Bookselling

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John Mutter -- 12/13/99
Oberlin Co-op closes and sues management company



After suffering financial reverses for several years and battling its management company, the Oberlin Co-op Bookstore, Oberlin, Ohio, closed its doors November 8.

The Cleveland Plain Dealer reported that a statement posted outside the Co-op said, "The community has long been aware of the financial struggles of the Co-op Bookstore. We regret to announce that we are forced to cease day-to-day operations of the bookstore and focus on maximizing the value of our remaining assets on behalf of our employees and membership."

Several weeks later the store took the unusual step of suing CUBPAC, the management company, as well as Oberlin College, alleging fraud and breach of contract because, it says, CUBPAC and Oberlin had a "secret agreement" whereby the college promised to repurchase the store's inventory if the management agreement between CUBPAC and the Co-op was terminated. The Co-op charges that the agreement also would have allowed CUBPAC to operate a bookstore for the college. The suit contains a copy of the contract, but there is no signature on the contract from anyone at the college.

The Co-op also charged that according to the contract between it and CUBPAC, the management company was supposed to give 120 days' written notice if it were to break the contract.

CUBPAC is a part of Business Management Concepts, which has headquarters in Maryland.

CUBPAC purchased the Oberlin Co-op's inventory and took over management on May 1, 1998. By last summer, CUBPAC and the board were fighting, and on October 29, CUBPAC demanded payment for outstanding fees -- about $1 million -- and its inventory. The store couldn't raise the necessary monies and shut down.

An Oberlin College official had no comment on the suit but did tell the Plain Dealer that it had aided the Co-op with loans and advice and had turned down offers from others to open stores in Oberlin. He also said he had no knowledge of a "secret agreement."

Brian Cartier, head of the Co-op board and chief staff officer of the National Association of College Stores, whose headquarters are in Oberlin, told PW that the immediate reason for the closing was the dispute with CUBPAC involving the store's inventory. He said that poor management was at the root of the Co-op's financial problems.

Cartier said he had joined the board recently as a kind of "good neighbor" policy. "I knew the store was hurting and was having trouble getting people on the board," he continued. "But I found out there were greater problems than I'd imagined."

In fiscal year 1998, ending March 31, 1998, the store lost $205,000. The following year, after the new management firm was hired, Cartier noted, the loss climbed to $430,000. In part, the increased losses were attributed to CUBPAC's management fees of $171,000; interest on a loan CUBPAC used to purchase the inventory amounting to $45,000; and $70,000 for a POS system CUBPAC required the store to install. The store owes some $1.4 million on the mortgage for its new building. The board had hoped to reopen the store, but it now appears that it will try to sell the building.

The college is "taking steps" to have textbooks available for students next semester, Cartier added.

Founded in 1940, the Co-op rebuilt its facilities in 1993, creating a modern, 21,000-sq.-ft. building that included a cafe. At the time, the store added many items, and for a time sold pottery, candles, gifts and software, and ran a copying center.

Hurt in part by competition online and from chains, as well as poor management, during the past year the store laid off employees, cut hours and closed down the second floor. Its membership rolls dropped from 300 to 75.

This has been a difficult season for co-op bookstores. After the Oberlin Co-op closing, the Yale Co-op filed for bankruptcy (News, December 6). As in the case of the Oberlin Co-op, however, Yale's reasons for closing were highly particular: in its case, years of financial difficulties were exacerbated when Yale University gave Barnes & Noble a lease on the Co-op's former space in 1997.