Erin Kee, Esq. is here again with Part 3 of her series on legal structures for farmers markets. Today she describes the rare but streamlined approach to market management – private ownership.
A privately owned farmers market is the most centralized route to local food. A market operated by a for-profit business entity could be owned by any individual looking to take advantage of the economic opportunity presented by local food. The purpose of forming a market with any of the legal structures we’ve discussed is to create an atmosphere that is conducive to shopping and socializing, and a privately owned market is free to quickly respond to the needs of market customers and vendors in order to make that happen. The destiny of the organization is not run by a committee or by a board of directors, but by a single entity or person with the executive authority to mandate the way business is conducted. Though it may seem autocratic, anyone with experience in “leadership by committee” understand that this can definitely streamline the decision making process of a market.
In my previous post about the non-profit structure for farmers markets, I discussed the importance of well-drafted, well-conceived bylaws that would serve as the governing document of the marketplace. In a privately owned market, however, the contract takes preeminent place. Each individual vendor must be contractually bound to the market owner with terms that cover the products to be vended, the prices charged, the duration of the agreement, the duties of the market owner, or any other term ordinarily included in a service contract.
Though this may expedite market leadership, it puts vendors at a disadvantage that other forms of market organization do not have. Vendors are not members of a privately run market and have no role in its governance. This leaves the vendors with little procedural recourse to fire a lousy manager or to change their low-traffic stall unless the terms of the contract contain language that addresses such issues.
Establishing a private market can nevertheless enrich the market owner and the farmer vendors. Owners can still profit through vendor participation fees, and these fees are justified by the planning, marketing, and advertising efforts of the private market manager. In order for this structure to remain profitable the owner would work to increase customer participation in the market. He or she would also endeavor to rack-up as many talented and diverse vendors as possible to participate in the market. Successful management of the market by an owner that is inherently invested in the growth of the market’s traffic and the diversity of its offerings would in turn increase the profits to individual farmers.
When thinking about starting a private farmer’s market the best legal structure to consider is the Limited Liability Corporation. The advantage of the LLC is that the private assets of the owner will be protected, taxes are paid at the individual level, and there are fewer statutory management burdens on this type of structure than corporations.
A great example of the private ownership model can be found in Columbia, South Carolina, where Emile DeFelice has founded the Soda City Market. Emile runs the private market and pays all the expenses associated with its operation. The vendors at his market are only responsible for creating a great product, showing up on time each week and paying their vendor fee. The private market is run more like a store than the traditional market, with Emile focusing on providing a sensible range of products and not saturating the market with too many similar products. Farmers want to participate in his market because of the Emile’s skill at market promotion and the sales platforms he creates for the farmers. Emile’s top priority is creating income for the participating farmers.Private ownership of farmers markets can be lucrative for everybody, even if they only simulate the sensation of community created by other collaborative legal structures.
— by Erin Kee, Esq.