Association of Co-ops
Bakers/owners at Arizmendi bakery in San Francisco, CA - Credit: Inside Scoop SF
The Arizmendi Association is itself a cooperative made up of nine member businesses: six cooperative bakeries, a landscape design/build cooperative, a construction cooperative and a development and support collective. Members share a common mission, share ongoing accounting, legal, educational and other support services, and support the development of new member cooperatives by the Association.
September 4, 2020
What inspired the development of Arizmendi and what is the intention of the association?
That might depend on who you ask, I was one of the original founders so I have a slightly different perspective. My own motivation was having a sense that the way our economy was going was going to destroy our environment and continue to create bigger and bigger social fractures. If you want a sustainable economy both for human purposes as well for the larger environment you need to create one that wasn’t based on growth so that led me to cooperatives. Also, I really thought that if you wanted a movement for democracy you need to have an economic movement that is based on daily democratic practice. When I learned about cooperatives particularly the Mondragon cooperative that really came together for me.
Did the association begin after the first bakery?
The association started out of a study group of three of us who were looking at why cooperative networks were more successful in other parts of the world. We did a study of that looking particularly at the Mondragon cooperative as well as the Italian cooperatives. We did a study and we said what we thought had gone wrong in some prior efforts to bring those to the U.S. - people tried to replicate something from a different culture and a different economy too closely. What we should be doing is looking at the culture of the United States, what to draw on, and look at what was working in our economy at that time and what we could learn from that.
We also did a study on what we saw was thriving which was franchises and chains, we don’t happen to be the type of people who like franchises and chains but we thought we should learn from them, why they are successful. That led us to believing that one of the keys for the cooperative networks in other parts of the world was that they started with something they were successful at and then they would grow other businesses from it and network them together. Whereas in the United States we would start things that were unrelated and not really a network. For us, we looked for a business that we could start replicating, now we would think of it more as iterating. We fairly quickly focused on the Cheeseboard which was an existing bakery, cheese shop, and pizzeria and approached them about whether they were willing to allow us to use their model for replicating businesses based on them.
The association itself depends on how you define it but there was a group of the three of us that created what we called the Development Support Cooperative and we approached the Cheeseboard and said we would like to do this and if you’re open to it we would like you to be a member with us and then the Oakland Co-op which was the first bakery we started became the third member of the association.
Emmentaler cheese cutting at the Cheese Board Collective
Chain establishments tend to compromise quality and service, what do you think has helped Arizmendi hold its integrity?
We found that most of the things we disliked about them were really about the fact that they were centrally controlled, hierarchical from the top, were draining resources from communities, and were creating a lot of monotony. We actually didn't think that was necessary to get some of the benefits that are involved in terms of food operation, economies of scale, and market presence. You could actually have it upside down where you had community stores that controlled shared services. We refer to them as community shared services without central control and that way the resources were staying in the community as well. We thought we didn’t want to have the monotony and we didn't want to have the lack of innovation that goes with that either. We wanted to have each store have enough commonality that the customer would recognize it as a good experience that they had somewhere else transferable to a new place but we wanted them to innovate and create new products, we feel like we have the best of both that way.
Why did you decide to expand the association of cooperatives beyond bakeries and what other types of cooperatives do you hope to join?
That was always our vision from the beginning to start with one business because by learning that one business you can create more jobs and replicate more quickly. Our long term vision was to create a mutually supportive democratic economy that is a bioregion and then go to other bioregions and start their economies of that nature. We really wanted from the beginning to have all aspects of production and consumption involved in a network. Now we've moved into land based and development coops, we have a construction and landscape cooperative. We’ve been working on creating an affordable housing development from a combination of the design and construction.
Backyard garden in San Francisco by Root Volume Landscape Cooperative
Why did you decide to expand the association of cooperatives beyond bakeries and what other types of cooperatives do you hope to join?
If you are one of the food business and you’re starting a new business, most food businesses fail. We’ve opened five bakeries since the original bakery and not a single one of them has failed. Part of that has to do with market presence, if someone has a good experience and trust with the name Arizmendi and they see a new one open up in their neighborhood then that's an initial boost. We have proven recipes and techniques and we have training resources. When we start a new bakery we place the bakers who are going to be the founders of the new bakery at the established bakeries to give them the training.
There’s a huge amount of advantages that a stand alone business doesn’t have; we also provide ongoing bookkeeping, legal, and educational support. What we found is that first of all, our societies do not train people well, they don’t give them a good background for how to make decisions and work democratically together so we need to provide education about that. There’s also the fact that within a small collective dysfunction can set in and if you are by your own then that dysfunction can turn into a downward spiral. Whereas if you are part of a network you have people who understand your business that can come in and help you identify what problems are going wrong. That's one of the other services we do is help co-ops identify difficulties and work through them.
