845) 21,293

$19,230 ($7,517) $2,756 $76,268 $35,539 $2,779 $107,047

($26,269) ($7,039) ($14,556) ($11,799) $64,469 ($9,818) ($7,039)

($7,039) ($14,556) ($11,799) $64,469 $100,007 ($7,039) $100,007

RUNNING A FOOD HUB 59

 Appendix (Continued)

Supplemental Tables: Direct-to-Consumer Model.................................................. 61

Table 22: Prototypical Direct-to-Consumer Food Hub Balance Sheet.................. 61
Table 23: Direct-to-Consumer Expense and Revenue.............................................. 62
Table 24: Direct-to-Consumer Labor Summary......................................................... 64
Table 25: Direct-to-Consumer Transportation summary.......................................... 68
Table 26: Direct-to-Consumer Cash Flow................................................................... 72

Photo courtesy of The Agriculture and Land-Based Training Association

60 RUNNING A FOOD HUB

n Supplemental Tables
Direct-to-Consumer Model

Table 22
Prototypical Direct-to-Consumer Food Hub Balance Sheet

Breakeven (B/E) Growth (GR) Viability (VI)

Assets
Cash and Equivalents 16,836 19,890 38,967
Accounts Receivables 20,087 27,006 36,200
Inventories 0 0 0
Total Current Assets 36,923 46,897 75,167
Buildings and Equipment, Net of Depreciation 39,941 37,391 34,842
Other Assets, Net of Amortization 0 0 0

Total Assets $76,864 $84,288 $110,009

Liabilities and Members’ Equity

Current Liabilities
Accounts Payable and Accrued Expenses 0 0 0
Accrued Interest 1,707 (2,296) (3,077)
Current Maturities of Long-Term Debt (1,264) (1,116) (958)

Total Current Liabilities $443 ($3,411) ($4,035)

Long-term Debt
Senior Debt 17,168 14,737 12,149
Less Current Maturities of Long-Term Debt (1,264) (1,116) (958)
Members’ Equity
Member Equity and Equity Equivalents 214,147 71,143 83,737
Dispersed Member Equity 0 0 0
Retained Earnings (Losses) (153,630) 2,935 19,116

Total Liabilities and Members’ Equity $76,864 $84,288 $110,009

RUNNING A FOOD HUB 61

n Supplemental Tables: Direct-to-Consumer Model

Table 23
Direct-to-Consumer Expense and Revenue
Percent
Annual Total of Revenue
Direct-to-Consumer Baseline Breakeven Breakeven

Income
Fresh Produce ($) 314,400 100.00%
Grant Funds ($) 0 0.00%

Total Sales All Types 314,400 100.00%

Variable Costs
Product Lost in Transport/Handling & Returns (7,531) (2.4%)
COGS Produce ($) (209,600) (66.7%)
Donations To Pickup Sites (9,432) (3.0%)
Credit Card Processing (2,830) (0.9%)
Packaging Material Expense (12,960) (4.1%)
Variable Labor & Delivery Expense (13,171) (4.2%)
Total Variable Costs (255,524) (81.3%)

Variable Margin 58,876 18.7%

Fixed Costs
Equipment Loan Interest Pmnts (1,264) (0.4%)
Business Personal Property Tax (233) (0.1%)
Tools, Dies, Fixtures, Maint/Repairs (2,600) (0.8%)
Fixed Vehicle Expenses and Forklift Rental (2,859) (0.9%)
Total Equipment Costs (6,957) (2.2%)
Facilities
Rent Expense (2,200) (0.7%)
Facility Expenses and Insurance (6,020) (1.9%)
Utilities (4,200) (1.3%)
Total Facility Costs (12,420) (4.0%)
Fixed Sales and Marketing
Promotional Costs (4,000) (1.3%)
Total Selling and Marketing Costs (4,000) (1.3%)
General/Administrative
Mgmt./Admin. Support/Fringe and Ovhd. (23,725) (7.5%)
General Expenses & Fees (Software, Legal, Supplies etc.) (4,860) (1.5%)
Total General/Administrative Costs (28,585) (9.1%)
Unforeseen/Contingency
Unforeseen Expenses and Bad Debt (6,288) (2.0%)
Total Fixed Costs (58,250) (18.5%)

