III. BUSINESS MODEL

Recycle-A-Bicycle provides environmental education and job training for New York City youth. Source: Recycle-A-Bicycle Mission Statement

Recycle-A-Bicycle, a growing social purpose business, is a manufacturing and retail venture that provides youth with training and employment opportunities by refurbishing and selling used bicycles as well as offering accessories and parts and repair services. Recycle-A-Bicycle is built around the concepts of youth development and environmental stewardship.

First, Recycle-A-Bicycle collects bicycles destined for the dump. These bikes are then processed by young people involved in the youth training program and sold to the community as an affordable alternative transportation option. Retail activities follow the principals of reuse, reduction and recycling. The two elements go hand in hand to create a viable business. Recycle-A-Bicycle’s operations generate considerable community benefits: waste reduction, an affordable source of non-polluting transportation, youth education, work force preparation, job creation and constructive social programming for youth.

• Recycle-A-Bicycle provides affordable and environmentally sustainable transport.
  
  
• Recycle-A-Bicycle trains youth for positions as bike mechanics and sales people, build skills in basic business concepts and computer training, and provide a safe alternative that is a positive influence on their development.

The youth training program provides Recycle-A-Bicycle with a relatively low cost labor input for the remanufacturing process. Youth are trained in the basic mechanics of bicycles and further benefit by developing job skills and understanding basic business concepts. In addition, they earn a stipend or school credits for their participation and they have the opportunity to earn their own bicycle as an incentive, which they are encouraged to use as their mode of transport to and from work or school. Students are trained at our DUMBO, Brooklyn facility or Children’s Aid Society partner site, and then have the opportunity to work in one of two retail shops, once they have demonstrated a certain level of competence. In 2002, Recycle-A-Bicycle worked with over 770 youth.

Recycle-A-Bicycle takes advantage of very low cost raw materials supply. With a fairly limited amount of outreach, Recycle-A-Bicycle is able to capture over 1,000 bicycles per year from the waste stream. In accordance with the environmental mission, Recycle-A-Bicycle accepts bikes in any condition. This provides a critical advantage in parts sourcing and materials reuse. On average, the business has removed 13 tons of waste per year from the waste stream, for the past 7 years.

Recycle-A-Bicycle is facing growing supply and demand for our product. Recycle-A-Bicycle has a proven track record and is now seeking capital to expand the social and environmental reach and develop more sustainable systems within the business.

DESCRIPTION OF PRODUCTS AND SERVICES

Recycle-A-Bicycle operates two stores offering used bicycles, full repair services, and parts and accessories for bicyclists. East Village, Manhattan Store 75 Avenue C, New York, NY 10009 • Located in the East Village of Manhattan. • RAB has operated in this neighborhood since 1997. • The current location on Avenue C opened in October 2000. • Sales have consistently grown. • Open Monday to Friday from 1 to 7pm and Saturday from 10am to 4pm. • There are two work stands for repairs and on average three employees. • Average sales are $234 per day.

The East Village store at its opening.

DUMBO, Brooklyn Store 55 Washington Street, Brooklyn, NY 11201 • Located in newly revitalized Brooklyn neighborhood, DUMBO (“Down Under the Manhattan Bridge Overpass”). • The store opened in October 2002. • Open Monday to Saturday from 12 to 7pm. • Training classes are held in the evenings and weekend morning hours. • The store has four workstations for repairs and training and on average 2 employees. • Recycle-A-Bicycle administrative offices are located here. • Average sales are $123 per day. DUMBO Store during a local artists exhibition co-promotion

Recycle-A-Bicycle’s growing success can be attributed to the fact that it has moved to more accessible locations and has built a solid reputation in the community. Repeat customers are common, as well as visitors who were referred by word of mouth. A majority of customers choose to patronize the Recycle-A-Bicycle shops because of the social and environmental missions.

A narrative of our history and major milestones is available in Appendix A.

Product Line --Bicycles: Recycle-A-Bicycle offers a wide variety of refurbished bicycles. Over 50% of sales are in the road bike category. This is due to the fact that it is the most common type of donation, and therefore most available in stock. Recycle-A-Bicycle experiences high demand for mountain bikes, hybrids, three speeds, and cruisers. These types of bikes offer the cyclist an upright position that is considered more comfortable for commuting. Recycle-A-Bicycle also sells children's bikes, but has found that few parents want to purchase second hand items for their children. Children’s bike sales account for less than 5% of the bikes sold. All bicycle sales come with a 30-day warrantee.

