FAQ

What is a Direct Public Offering (DPO)?

A Direct Public Offering (DPO) is a term that refers to the public offering of securities by a business to both accredited and non-accredited investors. Using a DPO (a type of investment crowd-funding), a business can market and advertise its offering publicly by any means it chooses — by advertising in newspapers and magazines; at public events and private meetings; on the Internet and through social media channels.

 

DPOs are legal under state and federal law, and have been for decades. Before DPOs can be legally offered, Issuers must complete a compliance process with the applicable securities regulators. We have completed this process and received approval to sell shares.

 

We worked with Cutting Edge Capital to launch our campaign. To better understand the purpose of a DPO, check out this video.

 

An interesting article published in the New York Times on other companies who have chosen to provide funding through a DPO.

Why choose a DPO for Cafe Brio?

We believe a DPO is the best capital vehicle for a business like ours because:

  • A DPO avoids the pitfalls of both Venture Capital and Debt financing.
  • We would rather pay back our community than the bank.
  • We have an incredible community that supports us everyday.
  • This provides a great local investment opportunity for our community.
  • A DPO will keep money in the local economy.

Are there any minimum wealth or income requirements to invest? Are there any other requirements to invest?

There is no minimum wealth or income requirement, although your investment cannot exceed 10% of your net worth excluding real estate. To invest in this Offering you must be a resident of California. The minimum investment is $1,000. For a detailed explanation of requirements, see the prospectus (“Offering Memorandum”).

What are you going to do with the money you raise?  What improvements will result?

In order to meet customer demand and serve our community more efficiently, we need to expand and improve our operations. With the money we raise, we hope to:

Build an expanded dining room for Cafe Brio, which will be used for overflow during peak daytime hours and dinner service. This will not increase our fixed locations costs, and will improve our margin and stabilize our cash flow.
Implement a paperless delivery and invoicing system at Brio Breadworks, to increase efficiency of delivery, resulting in fresher bread delivered earlier to our retail locations, reduce office time, long-term costs and environmental impacts.
Reconfigure existing cafe seating areas for better circulation.
Upgrade Cafe Brio’s kitchen facilities to accommodate increased customer demand and future dinner service needs. Remodeling our cafe kitchen will increase the range of menu items we can offer, and improve preparation time between the order and service of food.
Retire senior debt to improve financial stability and long-term fiscal health.

What are my Investor Benefits?

Your money will stay in the community, so you can feel great about supporting local businesses and local agriculture; investing in Main Street, not Wall Street. Investors will receive a dividend payable in cash or Brio credit at a 3.5% targeted rate (to be decided by the board of directors, see question below), invitation to an annual shareholder open house event, exclusive discounts, promotional items, and special events. Early adopters (before February 4th launch date) received a complimentary bottle of wine at Cafe Brio. Larger scale investors of amounts over $5,000 will receive an invitation to a special complimentary farm to table dinner. 

 

Several investor-only events have already occurred, including a bread making & baking class at the Breadworks, wine and small plate pairings at the Cafe, specialty bread exclusives and we will notify investors in our newsletter of further "Brio Benefits" and events being scheduled.

I have checked everything out on the site, but am not comfortable completing everything online. Can I meet with someone to have my questions answered and sign real, non-electronic documents?

As a small community business, we love meeting the people who support us. Please email us at invest@briobaking.com to set up a time to meet at the cafe to sign the forms in person. Thank you for your interest in our offering!

Can a Brio investment be part of an IRA?

Investing in a private company via an IRA will depend on whether the IRA custodian is set up to allow for that. Most are managed by very large institutions and they typically or almost always only allow for investments into the national market of publicly traded instruments.  However, you may establish an IRA or a rollover of your retirement account into a Brio stock holding using a specialized IRA asset custodian. It is important to consider the amount of your investment, the earnings you would experience with your investment and the annual fees custodians charge before investing.

 

For a discussion, review and comparison chart of specialized IRA custodians, check out this article.

 

The following custodians have been recommended by RSF Social Finance for investors to self-direct their IRA.
 
Self-Directed IRA Services, Inc., Waco, TX
Annual fees are $100 exclusive of asset value.
Contact information: Ryan Schneider, (866) 928.9394, ext. 4004, or ryan.schneider@sdiraservices.com ; www.sdiraservices.com

 

Pensco Trust Company, San Francisco, CA
Fees include a $25-50 set-up fee and a minimum $375 annual management fee. The annual fee is substantially lower for RSF clients, please confirm with custodian before investing.
Contact information: (866) 818-4472 or (415) 274-5600; www.pensco.com.

 

Equity Trust Company, Elyria, OH
Fees include a $25 set-up fee and a minimum $225 annual management fee.
Contact information: (877) 693-8208; www.TRUSTETC.com.
Millennium Trust Company, Oak Brook, IL
Please contact this custodian for information about fees.
Contact information: (630) 368-5600 or (800) 258-7878 or contact the Alternative Investments Department at (800) 618-6177; www.mtrustcompany.com.

Why do you need my investment? You’re always so busy. Doesn't Brio make plenty of money already?