Direct-to-Consumer Baseline EBITDA* 627 0.2%

Equipment Depreciation (2,549) (0.8%)

Receivables Interest (23 days @ 0.085) (1,707) (0.5%)

Net Direct-to-Consumer Baseline Income (3,630) (1.2%)

*Earnings before interest, taxes, depreciation, and amortization

62 RUNNING A FOOD HUB

 Percent Percent
Annual Total of Revenue Annual Total of Revenue
Growth Growth Viability Viability

422,710 100.00% 566,604 100.00%

0 0.00% 0 0.00%

422,710 100.00% 566,604 100.00%

(7,873) (1.9%) (10,630) (1.9%)

(281,807) (66.7%) (377,736) (66.7%)
(12,681) (3.0%) (16,998) (3.0%)
(3,804) (0.9%) (5,099) (0.9%)
(17,200) (4.1%) (23,220) (4.1%)
(17,640) (4.2%) (18,021) (3.2%)
(341,005) (80.7%) (451,705) (79.7%)

81,705 19.3% (451,705) (79.7%)

(1,116) (0.3%) (958) (0.2%)

(218) (0.1%) (204) (0.0%)
(2,678) (0.6%) (2,758) (0.5%)
(5,890) (1.4%) (10,112) (1.8%)
(9,902) (2.4%) (14,033) (2.5%)

(2,266) (0.5%) (2,334) (0.4%)

(6,201) (1.5%) (6,387) (1.1%)
(4,326) (1.0%) (4,456) (0.8%)
(12,793) (3.0%) (13,176) (2.3%)

(4,120) (1.0%) (4,244) (0.7%)

(4,120) (1.0%) (4,244) (0.7%)

(33,150) (7.8%) (41,600) (7.3%)

(5,506) (1.3%) (5,772) (1.0%)
(38,656) (9.1%) (47,372) (8.4%)

(8,454) (2.0%) (11,332) (2.0%)

(73,925) (17.5%) (90,157) (15.9%)

7,780 1.8% 24,742 4.4%

(2,549) (0.6%) (2,549) (0.5%)

(2,293) (0.5%) (3,077) (0.5%)

2,935 0.7% 19,116 3.4%

RUNNING A FOOD HUB 63

n Supplemental Tables: Direct-to-Consumer Model

Table 24
Business
Direct-to-Consumer Labor Summary
Per
Breakeven (B/E)

Jan Feb Mar Apr

Volunteer Labor # Emp. 0 0 8 8
Rate/Hr. Total Hrs. 0 0 47 47
$0.00 Cost $0 $0 $0 $0

Total Cost $0

Driver # Emp. 0 0 1 1
Rate/Hr. Total Hrs. 0 0 20 31
$13.00 Cost $0 $0 $265 $397

Total Cost $2,646

General Warehouse Labor # Emp. 0 0 1 1

Rate/Hr. Total Hrs. 0 0 17 34
$10.00 Cost $0 $0 $171 $343

Total Cost $2,057

Pickup Point Labor # Emp. 0 0 2 2

Rate/Hr. Total Hrs. 0 0 42 59
$10.50 Cost $0 $0 $882 $1,235

Total Cost $8,467

Total Cost Production: $0 $0 $1,318 $1,975

Total Labor Cost B/E $13,171

64 RUNNING A FOOD HUB

 May Jun Jul Aug Sep Oct Nov Dec
8 8 8 8 8 8 0 0
47 47 47 47 47 47 0 0
$0 $0 $0 $0 $0 $0 $0 $0

1 1 1 1 1 1 0 0
31 31 31 20 20 20 0 0
$397 $397 $397 $265 $265 $265 $0 $0

1 1 1 1 1 1 0 0
34 34 34 17 17 17 0 0
$343 $343 $343 $171 $171 $171 $0 $0

2 2 2 2 2 2 0 0
59 59 59 42 42 42 0 0
$1,235 $1,235 $1,235 $882 $882 $882 $0 $0

$1,975 $1,975 $1,975 $1,318 $1,318 $1,318 $0 $0

RUNNING A FOOD HUB 65

n Supplemental Tables: Direct-to-Consumer Model

Table 24 (Continued) Direct-to-Consumer Labor Summary

Growth (GR)

