A food hub business as defined by the USDA is “a centrally located facility with a business management structure facilitating the aggregation, storage, processing, distribution, and/or marketing of locally/regionally produced food products.
Food hubs also fill gaps in food system infrastructures, such as transportation, product storage, and product processing. Available data shows that there are about 212 food hubs in the United States and industry data indicates that local food sales totaled at least $12 billion in 2014 and estimates that the market value could hit $20 billion.
Steps on How to Write a Food Hub Business
Table of Content
Kansas Maestro™ Food Hub, Inc. is a standard and registered food hub that will be located in a farming community in Overland Park, Kansas. We have been able to lease a facility that can fit into the kind of food hub we intend to launch.
We chose Overland Park, Kansas because nearly 90 percent of Kansas’ land is devoted to agriculture. The state’s agricultural outputs are cattle, sheep, wheat, sorghum, soybeans, cotton, hogs, corn, and salt. As of 2018, there were 59,600 farms in Kansas, 86 (0.14 percent) of which are certified organic farms.
The average farm in the state is about 770 acres (more than a square mile), and in 2016, the average cost of running the farm was $300,000. John Abraham is the founder and CEO of Kansas Maestro™ Food Hub, Inc.
a. Our Products and Services
- Aggregation: Compile products from different suppliers/farms to distribute through a single channel
- Distribution: Store products and transport them to the customer
- Marketing and sales: Find buyers, sell and advertise farm produce, and promote farms’ brand identities.
At Kansas Maestro™ Food Hub, Inc., we also offer a single drop-off point for multiple farmers that also serves as a single pick-up point for distributors and customers.
b. Nature of the Business
Kansas Maestro™ Food Hub, Inc. will operate a Retail or Farm to Consumer (F2C) business model. This model gives farmers more access to high-value markets by distributing products directly to consumers online, in a retail space.
c. The Industry
Kansas Maestro™ Food Hub, Inc. will operate in the agribusiness industry.
d. Mission Statement
Our mission is to establish a food hub business that will benefit farmers by connecting them with additional (often larger) markets and providing services like marketing, accounting, sales, and education.
e. Vision Statement
Our vision is to build a top-flight food hub business; we want to be listed among the top 3 food hubs in the United States of America.
f. Our Tagline (Slogan)
Kansas Maestro™ Food Hub, Inc. – Farmers’ Trusted Business Partner!
g. Legal Structure of the Business
Kansas Maestro™ Food Hub, Inc. will be formed as a Limited Liability Company (LLC). The reason why we are forming an LLC is to protect our assets by limiting the liability to the resources of the business itself. The LLC will protect our CEO’s assets from claims against the business, including lawsuits.
h. Our Organizational Structure
- Chief Executive Officer (Owner)
- Warehouse/Storage Facility Manager
- Merchandise Manager
- Accountant (Cashier)
- Salesgirls and Salesboys
i. Ownership/Shareholder Structure and Board Members
- John Abraham (Owner and Chairman/Chief Executive Officer) 52 Percent Shares
- Tim Jeffery (Board Member) 18 Percent Shares
- Roland Patrick (Board Member) 10 Percent Shares
- Mark Heinsen (Board Member) 10 Percent Shares
- Mercy Freeman (Board Member and Sectary) 10 Percent Shares.
- Ideal location for a food hub business
- Highly experienced and qualified employees and management
- Access to a wide range of farmers
- Access to a wide range of farm produce merchants in and around our city
- Well-equipped and modern warehouse and storage facility.
- Financial Constraints
- A new business that will be competing with well-established and even government-owned food hubs.
- Inability to retain our highly experienced and qualified employees longer than we want
- Kansas is an agriculture hub (nearly 90 percent of Kansas’ land is devoted to agriculture.)
- Increase the number of farmers who would want to work with food hubs
- Online market, new services, new technology, and of course the opening of new markets
i. How Big is the Industry?
