Nov 1, 2022 - Business

Pandemic turns heads toward co-op business model

Illustration of a cash register with three raised hand icons in green

Illustration: Sarah Grillo/Axios

The co-op has seen a surge in interest during the pandemic.

Why it matters: Advocates see the alternative business model of worker ownership as a path out of income inequality, one that returns power to employees and builds community wealth.

  • Those values are becoming a higher priority after COVID-19 pushed conversations about racial inequities and workplace conditions, Margo Dalal, executive director of cooperative business lender Detroit Community Wealth Fund (DCWF), tells Axios.

By the numbers: The number of worker cooperatives in the U.S. increased 30% from 2019 to 2021, according to a State of the Sector report. The report identified 612 businesses, but estimates the actual number is closer to 1,000.

The big picture: Co-ops have a long history. There are prominent examples like Ocean Spray, but democratically owned businesses are still small in number. Well-known local businesses include the consumer-owned Detroit People's Food Co-op and the worker-owned Pingree Detroit.

  • The structures vary. Generally, workers or members own and have decision-making power over the business, with individual livelihood tied to performance.

What they're saying: "There is the demand for an alternative to what's not working that grew exponentially during the pandemic and all the racial and civic unrest," Karen Tyler-Ruiz, executive director of the local Center for Community-Based Enterprise (C2BE), tells Axios.

Yes, but: The model is unfamiliar to many, and it can be hard to find startup funding from investors who may not have as much control as at a traditional company.

Zoom in: It's tough to paint a picture of the local co-op landscape due to a lack of government data on the subject.

  • A Cooperative Economic Network of Detroit directory lists 28 operations in the area that are co-ops or have similar qualities.

The intrigue: Some new interest in cooperative ownership has come not from startups, but existing traditional business owners looking to retire and sell to their workers, Melissa Hoover, co-executive director of the national Democracy at Work Institute, tells Axios.

  • C2BE and DCWF have both turned attention in recent years toward helping traditional businesses make the transition.

What's more: Juan Carlos Dueweke-Pérez, owner of the local marketing agency Featherstone, says he is in talks with employees about becoming worker-owned as part of a long-term succession strategy.

  • It feels like the "correct next step" because it gives employees skin in the game and reflects Featherstone's "family style" values, he tells Axios.

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