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Next Street Financial LLC Copyright 2012CONFIDENTIAL 1

GATEWAY CULINARY INCUBATORPHASE 1 FINDINGS

DECEMBER 10, 2012

JOHN DESTEFANO, MAYOR


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WHY FOOD?

The urban food sector is dynamic and asset-rich, representing a powerful job

engine and driver of economic development

> Cities are home to large young adult and immigrant populations, which comprise a large, diverseand expanding market for food products

> In 2010, 82% of the US population lived in urban areas compared to just 64% in 1950

Diverse and

growing

population

Strategic

food assets

Shifting food

policy and

culture

> Most American cities contain assets that give them competitive advantages in importing, storing,processing, wholesaling and delivering food, including central locations, historic public markets,

transportation infrastructure, vacant buildings, and a large workforce

> Increasing awareness among policy makers is driving changes in procurement and reporting,

instigating local food production and influencing waste policies in every market> Emergence of low cost infrastructure such as shared kitchens along with increasing demand for

niche offerings like local products present food entrepreneurs with strong market-entry dynamics

> As the culture of fresh, local foods has become more prominent, institutional procurement officialsare looking to establish regional connections along the food chain

> Increasing diverse and immigrant populations are shifting the demand for raw ingredients andethnically influenced products


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OVERVIEW OF NEW HAVEN FOOD INDUSTRY

The existing food industry in New Haven spans the value chain and represents an

increasingly important component of the local economy

Agricultural

Producers

Intermediate

Processing

Grocery

Manufacturing

Wholesale /

Distribution

End Customer

/ Retail /

Restaurant

Source: Ninigret Partners, 2007 US Census Data, Dun and Bradstreet data

> New Haven County has

~1,800 harvested acreswith a strong shellfish

industry as well

> There are ~14 food wholesalebusinesses located in New Haven,

representing 270 jobs

> New Haven Food Terminal is home toseveral wholesale businesses

> Although there are a fewprocessors in New Haven, these

companies have little

integration with local

producers

> New Haven is home to ~15 food

manufacturing companies,representing 506 jobs,that

produce finished dessert items,

packaged meats, ready-to-eat

sauces, etc.

> Several of New

Havens currentprominent food

manufacturers (e.g.,

Palmieri, Chabaso)

began as cafes

and/or retail stores,

and moved into

product manufacturing


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STRENGTHS OF THE NEW HAVEN FOOD SECTOR

A survey of the New Haven food industry reveals a range of strengths

1. Growing cohort offood entrepreneurs

as well as established manufacturing

and restaurant sectors in New Haven

> Primary research indicates that there is a growing number of homechefs, food trucks, and small ethnic businesses that have inquired

about commercial kitchens available for rent. For example, we were

able to identify over 30 food trucks located in downtown New

Haven and/or Long Wharf

> Additionally, there are several facilities in New Haven (e.g., UltimateFoods) that have proven quite successful at providing

complementary services (e.g., co-packing) to growing small food

businesses that produce sauces, salsas, and other canned products

2. Broad network of organizations in otherparts of the food chain (e.g., distributors)

that could serve as critical partners /

support the food entrepreneurs

> There are a wide range of organizations (both public and private)that we perceive have a vested interest in the success of emerging

food businesses

> For example, the greater New Haven area is home to several largewholesale and food service distributors (e.g., Bozzutos, Thurstons,

Burris), which may be interested in cultivating a pipeline of local

suppliers

Commentary


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GAPS IN THE NEW HAVEN FOOD SECTOR

Additionally, there are a series of gaps in the New Haven market that have impeded

the launch and growth of food businesses

Commentary

1. Currently there is little

infrastructure in the greater New Haven

area to support early stage food businesses

who have needs beyond co-packing

> While some food entrepreneurs have rented restaurants or othercertified food service kitchens for their production / processing

needs, there are currently no shared commercial kitchen located in

Connecticut that are dedicated solely to small food businesses

> The nearest shared kitchen facilities are located in New York City,Lexington, NY, or Providence, RI

> The success of complementary food processing facilities in the NewHaven area (e.g., Ultimate Foods) speaks to the broader demand for

food processing / manufacturing

2. Expansion options for existing food

manufacturers and processors are limited

due to infrastructure and regulatory

constraints

> While there are other strategic food assets in the market, it is ourunderstanding that space for food manufacturing is at a premium due

to restrictions on existing locations (e.g., Mill River)


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THE OPPORTUNITY FOR NEW HAVEN

The existing commercial kitchen, classrooms, and offices at the Gateway Long

Wharf Campus represent an opportunity to address some of the gaps in the NewHaven market for food entrepreneurs

Unmet Needs of New

Haven FoodEntrepreneurs

ExistingInfrastructure atGateway Long

Wharf Campus

Food Assets in theNew Haven Area

Gateway Culinary

Incubator


7/18Next Street Financial LLC Copyright 2012CONFIDENTIAL 7

WHAT IS A CULINARY INCUBATOR?

There are a wide range of culinary incubator models in the market; however, most

incubators are designed to provided food entrepreneurs with the tools and supportrequired to successfully launch their business

Core Components

Services

Provided to

Businesses

> Key services include subsidized rent for a shared kitchen that includes access toequipment, hot and cold storage space, staff members expertise, and office space

> Incubators are increasingly providing technical assistance (e.g., business training,mentoring, etc.) to tenants to increase their likelihood of success following graduation

Economic Model

for Operators

Benefits to the

Community

> Typically a fee-based model that charges tenants on an hourly and/or monthly basisfor use of the kitchen, equipment, and other shared spaces

> Many incubators are run as non-profits by universities, quasi-public organizations, etc.