The food hub industry is indeed a big and ever-growing industry because the agribusiness industry that the food hub is part of is responsible for employing about 7,195,078 employees and the industry rakes in a whooping sum of $2 trillion annually.
ii. Is the Industry Growing or Declining?
Yes, the agribusiness industry that the food hub is a part of is a growing industry. The industry is projected to grow at 0.5 percent annually.
iii. What are the Future Trends in the Industry
The future trends when it comes to the food hub business will revolve around technology. We would have software that is meant to predict what customers want from a food hub business and also create online markets where people can order the farm produce they want from the comfort of their homes and get it delivered to them with ease.
iv. Are There Existing Niches in the Industry?
Yes, there are existing niche ideas when it comes to the food hub line business. Here are some of them;
- Organic food hub
- Non-organic food hub
- Retail or Farm to Consumer (F2C) food hub
- Community-Supported Agriculture (CSA) subscription
- Wholesale or Farm to Business/Institution (F2B).
v. Can You Sell a Franchise of your Business in the Future?
No, Kansas Maestro™ Food Hub, Inc. has no plan to sell franchises in the nearest future.
- The arrival of a new food hub business or even agribusiness merchant within our market space
- Unfavorable government policy and regulations.
- Economic uncertainty
- Liability problems
- The U.S. Food and Drug Administration (FDA) could change its regulatory status and decide to enforce strict regulations that can strangulate new businesses like ours.
i. Who are the Major Competitors?
- Farm Fresh Rhode Island
- The Food Hub
- Local Food Hub
- Iowa Food Hub
- Organic Greens
- Iowa Food Coop
- Prudent Produce
- Field to Family
- Grinnell Farm to Table
- Central Texas Food Hub.
ii. Is There a Franchise for Food Hub Business?
No, there are no franchise opportunities for food hub businesses.
iii. Are There Policies, Regulations, or Zoning Laws Affecting Food Hub Business?
Yes, there are county or state regulations or zoning laws for food hub businesses. The regulation of the industry is shared by the FDA and the Treasury Department’s Tax and Trade Bureau. Every food hub business must register with the FDA, and therefore any food hub business is subject to random FDA inspections without warning.
Please note that in the United States, you are required to follow your own state’s foodservice code. Visit the FDA website for a list of food service codes by state. Use this to find the state authority handling food hubs and view the laws that apply in your state.
a. Who is Your Target Audience?
Our target market covers farmers, off-takers, wholesalers, and consumers
i. Age Range
Our target market comprises people of all ages.
ii. Level of Education
We don’t have any restrictions on the level of education of those who will purchase farm produce from us.
iii. Income Level
There is no cap on the income level of those we will sell farm produce to.
There is no restriction when it comes to the ethnicity of the people who will purchase farm produce from us.
There is no restriction when it comes to the language spoken by the people who will purchase farm produce from us.
vi. Geographical Location
Anybody from any geographical location is free to purchase farm produce from us.
Kansas Maestro™ Food Hub, Inc. will not restrict any customer from purchasing farm produce from us based on their lifestyle, culture, or race.
b. Advertising and Promotion Strategies
- Deliberately Brand All Our Vans and Trucks.
- Tap Into Text Marketing.
- Make Use of Bill Boards.
- Share Your Events in Local Groups and Pages.
- Turn Your Social Media Channels into a Resource
- Develop Your Business Directory Profiles
- Build Relationships with players in the grocery retailing industry and the food services industry.
i. Traditional Marketing Strategies
- Marketing through Direct Mail.
- Print Media Marketing – Newspapers & Magazines.
- Broadcast Marketing -Television & Radio Channels.
- Leverage direct sales, direct mail (postcards, brochures, letters, fliers), referral (also known as word-of-mouth marketing), radio, and television.
ii. Digital Marketing Strategies
- Social Media Marketing Platforms.
- Influencer Marketing.
- Email Marketing.
- Content Marketing.
- Search Engine Optimization (SEO) Marketing.