Product Line -- Repairs: Recycle-A-Bicycle offers full bicycle repair services for all models of bicycle. Customers come to Recycle-A-Bicycle because many bicycle shops will not repair older bicycles. The percentage of repairs to total income has ranged from 5% to 15%, gradually increasing over the years as staff with professional experience have been added.

Offering repairs helps to further Recycle-A-Bicycle’s environmental impact by reducing the number of bicycles that become unusable. Furthermore, parts recycled from demanufactured bicycles are not entering the waste stream and are put to productive use again. The shops are well positioned to specialize in the repair of bicycles manufactured during the 1970’s and 1980’s. Repair pricing is competitive with other bicycle retailers.

Product Line – Parts and Accessories: Both stores sell new and used accessories that make cycling safe and comfortable. The number and variety of accessories are currently being expanded, but the merchandise mix will remain focused on the safety, commuting and security categories. The most popular safety and security items that are sold include locks, helmets, lights, and bells. Commuting items include pumps, patch kits, racks, baskets, and fenders. The mark up on new items ranges from 50-150%, averaging 100%. Recycle-A-Bicycle offers discounted prices on used accessories acquired from donated bicycles. These are priced at wholesale rates because they require no capital outlay. The ability to stock and sell new accessories currently accounts for a little over 17% of total income and growth is expected as product offerings increase.

Retail revenues have grown steadily throughout the past five years of operation. The trend in revenues has been towards increased sales of parts and accessories, driven primarily by customer awareness and loyalty. Recycle-A-Bicycle is also able to more efficiently special order items that will further increase sales in this category.

Recycle-A-Bicycle’s ability to quickly remanufacture bicycles, therefore meeting more of the demand for used bicycles, has been impaired by the lack of a focused production facility. Recycle-A-Bicycle expects the proportion of bicycle sales to increase once new inventory is created, as selling bicycles is the most effective way to serve both the social and environmental missions.

Youth Job Training The youth involved with Recycle-A-Bicycle are recruited through the organization’s strategic partnerships with Henry Street Settlement and Children’s Aid Society. These youth come from low-income families and receive a wealth of services through the partner organizations. Recycle-A-Bicycle provides meaningful training and employment opportunities for these young people who in turn provide a low cost labor input for the business.

Recycle-A-Bicycle works with over 750 students annually through a classroom training program focused on the following areas:

• Small business / setting goals;
• Safe cycling / road awareness.

Recycle-A-Bicycle also delivers innovative on-the job training programs in the following areas:

• Basic mechanics training / advanced mechanics training;
• Customer service and communications;
• Introduction to business management /entrepreneurship;
• Accounting, marketing and business operations;
• How cycling can create a healthy lifestyle and a social structure; and,
• Recycling and environmental stewardship.

COMPETITIVE ADVANTAGES

Recycle-A-Bicycle offers a unique product and service. Our social and environmental missions differentiate us from any other bicycle retailer in New York City.

On a product basis, Recycle-A-Bicycle bicycles are one of the most affordable modes of transportation in New York City. Because of low labor and materials costs, a Recycle-A-Bicycle bike is priced at least 50% lower than a comparable new bicycle from an independent bicycle retailer. Recycle-A-Bicycle prices are also competitive against other used bicycle dealers. Additionally, the 30-day guarantee is unique in the used bicycle marketplace and because Recycle-A-Bicycle tracks all inventory from its source, consumers are assured that they are not buying a product that was stolen or illegally obtained.

The youth programs inspire young people to make better life decisions. Recycle-A-Bicycle touches many aspects of their lives. To the youth participants, Recycle-A-Bicycle offers improved health and well-being, provides a goal-oriented social structure (earning their own bike by helping fix others), and helps improve self-esteem. An “I can do it” attitude pervades Recycle-A-Bicycle.

Consumers feel good about making their purchases with Recycle-A-Bicycle. Many customers report that they are drawn to Recycle-A-Bicycle because of the low prices, but feel much more compelled to purchase when they learn of the social and environmental stewardship.

