+Acumen Case Study: CommonWealth Kitchen

How One Nonprofit Pursues Market Opportunities to Generate Income Without Losing Focus of their Mission

January 07, 2019

CWK Header 2.jpg

CommonWeath Kitchen nonprofit business model case study
Teresa Maynard, owner of Sweet Teez Bakery, with one of the 48,000 mini-pies she made for Whole Foods in 2018. Photo: Sandy Rivlin

The mission of CommonWealth Kitchen (CWK) in Boston, Massachusetts is to provide “shared kitchens combined with business assistance to help aspiring entrepreneurs build great food companies, create jobs, improve healthy food access, and strengthen our regional food economy.” As the co-founder, Jen Faigel envisioned an organization that could work alongside entrepreneurs who are impacted by racial, social, and economic inequality, using a systems-based approach to help grow their businesses and close the wealth divide.

Founded in 2009, CWK has grown more than 700% in just the past 4 years. Between 2014-2018, CWK expanded from negative net assets to $1 million in positive assets, from three staff to 25, and from an operating budget of $320k to $2.4 million.

Since its launch, CWK has graduated 58 companies into their own dedicated operations. They are still in business today generating combined revenue of $35 million annually, and creating 600 jobs. On average, the incubator kitchen is home to 55 companies, including food trucks, caterers, bakers and packaged goods companies. Over 75% of the member companies are owned by women and/or people of color and employ 150+ in one of Boston’s lowest-income neighborhoods.

Today, the 12,000 square-foot kitchen facility supports 58 active members, and operates its own separate manufacturing enterprise, providing outsourced production to help member companies efficiently scale and on-demand processing for farms, retailers and anchor institutions.  In 2018, 44% of CWK’s budget came from earned revenue, with sights to reach 100% earned revenue by 2023.

CWK member products.jpg

CommonWealth Kitchen member company products, the result of their nonprofit business model
CommonWealth Kitchen member company products. Photo: Jhadley Sanchez

But the numbers weren’t always this positive. How did CommonWealth Kitchen successfully pull off an earned income strategy without diluting mission immpact?

A Rocky Start

Jen Faigel was first hired in 2013 as a consultant to support the redevelopment of a long-vacant food factory into a shared kitchen to bring more jobs into the neighborhood. Jen was not initially planning to lead CWK, but a background in real estate development and affordable housing project management made her a natural fit when the circumstances arose.

After Jen facilitated the initial project plan and helped raise $15 million in financing, it seemed like the organization was off to a promising start. However, four months before the newly renovated building was set to open, the anticipated launch stalled when it was discovered that the hired Executive Director was embezzling funds. The board brought Jen on temporarily for emergency damage control and to manage next steps.

With timely support from a network of funders, nonprofits, city and state agencies, and job training programs, the CWK team was able to open the doors in mid-2014 and start bringing aspiring entrepreneurs’ dreams to life.

Jen and the organization quickly learned that aspiring food entrepreneurs faced more hurdles to launching their businesses than simply accessing affordable kitchen space. On average, over 75% of CWK’s member companies are owned by low-income women, immigrants, or people of color. Access to kitchen space was top priority for these owners, but success also required support navigating the specifics of launching and running a food business, including licensing, sourcing, cash management, health regulations, marketing and more.

Coming from the housing sector, Jen did not have much experience working with food businesses. Yet, she knew she must leverage CWK’s “core” strengths in order to develop a business model that was sustainable and mission-aligned. To position CWK for success, she first hired a chef with extensive experience in the food business. With a track record of opening 25 restaurants in his career, he not only understood great cuisine but also operational necessities such as food formulation and permitting.

CWK Ravioli.jpg

CommonWealth Kitchen members making ravioli
Making ravioli in the CommonWealth Kitchen. Photo credit: Lucas Mulder

CommonWealth Kitchen Offerings

Shared kitchen space is available to member companies through a paid membership commensurate with usage. In addition of the kitchen, facilities include over 6,300 square feet of dry, cold, and frozen storage, a range of equipment and shared office space.

CWK offers additional free services to members:

Wrap-around business and technical support -

Ancillary support and services are designed for members in incubation, start-up, and growth stages, and cover areas of product development and processing, product and labeling, and business and legal needs.

Once the start-up preparation and permitting is complete, new food businesses can join as members to access the shared kitchen on a membership basis and receive additional support to grow. This includes production improvements, pitching, finding new distribution channels, hiring staff, managing finances, planning for graduation, and much more.