- Affiliate Marketing
- Mobile Marketing.
iii. Social Media Marketing Plan
- Start using chatbots.
- Create a personalized experience for our customers.
- Create an efficient content marketing strategy.
- Create a community for our target market and potential target market.
- Gear up our profiles with a diverse content strategy.
- Use brand advocates.
- Create profiles on the relevant social media channels.
- Run cross-channel campaigns.
c. Pricing Strategy
When working out our pricing strategy, Kansas Maestro™ Food Hub, Inc. will make sure it covers profits, insurance, premium, license, economy or value, and full package. All our pricing strategies will reflect;
- Cost-Based Pricing
- Value-Based Pricing
- Competition-Based Pricing.
Sales and Distribution Plan
a. Sales Channels
Our channel sales strategy will involve using partners and third parties—such as referral partners, affiliate partners, strategic alliances in the grocery retailing industry, and the food services industry, to help refer customers to us.
Kansas Maestro™ Food Hub, Inc. will also leverage the 4 Ps of marketing which are place, price, product, and promotion. By carefully integrating all these marketing strategies into a marketing mix, we can have a visible, in-demand service that is competitively priced and promoted to our customers.
b. Inventory Strategy
The fact that we will be selling different types of farm produce means that Kansas Maestro™ Food Hub, Inc. will operate an inventory strategy that is based on a day-to-day methodology for ordering, maintaining, and processing items in our warehouse and storage facility.
Kansas Maestro™ Food Hub, Inc. will make sure we work with “Just-in-time (JIT) inventory” – (JIT involves holding as little stock as possible, negating the costs and risks involved with keeping a large amount of stock on hand.)
c. Payment Options for Customers
Here are the payment options that Kansas Maestro™ Food Hub, Inc. will make available to its clients;
- Payment with cash
- Payment via credit cards
- Payment via online bank transfer
- Payment via check
- Payment via mobile money transfer
d. Return Policy, Incentives, and Guarantees
At Kansas Maestro™ Food Hub, Inc., our customers are our top priority hence if you receive farm produce that is different from your receipt, we will sincerely apologize. Please call us as soon as you notice that there was an error in your order you may come to pick up the correct farm produce.
For credit card payments, you will be refunded the sales price amount associated with the error and recharged for the new items’ price. For cash payments, you will be asked to pay the difference of the balance if the new farm produce has a greater value than the farm produce received in error. In some cases, we may offer you store credit.
Your order will be a priority if you come to pick it up. In all cases, please return the farm produce order in the original container(s) to our host. Please, if you have any questions regarding the Return & Refund Policy, please call our customer care officer.
e. Customer Support Strategy
Our customer support strategy will involve seeking customer feedback. This will help us provide excellent customer service to all our clients. We will work with effective CRM software to be able to achieve this. Regularly, we will work towards strengthening our Customer Service Team and also Leverage Multi-Channel Servicing as part of our customer support strategy.
We plan to expand our revenue by 25 percent in the second year and the plan will include a marketing, sales, and operations component. The operations component of the plan would include attracting partnership and retainer deals that will enable the firm to boost our sales and support revenue growth.
a. What Happens During a Typical Day at a Food Hub Business?
- The business is open for the day’s work
- The storage facility and walking area are cleaned and ready for the day’s business
- Farm produce is received from farmers and arranged in the warehouse and storage facility
- Walk-in customers are attended to
- Customer’s orders are taken and their orders are delivered to them
- Cashiers collect cash and reconcile accounts for the day
- Administrative duties are carried out
- The store or warehouse is restocked when required.
- The business is closed for the day.
b. Production Process
There is no production process for the food hub business.
c. Service Procedure
Food hubs work with farmers by connecting them with additional (often larger) markets and providing services like marketing, accounting, sales, and education. Food hubs can offer a single drop-off point for multiple farmers that also serves as a single pick-up point for distributors and customers.
d. The Supply Chain
Kansas Maestro™ Food Hub, Inc. will rely on key players in the grocery retailing industry and the food services industry to serve as off-takers. So also, we have been able to establish business relationships with a wide range of farmers in and around our city.
e. Sources of Income
- Commission from selling farm produce for farmers.
a. Amount Needed to Start your Food Hub Business?
