Small grocery stores are a staple for many communities, but food co-ops take that concept to the next level by putting the power directly in the community’s hands.
Starting a food co-op is a great way to build food security and community, especially in areas that are underserved by for-profit grocery chains. However, unlike a small grocery store, starting a food co-op can be a bit more complex (and take more time).
If you’re thinking of starting a food co-op, it’s vital to know some key action items and must-haves to ensure it will be a success. In this article, we’ll dive into the basics of a food co-op business, the reasons to start one, and seven practical considerations you need to know before you get started.
Before we get into the details of starting a food co-op, let’s first get on the same page about what a food co-op actually is.
The community-run aspect of a co-op is what makes them so appealing to many people. It can also make running the store a little more complicated, as cash flow is more limited and major decisions need to pass through a group.
A traditional grocery store or supermarket is owned by an individual, a business group, or investors who may or may not be members of that community. Here are some key differences between a grocery store and a food co-op:
It’s worth noting that there are many independent, family-owned grocery stores that are heavily invested in their communities and not solely focused on turning a profit. In many cases, independent ownership gives community-minded owners more flexibility to adjust business models and stocking decisions to meet changing expectations and economic conditions.
In other words, running a food co-op doesn’t automatically make you a more ethical or community-oriented business by default. However, knowing how each business is run will help you determine which business model is right for you.
Some grocery stores give their employees partial financial ownership of the store, usually through an employee stock ownership plan (ESOP). But a grocery store with an ESOP is not the same as a co-op because of the focus and decision-making processes.
For example, Publix, a popular grocery chain in the southern U.S., is often referred to as a co-op, and while it does offer employees stock compensation (and therefore some financial ownership), all strategic decisions are still made by a separate management group — and stores like Publix are still primarily focused on high profit margins.
In a food co-op, community owners are also the primary decision-makers. Unlike a publicly traded company, where a single person who owns many shares has more say in the company, co-ops run on the principle that every member has equal weight (one member, one vote). This allows all co-op members to weigh in equally on what to stock, marketing strategies, technology decisions, and everything else.
A food co-op is inherently more complicated to run and often harder to get financing for because traditional investors won’t see as large a return on investment (ROI). But just because they’re a little harder to get started, it doesn’t mean they’re not worth it.
Here are a few ways food co-ops benefit their communities:
A rising number of food deserts have emerged in areas that large corporations and chains deem unprofitable. Starting a food co-op offers an accessible, long-term solution for underserved communities.
If the idea of starting a food co-op excites you, then it’s time to jump into the practical aspects of running one. Here are seven key action items you need to consider before starting a food co-op.
The success of a co-op relies entirely on the surrounding community. If people aren’t willing to invest in a co-op, it will never be able to sustain itself in the long term.
So, before you get too far into the process, organize a small exploratory group and gauge interest in the idea. Send out surveys to nearby neighborhoods and apartment complexes, or see if you can attend HOA, town hall, or other community meetings to present the idea in person to community leaders.
Once you build up some steam, you can start to host your own meetings to talk about potential locations, local suppliers, and other details.
Community organization is essential during these early stages, running on goodwill, patience, and volunteer work. So, start with a small group of enthusiastic and personable volunteers and craft a strong mission statement that articulates your values and what you plan to bring to the community.
It’s also not a bad idea to start forging connections with other co-ops in your state or nationally to get professional advice.
Related Read: Opening a Grocery Store in a Small Town: Is It Profitable?
Once you’ve found an interested community, it’s time to think about what it will take to turn your co-op dream into a reality.
Like any traditional business, your first port of call is to write a detailed grocery store business plan. A business plan will help you articulate your value proposition, do market research, decide the types of products you want to stock, and determine all of the initial setup and ongoing operating costs.
This is another area where consulting established co-ops may be particularly useful to get a realistic idea of your budget and projected profit margins.
Here’s an example budget from a food bank in Fairbanks, Alaska, to give you a rough idea of the kinds of costs involved in starting a food co-op.
Image Source: Food Co-Op Initiative (FCI)
Food co-ops are a massive boon for farmers and other local producers, with a 2025 report estimating that almost 24% of an average co-op’s sales come from local products — that’s in stark contrast to conventional grocers, whose sales of local products make up only 2% of their total revenue.
A keen focus on locally-supplied food provides a mutually beneficial opportunity for your new co-op and local producers, so start talking to them long before your co-op opens its doors. Attend local farmers markets and other community events to get some face time with local producers.
You’ll also need to start forging relationships with regional distributors, local warehouses, and other suppliers.
Even though we’ve put this step after writing a business plan, the best time to start this process is while conducting market research. Food co-ops are all about securing local partners and building a local supply chain — the sooner you start, the better.
Last, don’t make promises you can’t keep. While you may be excited, be honest about the types of products you need, in what quantities, and how much you can afford to pay.
Co-ops are owned by their community members, but different co-ops have varied approaches to membership. Here are a few common membership caveats to consider:
To entice people to invest in a membership, many food co-ops provide perks for members, such as:
Regardless of how you specifically price or run your membership model, there’s one golden rule: Members cannot pay their way into more decision-making power. A co-op is run democratically, with an elected board. A higher-tier membership can’t be a way to bypass that decision-making process.
Most food co-ops get a mix of member funding and loans to finance their businesses. Once you understand your store’s projected operating budget, you can start to calculate what annual membership fees for the co-op should be.
Several organizations provide financial assistance to food co-ops, including:
It’s generally a good idea to recruit potential owners (members) into the business before applying for grants, as it’ll show investors that there’s a great deal of community excitement.
Even though it’s community-focused, a food co-op is still a business. That means you still need to have a clear understanding of how to:
Handling these processes by hand is inefficient and a recipe for disaster — which is why it’s essential for food co-ops to employ a modern grocery store point of sale (POS) system. More than just a register to ring up customers, POS systems come with tools to manage every aspect of your business.
While POS systems built for general retail tend to be a bit cheaper, we recommend investing in a system that’s specifically built for grocery store operations. In addition to basic functions, these industry-specific systems support things like:
A POS system touches every aspect of your business and operations, so take the time to find and invest in a system that meets your co-op’s specific needs.
When you’re in the early stages of planning a food co-op, the realities of what the store looks and feels like might be a distant thought. However, taking some time to think about your grocery store design is an invaluable step when starting a co-op grocery.
Once you’ve secured a space, think of how you want people to move through the store. What do you want them to notice first? What kind of signage and displays will you use to draw their attention?
You also want to think about what brand colors and visual themes you’ll incorporate in the store. It might seem like a minor detail, but color can have a direct effect on how people perceive your brand.
Not only will this help you articulate the look and feel of your brand, it’ll help you nail down some of your location’s startup costs.
Starting your food co-op is only half the battle. Once you get up and running, you need to continually find opportunities to grow your membership and improve your processes to sustain the business in the long term.
Collaborating with the right technology partner can help. IT Retail has over 30 years of experience helping small and independent grocery stores find success in an increasingly competitive marketplace.
Our grocery-specific tools are designed to simplify your daily tasks and give you better visibility over your store operations, so you can make smarter decisions with confidence.
When you’re ready to turn your food co-op dreams into a reality, try our build and price tool to put together a system that fits your unique needs.