We have a strange model even among cooperative developers - build and recruit model. We go out and build a business plan, we find a location, raise the money and we lease the space before we even have any members. Once we have our neighborhood then we start recruiting, we’ve done that because we want to draw on particular neighborhoods and we want the owners to be in the neighborhood that they are serving. We are only about four months out from opening when we recruit the founders. We have a six month candidacy, so even on opening day the people who are the temporary board of directors are the trainers from the veteran bakeries and from the development support cooperative and then we pass it over to the founders who passed their candidacy process.
As a part of that process we try to expose them to successful cooperative culture and part of that is putting them in internships at the existing co-ops to actually go in and operate one of the existing co-ops so they can all get to work together. We bring in people who are veteran bakers from other bakeries to do some of the initial training at the store and help open the store with. We are not picking these people just because they are good bakers we are also picking people who we believe are positive cooperative leaders.
Our bakeries happen to focus on sourdough breads and we think of this as our sourdough culture approach. Sourdough is a culture, it's a living thing and it picks up the elements of the baking around it and they bring a new richness to a new environment. We try to do that for our co-ops, we provide them with a structure and influences of successful cultures but we let them grow into their own culture. Part of my job is we let those experiments go and I get to study the existing co-ops that are doing new innovative things and say let’s write about that in the newsletter or do a workshop so that other co-ops can learn about it. Not that they have to do it or we say we’ve identified this as a best practice and now everyone has to do it. We take the experiment from one area we study it and we show it to the other co-ops and if they're interested they can adopt it and experiment with it in their own context.
Arizmendi Bakery (Mission District) - Credit: The City Lane
How do you decide where the next bakery business will be?
We survey the existing members and we ask where they think is a good place for us to look and where are neighborhoods you would be uncomfortable with us being in. When we are talking about neighborhoods that we are uncomfortable being in, they are neighborhoods that are maybe too close to an existing store. We come up with a list of neighborhoods to look in and we start to spend time in those neighborhoods, we talk to community organizations and see if they want us in their neighborhood.
We take a community organizing approach to it. We are not just going to come in and make a financial study, we find out if people want us in that neighborhood and we often do recruitment for the initial founders through ally community organizations. For us it's really a part of finding out if we are wanted in that community and how to belong in that community. We make a word out to our real estate people that we are looking in this community that we’ve identified and they seem to be interested in us being there. Then it gets down to mechanics where you just go to a neighborhood at 7:00 in the morning and you count how many people walk and drive by, and then you go at noon and count the same thing, you go there at 5:00 and you do the same thing. It’s gets to kind of be a mundane thing but we do have calculations that we take into account from that.
There’s certain things that we are looking for in a neighborhood culturally in terms of diversity in the community that we’re going to be drawing on and a certain urban density is kind of important for the food type of business we are trying to provide. We are not just trying to sell expensive things to wealthy people, we are trying to produce gourmet food for masses of people. We really want a neighborhood where there is going to be a lot of density, traffic, and a real feel of a neighborhood rather than just a drive by destination.
Outside Arizmendi Bakery San Francisco 9th Ave. Parklet - Photo by: Jack Verdoni Architecture
How did you receive funding?
We bootstrapped pretty much everything from the beginning but we tried to make connections with funders from the start by going to a bank that used to be called the National Cooperative Bank. We said we know you are not going to lend to us for our first business but we want to talk to you about it and we want you to identify for us some thresholds that if we need them in a couple years you’ll want to refinance our initial loans. They were impressed by the fact that we understood that we weren’t going to get a loan initially and they were impressed that we asked about thresholds. We actually got the thresholds about a year into the business and were able to refinance it very early on.
We went to individuals that we had connections with through our community work previously and we were able to raise a quarter of million dollars to start the first business. For the second business, we were able to get half of it through a loan and the other half through community loans. Now we go and we take a loan of somewhere between $500,000 and $600,000 from a bank but that’s leverage through the association putting about a quarter of a million dollars in terms of veteran production trainers, cash, and things like that. The initial founders put in a certain amount of money but that’s really more of a sign of investment in terms of emotional investment than it is a major source of capitalization. We want to keep the businesses accessible to people and if we made that based on what we thought the market value of the business was going to be we would be excluding a lot of people who we want to welcome in.