Recycle-A-Bicycle enjoys the following advantages in relationship to second hand dealers, chain stores, and bike stores:

• A legal operation that does not deal in stolen bikes;
• An indoor, year round, predictable space;
• Competitive prices;
• Higher quality bikes than the competition;
• A 30-day warranty;
• A selection of accessories and the ability to custom order special accessories and parts
• A full line repair services; and
• A social mission in which all proceeds are applied to the social and environmental programs.

STRATEGIC PARTNERSHIPS AND RELATIONSHIPS

The key to Recycle-A-Bicycle’s success has been its ability to develop strong partnerships. This strategy encourages resource sharing and allows each organization to specialize in what it does best. Recycle-A-Bicycle contributes its curriculum, mobilization of donated materials, technical expertise, retail capabilities, and networks in the environmental and cycling circles. Partner organizations contribute space, cost of instruction, transportation for bike collections, youth recruitment, support services, and neighborhood connections. Recycle-A-Bicycle’s two strongest partners are described below.

Henry Street Settlement, founded in 1893 by social worker/nurse Lillian D. Wald, is a not-for-profit arts and social service institution serving the people of New York City, especially Manhattan’s Lower East Side. Its innovative programs have been models for similar efforts in countless municipalities across the nation. Many Henry Street Settlement initiatives have led to major state and federal legislative changes.

Recycle-A-Bicycle works in partnership with Henry Street Settlement to offer a job training program that puts youth to work. We collaborate with the Youth Employment and Counseling Services as well as the Workforce Development Center. Henry Street Settlement has qualified counselors to recruit and work with young people who need assistance with basic job readiness skills. These counselors are also available to intervene in the case of serious issues regarding the social or mental well being of our participants. Henry Street Settlement also offers youth leadership development opportunities, tutoring, SAT preparatory courses, and career counseling services to our young people. These services are funded primarily by contracts with the New York City Department of Labor and some foundation grants. Recycle-A-Bicycle offers environmental education, bike repair, earn-a-bike, basic business instruction, and cycling trips to an average of 60 students each year.

Children’s Aid Society, founded in 1853 by Charles Loring Brace, is dedicated to promoting the welfare of children in New York City. It was one of the first agencies of its kind in the US and became well known for opening youth lodging houses in the poorest and most populous districts of New York City. The Children’s Aid Society continues to be at the forefront of child welfare reform as well as in providing services that respond to society’s needs. Currently it maintains 22 sites that provide child care, academic assistance, counseling, after-school programming, job training and leadership development services.

In 1990, the Children’s Aid Society partnered with the New York City Board of Education to open three community schools in Washington Heights, a low-income neighborhood in upper Manhattan. The unique partnership offers services to students, parents and members of the community such as health care, leadership and skills development (i.e. English as a second language and the parents’ association), and after-school and summer programming for young people. In May 1994, Recycle-A-Bicycle partnered with Children’s Aid Society and Intermediate School 218 to offer an after-school bike repair program. Based on its success, Recycle-A-Bicycle also became integrated into the summer program and then into the school day. The program offers environmental education, bike repair, earn-a-bike, and ride club activities to over 500 young people each year.

Community Networks Because of the Shop’s social mission, we have developed relationships with organizations that are willing to promote the business. Examples of this include:

• Transportation Alternatives features Recycle-A-Bicycle events during Bike Week;
• The Five Borough Bike Club creates a fundraising opportunity by inviting Recycle-A-Bicycle staff to break down bikes for their Montauk Century; and
• the American Gardening Association featured our shop by offering garden cycling tours on bikes rented from Recycle-A-Bicycle.

Recycle-A-Bicycle also belongs to other networks relevant to its social and environmental missions:

• New York City Waste Prevention Coalition;
• The Youth Bicycle Education Network; and,
• Seedco’s Nonprofit Venture Network.

REVENUE MODEL OVERVIEW

The organization has built a strong revenue base through its retail stores and also increased its ability to generate grant revenue by completing 501©3 status in July 2002. Grants will become a more important source of revenue for Recycle-A-Bicycle in the next five years as the organization seeks capital to expand its business operations and increase its youth outreach. The new DUMBO store, opened in summer 2002, will further increase Recycle-A-Bicycle’s ability to grow the bottom line.