GR Q1 GR Q2 GR Q3 GR Q4
Volunteer Labor # Emp. 13 13 13 13
Rate/Hr. Total Hrs. 373 142 142 111
$0.00 Cost $0 $0 $0 $0

Total Cost $0

Driver # Emp. 1 1 1 1
Rate/Hr. Total Hrs. 38 129 129 41
$13.25 Cost $500 $1,704 $1,704 $539

Total Cost $4,446

General Labor # Emp. 1 1 1 1

Rate/Hr. Total Hrs. 34 167 206 34
$10.25 Cost $351 $1,713 $2,109 $351

Total Cost $4,966

Pickup Point Labor # Emp. 2 2 2 2

Rate/Hr. Total Hrs. 67 126 126 84
$10.75 Cost $1,445 $2,709 $2,709 $1,806

Total Cost $9,072

Total Cost Production: $2,296 $6,126 $6,521 $2,697

Total Labor Cost GR $17,640

66 RUNNING A FOOD HUB

 Direct-to-Consumer Labor Summary

Viability (VI)

VI Q1 VI Q2 VI Q3 VI Q4
Volunteer Labor # Emp. 20 20 20 20
Rate/Hr. Total Hrs. 70 175 175 70
$0.00 Cost $0 $0 $0 $0

Total Cost $0

Driver # Emp. 1 1 1 1
Rate/Hr. Total Hrs. 36 122 122 41
$13.50 Cost $484 $1,649 $1,649 $550

Total Cost $4,331

General Labor # Emp. 1 1 1 1

Rate/Hr. Total Hrs. 34 167 206 34
$10.50 Cost $360 $1,755 $2,160 $360

Total Cost $5,076

Pickup Point Labor # Emp. 2 2 2 2

Rate/Hr. Total Hrs. 76 126 126 84
$11.00 Cost $1,663 $2,772 $2,772 $1,848

Total Cost $9,467

Total Cost Production: $2,507 $6,176 $6,581 $2,758

Total Labor Cost VI $18,021

RUNNING A FOOD HUB 67

n Supplemental Tables: Direct-to-Consumer Model

Table 25
Direct-to-Consumer Transportation Summary

Trasnportation Expense for Breakeven (B/E) ($)

Jan Feb Mar Apr May

Number of Delivery Days per Week 2 2 2 2 2
Number of Delivery Days per Month 9 9 9 9 9
$ Value of Produce Per Delivery Day $0 $0 $2,934 $4,402 $5,502
$ Value of Dairy Per Delivery Day $0 $0 $0 $0 $0
$ Value of Misc. Per Delivery Day $0 $0 $0 $0 $0
$ Value of Other Per Delivery Day $0 $0 $0 $0 $0
Lbs. of Product Per Delivery Day $0 $0 $0 $0 $0
Total Truckload Capacity 11250 11250 11250 11250 11250

% of Total Truck Capacity Utilized Per Load 0% 0% 0% 0% 0%

Number of Drop Off Points Per Delivery 10 10 10 10 10

Amount of Product Left at Each Point (Lbs) 0 0 0 0 0
# of 25 Lb Boxes Per Point (Units) 0 0 0 0 0
Number of Trucks Required 0.0 1.0 1.0 1.0 1.0

Total Average Miles Traveled per Delivery 0 75 75 75 75

Fixed Vehicle Expense

Vehicle Reimbursement Expense $0 $0 $357 $357 $357

Total Fixed Vehicle Expense $0 $0 $357 $357 $357

Personnel Expense
Load Time (hr) (Gen Labor) 0.0 4.9 5.7 5.7 5.7
Drive Time (hr) (Driver) 0.0 31.0 36.4 36.4 36.4
Unload Time (hr) (Driver) 0.0 0.0 0.0 0.0 0.0
Delivery Admin (hr) (Gen Labor) 0.0 3.6 4.3 4.3 4.3

