How to Start a Food Bank Business

Do you want to start a food bank? If YES, here is a complete guide to starting a food bank business with NO money and no experience.

Food insecurity is a mounting problem in the united states with over 49 million Americans unable to afford nutritious food required for growth and development. Food insecurity is a term used to refer to a situation where there is uncertainty about where the next meal is going to come from.

Billions of pounds of food go to waste every year while at the same time, millions of people are unable to put food on their tables.

The food banking system helps to bridge the gap between those who have surplus food and those who do not have enough to eat. Food banks obtain food through donations from various sources including individuals, manufacturers, retail stores, farms and distributors for onward distribution to the hungry.

Starting a food bank can be a way to help the poor and give back to the society. However, starting a food bank has its own unique set of procedures and challenges just like any other business out there. Food banks are mostly run as non-profit organizations relying on donations and volunteer services but to keep the food bank running, it has to be run as though it is a regular business.

This article details all the necessary steps that you would need to take in order to successfully set up a food bank in the United States of America.

Steps to Starting a Food Bank Business

1. Understand the Industry

A study carried out by Feeding America, a network of feeding banks in the US has revealed that at least 46 million Americans regularly rely on meal service programs such as food pantries and food banks to be able to put foods on their tables.

Most of these Americans find themselves dealing with overwhelming bills such as mortgages and rent payments, utility bills, medical bills, credit card repayments and so on. Their paychecks are hardly enough to accommodate these bills so they find themselves in a position where they have to make a choice between paying off these bills and putting food on the table.

Of course, most of them would have to choose the former in order to avoid the embarrassment that may come with not paying the bills and then rely on food banks for feeding. The study also revealed that the common stereotype that people who patronize food banks are unemployed, homeless, poor or lazy people are mostly false and misleading.

Bob Aiken, the Chief Executive Officer of Feeding America revealed that the people who visit their food banks were mostly employed and hardworking individuals in various professions who have somehow found themselves temporarily or permanently in positions where they are unable to make ends meet and as a result, they have no other choice than to resort to the services of food banks to be able to feed themselves daily.

Interesting Statistics About the Industry

The following are relevant facts and figures that would give you a better outlook on the food bank industry in the United States:

• Over 33.3 million adults and 15.8 million children in the United States of America live in households affected by food insecurity.
• At least 62% of food insecure households participate in food assistance programs.
• Arizona, Columbia, Georgia, Oregon and New Mexico are believed to be the top states with the highest number of food insecure children under 18.
• There are at least 15,083 food banks in America and 72% of these food banks do not feel that they are able to adequately meet up with the needs of their communities without adjusting the amount of food that they give out.

2. Conduct Market Research and Feasibility Studies

• Demographics and Psychographics

A study carried out by Hunger in America revealed that 43% of people who patronize food banks in America are white while 26% are black, 20% are Hispanic and 11% belong to other racial categories. The study also revealed that 65% of families that patronize food banks have at least one member of the family who is diabetic or require a special type of diet while 65% of them have someone who is under 18 or older than 60.

The median monthly income of people who patronize food banks is $927 according to the Feeding America Network and at least 79% of people using food banks report purchasing unhealthy, inexpensive food just to put food on the table for their family.

3. Decide Which Niche to Concentrate On

Most food banks in the United States operate as a general food bank serving just about anybody who walks through the door and because of this it may seem like there are no niche areas within the industry. This is not necessarily true. There are a few niche ideas within the industry that you can specialize in such as:

• Food Banks for Children

You can set up a food bank that would serve only children or people aged 18 and below.

• Food Banks for the Homeless

Another niche idea is to limit your services to the homeless.

• Food Banks for People on Special Diets

Getting healthy food to eat is tougher for people on special diets. You can choose to service people who fit into this category.

• Food Banks for the Aged

You could also focus on serving the aged and senior citizens.

• Food Banks for Pets

Lost and abandoned pets need food too. If you are an animal lover, you could look towards starting a food bank for pets.

The Level of Competition in the Industry

The level of competition in the food bank industry is low. The food bank industry is unlike any other industry out there because it is more of a humanitarian outreach than a business.

The business operates on a ‘the more the merrier’ kind of system as most food bank networks believe that they are unable to adequately serve the people within their communities without having to reduce the rations that they serve out.

The food banking industry does not compete with any existing commercial market so competition within this industry is really low or non-existent.

4. Know Your Major Competitors in the Industry

The food banking industry has two major business categories. The first category is the food banking network which operates mostly like a franchise. The food networks usually have branches of their food banks in different communities in the USA. The most popular food bank networks in the U.S include:

• The Global Food Banking Network
• Feeding America
• Houston Food Bank
• Feeding Texas
• Montana Food Network
• Food Bank for New York City
• Food Bank for the Heartlands
• North Texas Food Bank
• Regional Food Bank of Northeastern New York
• Maryland Food Bank
• Food Lifeline

The second category of food banks are the independent food banks. These ones are mostly owned by individuals, schools, churches or other organizations.