Preparing fine ingredients in traditional ways, without shortcuts or compromises, is very time consuming. In contrast to many food service operations that buy most items from one big industrial supplier, Café Brio buys carrots from one supplier, lettuce from another, fish from a local fisherman, meats from small non-industrial suppliers.  All of these perishables arrive unprocessed, bursting with life and freshness, but they need to be trimmed, washed, stored and prepared individually. To maintain all these connections between Farm and Table means that Cafe Brio has high labor costs and operates on an extremely slim margin. Similarly, Brio Breadworks maintains its high quality by hand shaping every loaf.  In addition to our high labor costs, our monthly debt service from financing such a great Cafe building only adds to the load, so our financial situation can be at times precarious. We are an equal opportunity employer and provide lots of jobs in our community. We pay above minimum wage, have numerous employees on salary, and provide benefits such as paid vacation and contributions to health care for full time employees. As our business grows, we need to expand and improve our operations to keep up with the demand. We believe we offer a unique service to our community and with this Direct Public Offering we are asking our community to support us so we can continue to grow and serve.

Is Brio financially unstable?

No, Brio has an outstanding track record of solid sales and cash flow and is in a very good financial situation, with excellent business financial ratios. The one exception is our debt to equity ratio. Part of this effort is to reduce our debt by increasing our equity.

What is a Benefit Corporation?

A Benefit Corporation is a legal entity, legislated in California and 27 other states, which is taxed as a C-Corporation, but has further commitments of purpose beyond increasing shareholder value which are enshrined in the corporate by-laws.

 

One of the purposes of a Benefit Corporation is to create general public benefit, which is defined as a material positive impact on society and the environment. A benefit corporation’s directors and officers operate the business with the same authority as in a traditional corporation but are required to consider the impact of their decisions not only on shareholders but also on society and the environment. In a traditional corporation, shareholders judge the company's financial performance; with a benefit corporation shareholders judge performance based on financial performance as well as how the corporation's activities benefit society and the environment. Transparency provisions require benefit corporations to publish annual benefit reports of their social and environmental performance using a comprehensive, credible, independent, and transparent third-party standard.

On the other hand, a “B-Corp” is a trademark issued by B-Labs.  Brio has qualified as a “B-Corp”, which means that we have been approved as such by B-Labs, a NGO Certification organization, meaning that we have completed their required survey, and have been found to meet their standards. It is a marketing trademark to show our sustainability credentials, but it is not the same thing as a Benefit Corporation. To use the B-Labs marketing seal of approval, we need to join their organization and pay annual dues of $1000.

What’s the Risk?

Equities investing does involve some risk, and we are obliged by securities law to tell you up front that you could lose your  investment.  For this reason, DPO regulations require that no investor invest more than 10% of their net worth (excluding real estate & automobiles), so you may not invest more than the regulators assume you could afford to lose.  That said, investing in any business is risky, whether you are investing in equity or making a loan.  If the business fails, you stand to lose.  It is important that you understand the risks, and they are laid out fully in the prospectus-offering memorandum, which you are required to receive and read before investing.  

What if I need my investment back?

The company will buy shares back from individual investors. The Board of Directors will create a reserve fund to repurchase shares from investors.  Investors must give the company 30 days notice, and the company will consider share buybacks on a case-by-case basis.  In order to maintain a healthy cash position, Brio Baking Inc. will not buy back shares during the first year of selling shares.

Are my dividends guaranteed? Are my dividends secure?

After Brio Baking Inc.’s financials are submitted in February, the Board of Directors will make a dividend decision in March. The board will take into consideration: the health of the company, current cash flow, our responsibilities as a benefit corporation, and other objective criteria. Financial statements will be available to stockholders at the annual stockholders meeting, which will be held to discuss criteria and the dividend percentage. As with all security investments, there is no guarantee, however our 10-year financial projections indicate that with modest growth we will be able to hit our targeted 3.5% dividend. 

Are you holding the proceeds of share sales in escrow until a minimum amount is raised — or are the funds being put to immediate use?

The funds are not being held in an escrow account, nor are they being put to immediate use – The funds are being held in a separate account, but a formal escrow account would be both cumbersome and costly for our purposes. No funds from the offering have been spent or appropriated, with the sole exception of a small advance to the architect to get our building plans started.  The campaign is scheduled to last until fall, and we have no intention of using these funds until we can make a final development plan based upon the actual amount of funds raised. Any disbursement must be approved by our board of directors and will be based on the final development pan.

If Brio is unable to meet the total investment goal of $600,000 will the dividend rate for investors be affected?

No, investments will be spent until our offering is complete, and our Board of Directors will create a reserve fund to accommodate the first year dividend. In the Offering Memorandum, we have included financial projections for varying levels of capital raised by this Direct Public Offering. The total amount of investments should not affect the dividend rate, however the Board of Directors will officially declare the dividend in March. The board will take into consideration; the health of the company, current cash flow, our responsibilities as a benefit corporation, and other objective criteria. For complete transparency, a careful analysis of financials will be available to stockholders and an annual stockholders meeting will be held to discuss criteria and the dividend percentage.

Location is very important in business and Brio has a great one. What are the terms of your lease?  

We have obtained a fourth 5-year least option, which would give us a total of 20 years from June (2016). We also have the right of first refusal if the landowners decide to sell.

Who makes up your board and what are their qualifications?

The Board of Directors for Brio Baking Inc. is composed of three official members. Serge Scherbatskoy is the Chairman of the board; he is the founder of Brio Breadworks and Cafe Brio. Nancy Diamond is the Secretary of the board; she is a well-known local attorney, as well as the Attorney for the City of Arcata. Nick Frank is the Treasurer of the board; he is a semi-retired local businessman with extensive experience in Silicon Valley and Eastern Europe and has been our financial advisor for 6 years. Company Director representatives at the meetings include Alex Ozaki-McNeill (Investment Manager), Tamra Tafoya (Cafe Brio General Manager) and Sheldon Heath (Brio Breadworks General Manager).

 

Did you find the answers you needed? Further questions should be sent to invest@briobaking.com.