Total Time (hr) 0.0 39.5 46.5 46.5 46.5

Driver Pay $0 $0 $604 $604 $604
Driver Overtime Pay $0 $0 $0 $0 $0
Loader Pay $0 $0 $100 $100 $100

Total Personnel Expense $0 $0 $704 $704 $704

Total Delivery Expense $0 $0 $1,062 $1,062 $1,062

68 RUNNING A FOOD HUB

 Jun Jul Aug Sep Oct Nov Dec Total
2 2 2 2 2 2 2
9 9 9 9 9 9 9
$6,602 $5,869 $5,135 $4,035 $2,201 $0 $0
$0 $0 $0 $0 $0 $0 $0
$0 $0 $0 $0 $0 $0 $0
$0 $0 $0 $0 $0 $0 $0
$0 $0 $0 $0 $0 $0 $0
11250 11250 11250 11250 11250 11250 11250

0% 0% 0% 0% 0% 0% 0%

10 10 10 10 10 10 10
0 0 0 0 0 0 0
0 0 0 0 0 0 0
1.0 1.0 1.0 1.0 1.0 0.0 0.0

75 75 75 75 75 0 0

$357 $357 $357 $357 $357 $0 $0

$357 $357 $357 $357 $357 $0 $0 $2,859

5.7 5.7 5.7 5.7 5.7 0.0 0.0

36.4 36.4 36.4 36.4 36.4 0.0 0.0
0.0 0.0 0.0 0.0 0.0 0.0 0.0
4.3 4.3 4.3 4.3 4.3 0.0 0.0

46.5 46.5 46.5 46.5 46.5 0.0 0.0

$604 $604 $604 $604 $604 $0 $0
$0 $0 $0 $0 $0 $0 $0
$100 $100 $100 $100 $100 $0 $0

$704 $704 $704 $704 $704 $0 $0 $5,634

$1,062 $1,062 $1,062 $1,062 $1,062 $0 $0 $8,493

RUNNING A FOOD HUB 69

n Supplemental Tables: Direct-to-Consumer Model

Table 25 (Continued)Business
Direct-to-Consumer Transportation
Per Summary

Trasnportation Expense for Growth (GR) ($)

GR Q1 GR Q2 GR Q3 GR Q4
Number of Delivery Days per Week 3 3 3 3
Number of Delivery Days per Quarter 13 39 39 13
$ Value of Produce Per Delivery Day $13,495 $6,407 $0 $0
$ Value of Dairy Per Delivery Day $0 $0 $0 $0
$ Value of Misc. Per Delivery Day $0 $0 $0 $0
$ Value of Other Per Delivery Day $0 $0 $0 $0
Lbs of Product Per Delivery Day 0 0 0 0
Truckload Capacity 11250 11250 11250 11250
% of Truck space Utilized Per Load 0% 0% 0% 0%
Number of Drop Off Points Per Delivery 15 15 15 15
Amount of Product Left at Each Point (Lbs) 0 0 0 0
# of 25 Lb Boxes Per Point (Units) 0 0 0 0
Number of Trucks Required 1.0 1.0 1.0 1.0

Total Average Miles Traveled per Delivery 100 100 100 100

Fixed Vehicle Expense

Vehicle Reimbursement Expense $736 $2,209 $2,209 $736

Total Fixed Vehicle Expense $736 $2,209 $2,209 $736

Personnel Expense
Load Time (hr) 7.6 25.8 25.8 8.2
Drive Time (hr) 70 238 238 75
Unload Time (hr) 0.0 0.0 0.0 0.0
Delivery Admin (hr) 5.7 19.3 19.3 6.1
Total Time (hr) 83.0 283.0 283.0 89.6
Driver Pay $367 $3,750 $3,750 $396
Driver Overtime Pay $0 $0 $0 $0
Loader Pay $136 $463 $463 $146

Total Personnel Expense $502 $4,212 $4,212 $542

Total Delivery Expense $1,239 $6,421 $6,421 $1,279

70 RUNNING A FOOD HUB

 Trasnportation Expense for Vitality (VI) ($)