The association itself is fueled by the success of the businesses we start, we don’t take grant money, we don’t take government funds, our fees are based on the success of our cooperatives. When we first started going we studied the franchises and what they did to succeed and we studied the cooperatives in Spain and Italy. Franchises will charge something like 7% of revenue, so for 7 cents out of every dollar that may come through a fast food chain that 7% goes to the central headquarters. They do it that way because they don’t really care if the individual businesses succeed or not and they don’t trust the individual business.If you were doing it based on a profit basis for how well the business is doing you would be worried that you were going to get cheated. For us that really wasn’t the issue. We really wanted to eventually be a business which the businesses that were doing better were contributing more to the mission.
We have changed from a more solidarity worker formula, the formula essentially says if you have a bakery with 20 workers think of their being an additional 21st worker. You pay through the association the amount that you paid that 21st worker based on the average worker you have and the job of that 21st worker who’s working beside you for the benefit of the cooperation of the people. When a cooperative pays their fee they are paying for the ongoing services in terms of bookkeeping, legal support, and educational support but they are also contributing to a fund to start the next co-op.
What decision making processes are used?
Each co-op is separately incorporated and a separate entity that makes 99% of their decisions without concerning any of the other co-ops. When there is a decision to be made that affects more than one co-op that decision is made though our policy council which is technically the board of directors of our association. The association of the cooperative is made up of the individual co-ops and each of those individual co-ops elect two representatives to our policy council. Through modified consensus we make decisions about where the next bakery might be or what line of business we are going to go into or what ongoing support services do we want to go to the established members.
What is the greatest challenge in nurturing an association of cooperatives?
There’s micro level and macro level on the micro level I would say it's the fact that we’re trying to do something cooperative in a society that encourages individuals with competition so fundamentally you are having to build a culture that encourages a different way of living and interacting with each other. On a macro level even if you build cooperatives individually where people cooperate with each other on a day to day basis sometimes it's hard to get people to want to cooperate on a more regional basis because they tend to identify with their individual co-ops.
Generally in the progressive movement people tend to have this thinking where small is beautiful and big is bad, there’s some truth to that but there’s also some truth to the fact that small is beautiful can also be small is marginal. Trying to build up for people a sense that your immediate community connections are important but we should also be trying to build a larger movement where we try to bring these benefits to more people is a challenge that we face. I think a lot of people take a look at cooperatives and they think either they won’t work and if they are around long enough and they’ve proven they can work then it's like well that’s cute that’s an exception that can work on a small scale. Unless you can prove that we can fulfill society’s larger needs then you’re basically surrendering the rest of the field. We have to prove that cooperatives can fulfill our communities needs in all different realms in terms of transportation networks and all different types of things.
We look at our cooperative as not just individual cooperatives but as democracy demonstration projects and schools and trying to show that you can have a different kind of economy that is sustainable and community based. For us if we weren’t getting larger we wouldn’t actually be reaching as many people and we wouldn’t be giving them hope and that’s what we are about. We are not just about baking bread and constructing buildings, we are about giving hope to people. Being bigger is a part of proving to people that we can fulfill their bigger hopes.
First Arizmendi Bakery in Oakland, CA - Credit: On the Grid
What is the greatest benefit in nurturing an association of cooperatives?
I think it’s very hard to succeed in a capitalist economy. It's a small island of cooperation so it's important to have a network of people and resources that are geared towards cooperative operation. When I first started doing this type of work, if you were to approach an accountant or an itinerary about how to start a co-op the first thing they would try to do is talk you out of it, they would say that’s not possible or you shouldn’t do it that way you should do it this way. Same thing in terms of educational resources, like in business school still to a large extent they don’t even mention co-ops. One of the things we learned from the Italians in the Basque was that you need educational resources and support services that are geared towards co-ops, I think that’s one of the reasons why we’ve had such a high success rate compared to businesses in general and cooperatives.
Knowing what you know now, what advice would you have given yourself when Arizmendi first began developing?
There’s lots of things that we should’ve learned quicker than we did, the first thing that comes to mind for me is to invest in creating a cooperative community that is self replicating, self-repairing, and self-renewing, we did a really good job of training the initial founders but we didn’t do a good job of training them on how to train other people. We now put a lot of effort into creating a founding group who can also train people and bring them into the culture and also finding ways that the culture can be self-repairing and self-renewing. Each of our businesses are a collective, we don’t have general managers, we don’t hire professional managers, everyone is a manager.
We also create what we call a collective evaluation committee whose job it is to sit down every month and discuss the things that people keep talking about but no one is doing anything about it. It’s not their job to be a management group and do something about it; they are just bringing it to the attention of the collective to discuss. We try to build in ways to make sure it doesn’t go too far off in one negative direction or fails to recognize opportunities. The advice I probably would’ve given myself is how to create a culture that is continuing to replicate and how it will repair itself.