Industry Connections -

CWK facilitates connections to powerful industry networks up and down the supply chain to help member companies access new channels and secure sales.

In addition to serving member companies, CWK runs a 13-week business class specialized for food business start-ups. It is advertised in predominantly lower-income neighborhoods with the majority of participants being women or people of color. Demand for the class is growing, with many times more applicants than CWK can serve with only 15 spots per cohort. Building off this success, CWK subsequently partnered with Santander Bank, Babson College, and Initiative for a Competitive Inner City to deliver a 6-month business class for later stage food companies.

Earned Revenue Streams:

Shared Kitchens -

Member businesses pay a modest $100/month membership fee, plus hourly fees for kitchen rental and monthly fees for warehousing. This variable fee structure ties costs to member sales and activity. For example, food trucks can pay $3,000-4,000/month during the busy summer season, then a small fraction of that during the winter months when it’s much less busy. This approach reduces strain on cash flow for member companies, but results in more unpredictable revenue for CWK.

Outsourced Manufacturing -

CWK provides fee-for-service food production services to established members in need of scaling manufacturing.

CWK leverages the power of vertically-integrated services for members. By consolidating manufacturing services for companies at this stage, CWK can employ a specialized team and invest in large capacity equipment to help scale production, while turning multiple member company part-time and seasonal jobs into full employment with benefits on CWK’s staff. This dedicated team also helps oversee critical management issues like food safety, quality control, insurance, and keeping integrity with recipe and process.

Today, CWK manufacturers products (including veggie burgers, sauces, crackers, cookies and more) for 6+ member companies and wholesale customers, with more kitchen and staff capacity to grow this revenue stream further.

Institutional Manufacturing -

CWK manufactures food products for institutional clients.  Whenever possible these products rely on locally sourced raw ingredients, with many utilizing farm surplus. Current clients include Harvard University, Boston Public Schools, MIT, Leslie U, Emmanuel College, Emerson U, Blue Cross/Blue Shield, and Boston Children’s Hospital.

Farmer Value-Added Program -

CWK processes excess local farmer produce into white label shelf-stable and frozen products for farmers to extend the value of their harvests.

Read more about CommonWealth Kitchen member companies in the Boston Globe or listen to their stories below:

A Champion for Members

As the member companies that CWK was serving became more established, the organization saw an opportunity and a need to help their businesses navigate the next stages of growth.

The first question Jen began asking was, “Can we help these entrepreneurs figure out how to get their food distributed?”

Individually, members’ small order sizes deterred distributors who were typically only willing to handle larger, more established companies. By aggregating demand from multiple members, CWK was able to identify and unlock distribution partners and eliminate this key obstacle.

The next challenge CWK sought to tackle was finding more sales channels for members so they could continue scaling their businesses.

For 1.5 years Jen had her sights set on partnering with Whole Foods. With a bit of determination and a lot of luck, Jen found herself in front of a team of Whole Foods buyers while meeting with the staff from Sam Adams beer company’s “Brewing the American Dream” program, one of their existing corporate sponsors.

Jen remembers the experience: “I walked in with a giant cooler of product. I sat down and started pulling (the products) out like Mary Poppins. I just kept putting jars of jam and tubs of salsa and bottles of juice on the table and they looked at me like I was Santa Claus. They looked at the products, and there were clean labels, the packaging was nice, and the next thing we know, two weeks later, we had 25 people from Whole Foods in our kitchen doing a tasting with our companies.”

Since then, Whole Foods has remained a strong strategic partner, recently ordering 48,000 mini-pies from one of CWK’s member companies.

Jen credits securing this game-changing relationship to three things:

  1. She had built a strong reputation and reliable network, like existing corporate partners, who were able to facilitate key introductions. 
  2. Luck--she was in the right place at the right time!
  3. Supporting member companies to be in a position to showcase high-quality products when it counted and be ready when the sales come through.

Whole Foods has since become a thought partner to help member companies refine and improve their products for the retail channel. For example, an upcoming project will test showcasing member products, a diverse range of food products from across the globe, at the Whole Foods’ hot bar food station. The goal is to build buyer awareness while reducing the need for the entrepreneur to invest in sample days at every store, an enormous challenge for CWK’s mostly low-income, early-stage businesses.

For member businesses that are able to secure large orders, CWK can also backstop them by offering outsourced manufacturing services.

Jen shares: “We saw our companies struggle to find part-time staff to keep up with fluctuating orders, and were unable to find the money to invest in specialized equipment needed to ramp up production. We tried to recruit co-packers to outsource the production, but none had the flexibility to work with our early-stage businesses. So, we decided to step in and see if we could fill that gap.”