Kansas Maestro™ Food Hub, Inc. would need an estimate of $250,000 successfully set up our food hub business in the United States of America. Please note that this amount includes the salaries of our staff for the first month of operation.
b. What are the Costs Involved?
- Business Registration Fees – $750.
- Legal expenses for obtaining licenses and permits – $1,300.
- Marketing, Branding and Promotions – $1,000.
- Business Consultant Fee – $2,500.
- Insurance – $1,400.
- Rent/Lease – $75,000.
- Other start-up expenses like TV subscriptions, phone and utility deposits ($1,800).
- Operational Cost (salaries of employees, payments of bills et al) – $30,000
- Start-up Inventory – $55,000
- Store Equipment (cash register, security, ventilation, signage) – $1,750
- Furnishing and Equipping – $50,000
- Website: $600
- Miscellaneous: $2,000
c. Do You Need to Build a Facility? If YES, How Much will it cost?
Kansas Maestro™ Food Hub, Inc. will build a new facility for our food hub business and it will cost us approximately $165,000.
d. What are the Ongoing Expenses for Running a Food Hub Business?
- Utility bills (gas, internet subscriptions, phone bills, signage and software renewal fees et al)
- Salaries of employees
- Delivery vans maintenance
- Marketing costs
e. What is the Average Salary of your Staff?
- Chief Executive Officer – $55,000 Per Year
- Warehouse/Storage Facility Manager – $38,000 Per Year
- Merchandise Manager – $37,000 Per Year
- Accountant – $35,630,000 Per Year
- Salespeople – $26,000 Per Year
- Cleaners -$24,000 Per Year
f. How Do You Get Funding to Start a Food Hub Business?
- Raising money from personal savings and sale of personal stocks and properties
- Raising money from investors and business partners
- Sell shares to interested investors
- Applying for a loan from your bank/banks
- Pitching your business idea and applying for business grants and seed funding from the government, donor organizations, and angel investors
- Source for soft loans from your family members and friends.
a. How Much Should You Charge for your Product/Service?
We don’t have a specific amount to charge, it will depend on the type of farm produce, and the quantity.
b. Sales Forecast?
- First Fiscal Year (FY1): $280,000
- Second Fiscal Year (FY2): $540,000
- Third Fiscal Year (FY3): $750,000
c. Estimated Profit You Will Make a Year?
- First Fiscal Year (FY1) (Profit After Tax): $80,000
- Second Fiscal Year (FY2) (Profit After Tax): $180,000
- Third Fiscal Year (FY3) (Profit After Tax): $300,000
d. Profit Margin of a Food Hub Business
The ideal profit margin we hope to make at Kansas Maestro™ Food Hub, Inc. will be between 20 and 40 percent.
a. How do you intend to grow and expand?
Kansas Maestro™ Food Hub, Inc. will grow our food hub business by expanding our storage facility and of course, accommodating more farmers.
b. Where do you intend to expand to and why? (Geographical locations)
Kansas Maestro™ Food Hub, Inc. plans to expand to Little Rock, Arkansas, Idaho Falls, Idaho, Des Moines, Iowa, Wichita, Kansas, Brooklyn Park, Minnesota, Springfield, Missouri, North Platte, Nebraska, Grand Forks, North Dakota, Gresham, Oregon, and Dallas, Texas.
The reason we intend to expand to these locations is the fact that available statistics show that the agriculture industry is a major contributor to the GDP of the cities listed above.
The founder of Kansas Maestro™ Food Hub, Inc. plans to exit the business via family succession. We have placed structures and processes in place that will help us achieve our plan of successfully transferring the business from one family member to another and from one generation to another without hitches.