VI Q1 VI Q2 VI Q3 VI Q4
Number of Deliveries per Week 4 4 4 4
Number of Deliveries per Quarter 17 51 51 17
$ Value of Produce Per Delivery Day $12,162 $6,860 $0 $0
$ Value of Dairy Per Delivery Day $0 $0 $0 $0
$ Value of Misc. Per Delivery Day $0 $0 $0 $0
$ Value of Other Per Delivery Day $0 $0 $0 $0
Lbs of Product Per Delivery Day 0 0 0 0
Truckload Capacity 11250 11250 11250 11250
% of Truck space Utilized Per Load 0% 0% 0% 0%
Number of Drop Off Points Per Delivery 25 25 25 25
Amount of Product Left at Each Point (Lbs) 0 0 0 0
# of 25 Lb Boxes Per Point (Units) 0 0 0 0
Number of Trucks Required 1.0 1.0 1.0 1.0

Total Average Miles Traveled per Delivery-All Trucks 125 125 125 125

Fixed Vehicle Expens

Vehicle Reimbursement Expense $1,264 $3,792 $3,792 $1,264

Total Fixed Vehicle Expense $1,264 $3,792 $3,792 $1,264

Personnel Expense
Load Time (hr) 10.1 34.5 34.5 11.5
Drive Time (hr) 64 219 219 73
Unload Time (hr) 0.0 0.0 0.0 0.0
Delivery Admin (hr) 7.5 25.7 25.7 8.6
Total Time (hr) 81.8 278.7 278.7 92.9
Driver Pay $368 $3,763 $3,763 $418
Driver Overtime Pay $0 $0 $0 $0
Loader Pay $185 $632 $632 $211

Total Personnel Expense $553 $4,395 $4,395 $629

Total Delivery Expense $1,817 $8,187 $8,187 $1,893

RUNNING A FOOD HUB 71

n Supplemental Tables: Direct-to-Consumer Model

Table 26
Direct-to-Consumer Cash flow

Ongoing Jan Feb Mar Apr

Operating Activities
Net Income (Loss) (3,428) (4,518) (4,285) 88,815 (33,324)
Non cash charges to net income (loss)
Depreciation 212 212 212 212 212
Tax Credit 0 0 0 0 0
(Increase) Decrease in current assets
Accounts receivable 0 0 0 (95,312) 95,312
Inventories
Increase (decrease) in current liabilities
Accounts payable and accrued expenses
Accrued interest 0 0 0 675 0

Net Cash Provided by (Used in)

Operating Activities ($3,215) ($4,306) ($4,072) ($5,609) $62,200

Investing Activities
Purchases of property and equipment 0
Financing Activities
Member contributions (distributions) 0 0 0 0 0
Other contributions 0 0 675 0
Grants 0 0 0 0
Net borrowings (payments) on short-term
loans or notes 0 0 0 0
Principal payments on long-term loans (190) (190) (190) (190)
Proceeds from long-term debt borrowings 0
Net Cash Provided by (Used in)
Financing
Activities 0 (190) (190) 485 (190)

Net Increase in Cash ($3,215) ($4,496) ($4,263) ($5,124) $62,010

Cash — beginning of period $20,000 $16,785 $12,289 $8,026 $2,902

Cash — end of period $16,785 $12,289 $8,026 $2,902 $64,912

72 RUNNING A FOOD HUB

 May Jun Jul Aug Sep Oct Nov Dec B/E

Annual
(40,001) 127,354 (42,227) (37,119) (30,442) (19,314) (4,285) (4,285) (3,630)

212 212 212 212 212 212 212 212 2,549

0 0 0 0 0 0 0 0 0
0
0 (145,728) 145,728 0 0 0 0 0 0

0
0
0 1,032 0 0 0 0 0 0 1,707

($39,788) ($17,130) $103,714 ($36,906) ($30,230) ($19,102) ($4,072) ($4,072) $627

0
0
0
0 0 0 0 0 0 0 0 0
0 1,032 0 0 0 0 0 0 1,707
0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0 0
(190) (190) (190) (190) (190) (190) (190) (190) (2,282)
0