In the CWK.jpg

Inside the CommonWealth Kitchen
CWK business owner April Texeira, of Corny Bread Co., working in the kitchen. Photo: Karen Gowan

CWK launched its manufacturing operation in 2015, and today manufactures products for more than 30 different clients.  Jen explains that, “when we piloted the manufacturing work, we had no idea how complicated it would be or how much demand there would be. Not only from our own members, but also from local restaurants, retailers, farms and institutions, like colleges and hospitals. We kind of stumbled into this major market gap for small-batch processing.”These are only a few examples of the role CWK has carved out as a champion for members seeking to develop their businesses. Whether it is offering access to capital, markets, knowledge, or distribution, CWK now offers members much more than kitchen space. It has become an essential partner in navigating the food business.

A Systems-Lens to Value Creation

Pursuing all of these activities has not been without complication. Jen notes that funders have expressed concerns that CWK has taken on too many disparate goals. They say, “you are doing too many things. Pick one and then we can get behind you,” Jen reports.

This is understandable. Between offering kitchen space, training, manufacturing, and a pop-up store (a pilot described in the Lean Learning section below), the CWK portfolio could seem disjointed to fresh eyes.

But when looking through a systems lens, everything fits. Like a conductor, Jen is willing to experiment with unlikely arrangements to make functioning food business models come together.

Ultimately, her north star is helping aspiring entrepreneurs build great food companies, generate assets and wealth, create jobs, and strengthen Boston’s regional food economy. She considers any activities that fall within that purview mission-aligned.

“If you look at the nonprofit sector, in general, what you see are organizations who are very siloed. They’re focused on addressing specific symptoms, like hunger, but are not necessarily addressing the underlying cause of WHY people are hungry. It’s a very narrow, transactional way of thinking. And we are not that. We say: if our goal is to build assets and wealth and create sustainable employment by helping people build food businesses, then we have to help with each aspect of the business. If we don’t help our companies solve for distribution, or sourcing, or processing, or sales, or access to capital, then we’re not putting them in a position for success, and we’re not meeting our mission.”

CWK has proven that they are positioned to directly connect entrepreneurs to key parts of the food business value chain, including collaborations with retailers, event planners, corporate and institutional procurement staff, produce aggregators, distributors, and a range of funders. Yet, they recognize their limits and core competencies.

For example, they are not direct capital providers for companies. However, Jen can help the entrepreneurs prepare to pitch and introduce them to potential funders. She explains,

“my job is to go be in the face of those lenders and say ‘you need to do this deal and here’s why.’ At the same time, I need to make sure our member companies are ready for the opportunity when it comes. We need to do both of those things.”

CWK Members.jpg

CommonWealth Kitchen members showing off their products
The proud team from Hapi African Gourmet. Photo: Karen Gowan

Building from Your Core: A concept from the +Acumen Earned Income Accelerator

In 2014, Acumen co-authored a study with Bain and Company that found that agricultural enterprises were most effective if they had a clearly defined “core.” Your “core” is what your organization does distinctively well. This is typically the combination of 3 things: (1) the products or services you’re uniquely good at developing or delivering (2) the customer segments you’re uniquely good at serving and (3) the geographies or markets where you are dominant.

When you combine these three elements, you get a picture of the foundational parts of your organization. This can illuminate opportunities for growing your reach with a revenue-generating social enterprise while also preventing mission drift.

The core map is a tool that can help you think about your areas of focus by determining where your expertise lies now and how you can expand into new markets strategically. The core map’s vectors represent your product or service, your customers, and your target geography. You can include other dimensions, but this simple version is a way to get started.

With each level removed from the core, your product, customers, and geography become a little less central. That is, you begin to expand into adjacencies or markets that are related, but not directly included in your core.

As you think about developing a social enterprise idea, you’ll want to build upon areas that are already close to your core—rather than branching into entirely new directions when you do not already have existing strengths or resources. Mapping your core in this way will also help you determine which adjacencies to explore first, as it’s best to branch out only one dimension at a time.

The Makings of a Customer

How has CWK created a sustainable model to fund all of these important activities? CWK’s earned revenue model starts with charging members fees for the use of shared kitchen space. However, this revenue only covers about 20% of the operating budget.