• Second Harvest Food Bank
• Soup Kitchen
• Bow Food Bank
• Feed my People Food Bank
• Imperial Valley Food Bank
• Thorne & Moorends Food Bank Group
• Renewal Food Bank

Economic Analysis

Starting a food bank is a huge financial undertaking hence the most important economic factor you would need to put into consideration is how to raise the initial capital required for setting up a food banking structure.

Sustainability is another important factor that needs to be put into consideration because you would need to be able to consistently put food on the table for the people you service. Any downtime for your business means that the people you service may need to go hungry and since most of the food would come through donations, nothing is guaranteed.

The solution to this is to create multiple donation sources and also establish a solid emergency donation system so that you can always guarantee access to food supply.

Ability to keep up with trends in the industry is another important economic factor. One of the most significant trends in recent times is provision of special diets to people with special needs. In the past, most food banks were just happy to be able to provide any kind of food to the hungry to keep them from starving.

But many have realized that offering people with special dietary requirements meals that may be unhealthy for them would do them more harm than good, so many of them are left with no other choice than to look for a means to provide healthy meals to people with specific dietary requirements.

5. Decide Whether to Buy a Franchise or Start from Scratch

Joining a food banking network is the easiest way to start a food bank. Most food banking networks already have large databases of donors, partners and volunteers in every city so that when you join them, you wouldn’t need to work too hard to get donors and volunteers to work with.

However, joining a food network is not something you want to do if you do not have a lot of capital to invest. Food banking networks often require you to meet up with some specific requirements and standards before they can allow you to join their network. Putting these structures in place may cost you a lot of money.

If you don’t have enough funding, you can set up an independent food network. You can look for people to partner with within your local community – neighbors, churches, members of local groups and associations and so on. If you start from the scratch, you can start as small as you want- even if it is from your little garage and then you can continue to grow as you get more funding for the business.

6. Know the Possible Threats and Challenges You Will Face

Starting a food bank can be very rewarding but it comes with challenges of its own. Some of the challenges that existing food bank operators have had to face include the following:

• Volunteer Challenges

To run a food bank smoothly, you need employees and since most of your budget would go into buying foods, you would have to rely heavily on the services of volunteers. A lot of food bank operators have complained about the inconsistency of volunteers as sometimes they don’t get enough volunteers and at other times, some of them simply choose not to show up without prior warning.

• Funding Challenges

Running an organization where you have to rely on donations is challenging because if any of the donors fail to make good on their promises, it would create a huge gap in the business.

• Accommodating Growth Challenges

Another challenge is the ability to deal with the growth in the number of clients that would be visiting your food bank. If you are unable to deal with additional demands, it may put a strain on your business.

• Spacing Needs

Spacing is a very important factor in this business because food takes up a lot of space and you would need to consistently create more space as your business continues to grow.

7. Choose the Most Suitable Legal Entity (LLC, C Corp, S Corp)

To set up a food bank, you need to register it as a non-profit organization. The process of registering your business as a non-profit organization is a little bit different from other profit-oriented businesses.

First, you would need to register your business with your state because only then would you be permitted to run your business as a non-profit organization.  Before you can register, you would need to produce an article of incorporation which you would submit along with some forms to the secretary of state or department of licensing office.

You would also need to apply to the IRS for non-profit status which allows tax write-off for your donors, and also register as a charitable solicitor permitting you to solicit for donations and funds from the public. In addition, to qualify as a non-profit business, you would need to convene a board of community stakeholders and write bylaws which would describe your business operating procedures.

8. Discuss with an Agent to Know the Best Insurance Policies for You

Your food bank would also need to have some vital insurance policies in place depending on your state’s requirements. These insurance policies are basically meant to cover for unexpected costs or potential lawsuits. Some of the insurance policies you would be required to take up in most states include:

• General Liability Insurance

General Liability Insurance covers your food bank against unexpected accidents or liability lawsuits.

• Directors and Officers Insurance

This type of insurance is designed to cover the board of directors against potential lawsuits in case of allegations of mishandled funds or negligence.

• Professional Liability Insurance

Professional liability insurance protects your business against lawsuits regarding professional negligence or mistakes made while serving your clients.

• Special Events Insurance

This covers for liabilities that may arise when you host special events such as fund raisers. Any damages that occur during this program such as damages to the venue or properties of the vendors would be covered by this insurance policy.

