Frequently Asked Questions about Patronage
1-What is patronage?
Patronage is a structure that allows the Co-op to share our profit through the patronage dividend. Coop owners receive a portion of the Co-op’s profits through annual patronage dividends. The Board of
Directors determines annually if the Co-op can afford to distribute dividends. Yours will be determined
by the amount you spend in a given year. There’s no guarantee, but if the Co-op’s fiscally healthy, we all
benefit.
2-How do I become a member under the new patronage structure?
All members are now defined as owner-members and you become an owner-member by purchasing a
share.
3-How much does a full share cost?
A full share is $100.
4-I don’t have $100 – can I still become an owner?
Daily has a payment plan in increments of $20. You can pay $20 and receive all owner-member
benefits, excepting patronage dividends (read on for an explanation of dividends). You must reach the
$100 investment to be entitled to a share of the Co-op’s profits, but you will still be considered an
owner, provided you remain timely with the payment plan.
5-Can one owner-membership cover my entire household?
A membership belongs to the person(s) who signs the membership application form. Spouses, partners,
children or other household members may use the member number when shopping at the store, but all
official business must be conducted with the signer(s).
That means:
• Only the signer(s) may vote in elections
• Patronage dividend checks will be made out to the signer(s)
6-How does the patronage structure compare to the discount?
• It’s a more sustainable method of distributing profits. All co-ops return profits to owners based
on how much they use the services. The discount program returned these profits before we
made them. The dividend program allows the board to decide how much to return after the
books are closed.
• Patronage dividends allow the Co-op to realize significant tax savings. The dollars that we
allocate as patronage stay here in the community rather than going to the IRS.
• The retained portion of patronage dividends builds financial stability.
7-What exactly is a patronage dividend?
A patronage dividend is a more traditional form of co-op member discount. Cooperatives are structured
so that when business operations are profitable, the annual surplus may be returned to owner-members
as patronage dividends based on their purchases. For example if the Co-op had a 2% profit (which is
ideal – industry average is 1-2%), the board could allocate 2% of your purchases for that year to you as
patronage dividend. The Co-op would send you 20% of the total rebate amount for that period and
retain 80% of that total in a retained patronage account in your name for working capital for the
business. As the Co-op matures and builds a stronger capital base, the retained portion may also be
refunded as a dividend over time.
8-Say again? How does this work?
Step 1 Daily Groceries Co-op provides its owner-members delicious food and other fun things.
Step 2 Every member purchase is recorded in the membership records.
Step 3 When Daily is profitable, the board and management review plans and financial
obligations.
Step 4 The Co-op sets aside any profit needed to pay for those and records it in each members
account as non-voting shares in Daily.
Step 5 The money that is not needed to reinvest in the business is returned by check to our
owner-members. Your patronage dividend is based on the amount of your purchases
over the fiscal year.
When you get your check, the stub will mention the part of the profit that Daily is reinvesting in
the business. This is called “qualified equity certificates,” a type of stock share. The law
requires us to let you know about the retained portion of the year’s profits in this manner. Coop shares are not like stock in other kinds of business because they do not change in value,
cannot be sold, and do not increase your voting power in the Co-op. It is really an accounting
method that shows who the Co-op belongs to. These reinvested (retained) shares are our
legacy to future generations.
9-How many other co-ops use this form to return profits to their owners?
Just about all co-ops use dividends. More and more natural foods co-ops are using dividends, but nearly
all co-ops in other sectors use them.
10-Why can’t we take our dividend from the overall profit? Why is it limited to profits from sales to
owners?
Dividends are a common way for co-ops to distribute profits, so they are strictly regulated by the IRS.
This is one of those requirements.
11-Will the Co-op distribute dividends every year?
No. Only in years when the Co-op generates sufficient profits.
12-Without an owner worker program and discount, aren’t we just like any store now?
The member work program was a wonderful way for our owners to invest their sweat equity in the store
and feel ownership on a deeper level. For a long time it was a big part of what made us who we are, but
it was never what made us a co-op.
Here are five ways the co-op is still different from other stores…
• You own the Co-op.
• The Co-op can only be owned by the people who use it. Publicly traded corporations can be
owned by anyone.
• The Co-op exists to provide a service, while publicly traded corporations exist to make a
profit for their shareholders.
• Our Co-op returns profits based on how much our owners use the service, not how much
stock they own.
• Our Co-op is democratically owned by community residents, lending accountability and
oversight to store operations.
13-What does it mean to be an Owner-Member of Daily Groceries?
Joining a co-op means you own this store! As owners of this business you may:
• Receive all financial benefits of membership.
• Vote for the directors – annual election.
• Receive a copy of the Co-op Bylaws upon joining.
• Review reports on financial performance at the annual meeting.
• Run for the Board of Directors.
• Vote on questions before the membership.
• Vote for changes in the Articles and Bylaws as proposed by the Board of Directors.
• Attend board meetings. Meeting dates are posted in the store and on facebook.
• Participate in member surveys.