More significant revenue comes from developing and manufacturing custom food products for non-member clients, primarily farms, retailers, wholesalers, and multiple anchor institutions (local universities,  hospitals and public schools). With this fee-for-service processing and R&D offering as a growing revenue source, CWK forecasts reaching 100% self-sustainability within five years.

Realizing the market potential of the institutional market required nimbly responding to individual needs and requests.

For example, discussions with Boston Children’s Hospital led to production of local applesauce utilizing nearly two tons of rescued apples originally destined for the compost pile. Similarly, Harvard requested the creation of a vegetarian option that could address growing student demand, so CWK responded by developing a new eggplant ‘meatball’.

This customized approach might not sound scalable, but it allows CWK to differentiate its products from larger food companies who typically offer commodity products at much lower costs. CWK works hard to deeply understand the needs of their largest customers and forge strong partnerships. Jen reflects, “our operation has come so far (because) we’re offering them something they need and we’re using their distributors to make it as easy as we can for them to work with us without losing authenticity on our side.”

When working with such large clients, offering customized services helps build relationships for future engagements and that extra effort can be built into the price. The vegetarian eggplant meatball that CWK developed for Harvard University is now on the menu at Boston Children’s Hospital, and is set to be on the menu at other Boston area hospitals in early 2019.

Looking back on their progress, Jen likens their approach to the ‘lilypad effect’:

Once you have one step figured out, you can jump to the next thing without compromising quality, service, or margins. However, it requires focusing on only one lilypad at a time while keeping an eye on the whole pond.

After establishing services for member companies, one ‘lilypad’ CWK leapt to next was farms. At the end of a season, farmers often deal with excess produce, which floods the market and crashes prices, or goes to waste altogether. According to the USDA, it is estimated between 30-40% of the food supply in the United States is wasted. Reducing food waste in landfills is now the third largest opportunity to reduce greenhouse gas, according to Project Drawdown.

With its kitchen infrastructure and manufacturing expertise, CWK saw the opportunity to reduce food waste and open up an alternative revenue stream for local farmers at the same time. Last season they tested the idea by developing simple master recipes for products like pickled vegetables and tomato sauce. More than the recipe itself, they ensured the corresponding FDA approval, shelf-life testing, and packaging was properly completed. With these approvals in place, farmers paid CWK a set fee to process surplus produce that the farmers could then sell at a profit.

Now the CWK Farmer Value-Added Program helps farms throughout New England process fruits and vegetables into shelf-stable and frozen products under the farm’s own logo. Prepared products range from marinara sauce, applesauce, zucchini relish, pesto, and more. In 2018, CWK worked with 15 farms to process 60 tons of surplus produce, a total equating to the equivalent of 17 cars or nine elephants!

Bread and butter pickles.jpg

CWK Bread and Butter Pickles
Pickles produced by CWK for the Trustees of Reservations' Appleton Farms. Photo: Karen Gowan

Again, Jen’s philosophy of removing barriers is a core driver of this offering.

“Our approach is pretty simple. We’re leveraging the fact that we have a kitchen, we have chefs, and understand the licensing, and permitting regulations. We can connect the dots so that farmers can focus on being farmers. We’re doing everything we can to take away the friction they have. We’re problem-solvers,” she says.

Lean Learning

Many things have fallen into place to allow CWK to grow by over 700% in the last few years, but it hasn’t been easy. CWK maintained steady organic growth (and avoided irreparable failures) by applying the core Lean Startup principles.

Step 1 - Filter New Ideas Through Mission Goals

“There’s definitely been places where we have tried things that we didn’t end up continuing, or things we thought about and didn’t do.

I subscribe to the idea that it’s okay to make mistakes, as long as they’re new ones.”

Jen shares how people have suggested multiple times that CWK needs to start a fund to further support the growth of member companies. This sounds like a logical step for an organization that has had success raising funds for past capital projects, but as Jen explains, “I keep saying no, this is one of those places where there are plenty of people who know how to do this who will be way better at it than I am. There are solutions out there. Our job is to make the right connections.”

Similarly, many people told Jen that CWK should consider becoming a distributor themselves. “You’re a nonprofit; I’m sure somebody would donate money for you to buy trucks,” Jen recalls. Ultimately, she smartly concluded that just because it’s possible to take up a new opportunity doesn’t mean it’s a smart decision for the organization. Being a logistics company is very different from running a shared kitchen.

Step 2 - Practice Rapid Testing

To find new opportunities aligned with your organization’s core competencies, you need to rapidly test ideas.

The first question Jen asks herself is, “Can you do any kind of rapid test on it?”