• Property Insurance

Property insurance covers all the equipment and important tools that you use to carry out your business.

• Commercial Auto Insurance

The commercial auto insurance protects the vehicles that you use to run your food bank business against accident and damages.

9. Get the Necessary Legal Documents You Need to Operate

You would need the following set of documents to set up a food bank:

• Business Plan
• Article of Incorporation
• Evidence of registration with the IRS for non-profit status
• Insurance Policy
• Bylaws of the organization
• Certificate of business registration
• Details of the board of directors and stakeholders of the business

10. Raise the Needed Startup Capital

Financing a business like this is relatively easy because if you know where to look, you would find a lot of willing partners to support you. For this type of business, you would need three major things:

• The Food

There are a number of ways to get food on the shelves. Some of them include:

• Purchasing Food

If you have the cash or can raise enough from donors, you can purchase food or cook the meals for your clients yourself.

• Food Rescue

Rather than allow the surplus they have to waste, grocery stores, farmers and local restaurants donate their leftovers to food banks. You can set up an arrangement with those in your community.

• Food Drives

Another popular way to get food is by organizing food drives that would allow community members, churches, businesses or private individuals to donate foods and grocery items to your food bank from time and time.

• Volunteers

You would need staff to help out with serving out food and managing the business. Make sure you have an existing volunteer program in place and create enough awareness for it so that other people can regularly volunteer.

You can also reach out to organizations like the Food Bank of Corpus Christi, Create the Good and Second Harvest Heartland as they have a large network of volunteers that may be able to assist you. You can also reach out to churches, community groups and schools around you for help.

Cash

Food donations and volunteers are simply not enough to run a food bank. You would need cash sometimes. For this, you can explore any of these funding options:

• Grants
• Donations from other charitable organizations
• Private donations
• Donations from businesses as part of their community outreach programs

11. Choose a Suitable Location for your Business

The first factor to consider when choosing a location for your food bank is accessibility. You want to choose a place where hungry people, donors and volunteers can easily find you.

Privacy is another factor you need to consider. People who visit food banks are often stereotyped and looked down upon and this prevents some people who really need your services from visiting because of the fear of ridicule. You should try as much as you can to locate your food bank in a place that guarantees some measure of privacy for your clientele.

It is also important to choose a location with a high percentage of low income earners as these are the people that make up the bulk of your clientele.

12. Hire Employees for your Technical and Manpower Needs

You need some basic equipment and manpower requirements to run your food bank business. As for manpower, you may need:

• A storekeeper
• An Accountant/Bookkeeper
• Security
• Chef and kitchen assistants
• Drivers
• Volunteers to serve food
• Cleaners
• Dishwashers

You may not need to employ many people as you can get volunteers to fill in some of these positions. As for equipment and tools, you would most likely need:

• Food Storage facility
• Shelves
• A truck to pick up and deliver food
• Refrigerators
• Packing Boxes
• Kitchen Utensils
• Food warmers and coolers
• Computers
• Stationeries
• Promotional materials
• Water dispensers.

The Service Delivery Process of the Business

There are two major decisions you would need to make regarding service delivery. The first option is regarding the packing method.

You would need to decide whether you want you adopt the pre-packing model where the foods are already packed and clients simply need to pick up their food packs. This option makes it easy for you to keep track of your inventory and reduce serving times.

The second method you could adopt is the pack-as-you-go method. This method allows you to cater to clients with special dietary needs.

The second service delivery decision you would need to make is the income bracket you would prefer to cater to. A lot of food banks choose to serve only people who earn less than a specific sum monthly. Documentation of your clientele is also important.

You may need to provide each of them with a photo card that they would be required to present before they can be served. This would help you weed out opportunistic clients.

13. Write a Marketing Plan Packed with ideas & Strategies

For your food bank to be successful, you need to have a specific plan for getting word out about the business to other people. Remember that the more popular your food bank is, the more donors, volunteers and clientele you would get. Some of the most effective ways to promote your food bank include:

• Word of mouth.
• Creating social media pages (especially Facebook) to enable members of your community become aware of your food bank.
• Distribution of flyers and posters to strategic places such as churches, schools, libraries, post offices, banks and local shops.
• Partner with community groups and civic organizations around you.
• Organize food drives regularly.
• Host public events centered around feeding the poor as often as you can.
• Create a website for your food bank business and register on Online business directories like YELP to allow more people to find you.

Conclusion

After setting up your food bank, it is important to manage it as carefully as you would manage a regular profit oriented business and keep adequate record of the donations you receive and how you utilize them. This would not only help to keep your food bank on its feet for a long time, it would also help you avoid problems with government agencies charged with monitoring the affairs and operations of non-profit organizations.