(190) 842 (190) (190) (190) (190) (190) (190) (575)

($39,979) ($16,288) $103,524 ($37,097) ($30,420) ($19,292) ($4,263) ($4,263) $52

$64,912 $24,933 $8,646 $112,170 $75,073 $44,653 $25,362 $21,099 $16,785

$24,933 $8,646 $112,170 $75,073 $44,653 $25,362 $21,099 $16,836 $16,836

RUNNING A FOOD HUB 73

n Supplemental Tables: Direct-to-Consumer Model

Table 26 (Continued)
Direct-to-Consumer Cash flow

GR Q1 GR Q2 GR Q3

Operating Activities
Net Income (Loss) 117,195 69,142 (146,676)
Non cash charges to net income (loss)
Depreciation 637 637 637
Tax Credit – – –
(Increase) decrease in current assets
Accounts receivable (44,558) (18,909) 63,468
Inventories
Increase (decrease) in current liabilities
Accounts payable and accrued expenses
Accrued interest (947) (1,349) –

Net Cash Provided by (Used in) Operating Activities $72,327 49,522 ($82,571)

Investing Activities
Purchases of property and equipment –
Sale of Property and Equipment
Financing Activities
Member contributions (distributions) – – –
Other contributions 947 1,349 –
Grants – – –
Net borrowings (payments) on short-term loans or notes – – –
Principal payments on long-term loans (608) (608) (608)
Proceeds from long-term debt borrowings –
Net Cash Provided by (Used in ) Financing Activities 339 741 (608)

Net Increase in Cash $72,666 $50,263 ($83,178)

Cash — beginning of period $16,836 $89,503 $139,766

Cash — end of period $89,503 $139,766 $56,587

74 RUNNING A FOOD HUB

 Annual Annual
GR Q4 VI Q1 VI Q2 VI Q3 VI Q4 Total GR Total VI

(36,727) 139,399 117,859 (192,414) (45,728) 2,935 19,116
– –
637 637 637 637 637 2,549 2,549
– – – – – – –
– –
– (53,831) (37,136) 90,967 – – –

– –
– –
– (1,144) (1,933) – – (2,296) (3,077)

($36,089) $85,061 $79,427 ($100,809) ($45,091) $3,189 $18,589

– – –
– – –

– – – – – – –
– 1,144 1,933 – – 2,296 3,077
– – – – – – –
– – – – – –
(608) (647) (647) (647) (647) (2,430) (2,588)
– –
339 485 1,269 (647) (647) (135) 489

$72,666 $85,558 $80,713 ($101,456) ($45,738) $3,054 $19,077

$56,587 $19,890 $105,448 $186,161 $84,705 $16,836 $19,890

$19,890 $105,448 $186,161 $84,705 $38,967 $19,890 $38,967

RUNNING A FOOD HUB 75

76 RUNNING A FOOD HUB
Photo courtesy of Common Market Philadelphia
 N e w T e c h n i c a l R e p o rt S e r i e s

Running A
FOOD HUB
ME ONE ME TWO FOUR
VOLU VOLU ME
VOLU

Running a Food Hub: Lessons Learned From the Field, Vol. 1, SR 77

Running a Food Hub: A Business Operations Guide, Vol. 2, SR 77
Running a Food Hub: Learning From Food Hub Closures, Vol. 4, SR 77

These reports are part of multi-volume, technical report series: Running

a Food Hub. The first volume compiles a number of best business
practices for starting or expanding a food hub enterprise. It includes
operational profiles of the food hubs profiled in the report.
Volume 2 focuses on operational issues faced by food hubs, including
organization, infrastructure, and logistics, among others.
Volume 4 examines factors that led to the closure of six food hubs. It
identifies lessons learned from each case, helping other food hubs avoid
similar pitfalls.
For hard copies (please indicate title, publication number, and
quantity needed), e-mail: [email protected], or call: (202) 720-
7395. Or write: USDA Co-op Info., Stop 0705, 1400 Independence Ave.,
SW, Washington DC 20250. To download from the Web, visit: www.
rurdev.usda.gov/rbs/newpub.htm.