When developing CWK’s first 13-week training class, she explains: “We identified a challenge—that aspiring food entrepreneurs need more technical support to develop their concept, that working with them one at a time was too much burden on our staff, and sending them to general business classes wasn’t providing the industry-specific training they need. So, we tested out running our own class, and brought on a strategic partner, Lawyers for Civil Rights,to share the work. We rapid tested. We didn’t have funding. We just tried it, and quickly found it was huge help for our staff and entrepreneurs. The benefit of having earned income is that we could just try it. We didn’t have to first develop the program, then find a funder, and then launch. Having earned income lets us be very nimble.”

Another idea CWK piloted was a three month pop-up in a local strip mall. The space served as a retail location where members could sell their pantry goods and food truck meals. At first, with low rent for an existing retail space in a wealthy neighborhood, the deal looked too good to miss. However, in the end, CWK discontinued the pilot due to sales levels that didn’t justify the amount of staff time it took to run the shop. Running a pilot before jumping into a long-term commitment limited the amount of resources that would have otherwise been wasted.

Step 3 - Continuous Evaluation, Adjustment, and Cut What’s Not Working Quickly

Even when a pilot is promising, taking a lean approach requires continuous improvement to reach a predictable and scalable model. For example, CWK realized they needed to change the accepted product minimums for the Farmer Value-Added Program to become financially sustainable. If they accepted smaller quantities, they ended up losing too much money due to lack of efficiencies.

In the CommonWealth Kitchen.jpg

Members working in the CommonWealth Kitchen
CWK prepared meals company, Soulfuel, working in the shared kitchen. Photo: Karen Gowan

A View Toward the Future

In only a few short years, CWK has proven that it’s possible to stay focused on an organization's social mission while working in a complex food system and pursuing earned income opportunities.

By building relationships and staying true to its core capabilities, CWK has established itself as essential connective tissue in Boston’s food ecosystem.

Already, 58 companies have gone through the kitchen and are still in business generating combined revenue of $35 million annually and supporting 600 jobs. With planned expansion projects, CWK is on track to become fully self-sustained from earned income within five years, allowing them to scale their impact many times over.

With existing institutional clients, from Harvard to MIT, a growing menu of differentiated products from both CWK and its diverse member companies, and inroads with a distributor that will open the door to more clients, the demand side of the earned income equation is secure for the future. Simultaneously, CWK is planning to bolster their infrastructure and operational capacity to better deliver on the supply side.

With this kind of early success, talk of their model is spreading, and there are several discussions about how to scale CWK’s approach by sharing a roadmap for others to build from.

Advice for Other Nonprofits Growing Earned Income

1 - Remain Customer-Centered and Align Interests

Reflecting on the advice she would offer to other nonprofits looking to start an earned income venture Jen recounts the same advice shared in the for-profit sector:

“Start from the end user and stay focused on solving the problem.”

Launching a profitable social venture requires unrelenting dedication to understanding what customers need and finding ways to align interests to meet them there without sacrificing the organization’s own needs and mission.

2 - Look for Patterns

Jen also advises that, when taking risks,

“incrementalism is enormously helpful. Don’t get so excited about one thing. You have to understand that what you come up with is going to change, so be open to that.”

Jen credits her ability to respond to customer needs without getting pulled in too many directions to careful observation to recognize patterns, ask for advice, and then determine how to move forward. “Rather than feeling like, this is the problem so let’s fix it. No. Slow down, ask ‘is it really an issue and how many times have we seen this?’” Once the true needs have been identified, CWK’s diverse team of staff and members can collaboratively test and develop innovative solutions and determine how to move forward.

Being responsive to market feedback does not mean following every suggestion. Real momentum comes from listening carefully to notice the trends and taking action in those specific directions.

3 - Stick to Your Core

CWK balances the pursuit of new funding opportunities and programs with a practical grounding in the core purpose of the work.

Whether offering programming or exploring new revenue streams, every decision CWK makes comes back to the mission of supporting aspiring entrepreneurs to build great food companies, generate assets and wealth, create jobs, improve healthy food access, and strengthen Boston’s regional food economy to contribute to an equitable and resilient local economy.

Earned income is not the end goal in and of itself, but rather a vehicle for sustaining the organization’s larger social impact mission.

Learn more from Jen Faigel about the evolution of CommonWealth Kitchen and her approach to leadership:

 

Spread Positive Change

NEVER MISS A POST

SIGN UP FOR THE +A JOURNAL TODAY.

Newsletter Form