> Accelerators, which are run by experienced business owners and/or investors, maytake an equity stake in tenants

> Incubator graduates have the potential to create jobs in the local community,serving as a driver of economic growth

> Creates an opportunity to connect to and strengthen other food assets in themarket (e.g., local agriculture, distributers, etc.)



CHARACTERISTICS OF SUCCESSFUL INCUBATORS

Leveraging our experience in the incubator space and secondary research, we have

identified several common themes among successful incubators

1. Gain support early from local public and private stakeholders, as well as regulators

2. Leverage local food assets and connect to local agriculture as potential sources for raw

ingredients / produce

3. Identify value-added services and alternative revenue streams (e.g., technical assistance,business education, product development, etc.)

4. Thoughtfully develop a detailed operational and financial planboth for the incubatorslaunch and for ongoing operations

5. Tightly manage overhead costs (e.g., rent, utilities, incubator staff / management, etc.), whilefocusing on quality investments



PROFILED INCUBATOR: LA COCINA

San Francisco-based culinary incubator La Cocina works primarily with women

food entrepreneurs from low income communities



PROFILED INCUBATOR: CARBONDALE CENTER

The business below - Babunyas is a start-up that successfully launched out of the

Carbondale, PA Kitchen Incubator



GATEWAY TECHNICAL BUILDING AT LONG WHARF

Gateway Colleges move to downtown presents a unique opportunity to reuse the

former site on Long Wharf for education and technical training

Context

> Gateway Community College and theBoard of Education, along with Economic

Development partners, are working on a

reuse plan to include:

Hyde Foundation School: Focuson health sciences and sports

medicine

Gateway Automotive: Relocatefrom North Haven and build state-of-

the-art training center at Long Wharf

Gateway Technical Institute:STEM focused learning environment

focused on New Havens growing

economic sectors

Culinary Incubator: Support foodentrepreneurs in the New Haven area



GATEWAY CULINARY INCUBATOR CONTEXT

Support small business growth and entrepreneurs, particularly inthe food sector, and to generate job creation in New Haven and,more broadly, Connecticut

Create opportunities for Gateway students and the broadercommunity to gain hands-on experience working in a commercial

kitchen and the necessary training to launch their own business

Vision / Rationale

Home to a commercial kitchen, which already has much of theinfrastructure and equipment required to launch an incubator

Located along major transportation corridors (e.g., I-95) withaccess to many distribution channels

Buy-in from key government stakeholders who have alsoconvened key stakeholders across the food chain

Strategic Assets



GATEWAY PHASE 1 FINDINGS

Phase I of the Gateway Food Incubator Project assessed the feasibility of

establishing a culinary incubator in the Gateway Long Wharf commercial kitchen

Summary of Key Findings from Phase 1

1. Demand for Incubator: Research and conversations with experts highlighted demand for ashared commercial kitchen from a range of individuals and companies (e.g., home chefs, caterers,

food trucks, larger operating companies)

2. Valuable Preexisting Assets: The facilitys underlying assets (e.g., existing commercial kitchen,equipment) will enable the project to manage many of the economic risks typically associated

with culinary incubators

3. Opportunities for Expansion:Additionally, the incubator may have the opportunity to expandinto adjacent rooms (e.g., cafeteria kitchen, classrooms) as the incubator grows

4. No Insurmountable Roadblocks:While identified several risks / key questions for additionalvetting, we believe that the Gateway culinary incubator has met the burden of proof from

economic, regulatory, and demand dimensions to be given the green light to proceed



ASSESSMENT OF EXISTING FACILITY

When evaluating Gateways space, we considered both what can be done with

relatively little investment to the current kitchen as well as how the concept could

expand after the model is proven

Gateway Commercial Kitchen Cafeteria Kitchen Adjacent Rooms

Capabilities

> Suitable for basic cooking education, foodpreparation, dining / meals production, and

baking with some basic office and storage

space

> Quick cooking andprep space

> Office and / or classspace for tenants

and additional dry

storage

> 3 stoves, 2 deck ovens, 2 standalonerefrigerators, 1standalone freezer, 2 Hobart

mixers, 1 proofer, and 1 grill

> Shared dishwasher and ice machine withcafeteria

Equipment

> Small walk-in freezer,grill, deep fryer, and

deck oven

> TBD

> Limited number of hot stations> Minimal dry and cold storage> Poor heat / humidity control> Loading and transport of goods to kitchen

Possible

Challenges

> Transportation ofgoods / prep to

commercial kitchen

> Coding requirementsif used for storage

and / or prep



TENANT PROFILEWe have identified a preliminary profile of Gateways target tenant based on our

understanding of market demand and limiting factors resulting from the facilitys

existing infrastructure

Limiting

Factors

> Based on Gateways existing infrastructure, there aresome limitations on the types of businesses that could be

supported in the incubator (without significant fit-out)

> As there are several successful co-packing facilitieslocated in New Haven area, the incubator should not

focus on high-volume production of sauces and salsa

> It is important to identify anchor tenants that can berelied upon to use the facility consistently

Geographic

Breadth

> The facility should focus on attracting entrepreneursfrom both New Haven proper and its surrounding

counties, including Fairfield and Hartford, which jointly

have a population of over 2.6 million

Profile of Possible Tenants

> Catering companies

> Low-volume bakeries(e.g., cookies, pies,

cupcakes)

> Food trucks who needprep space

> Larger companies in needof test kitchens for

product development



SERVICE OFFERING

The incubators service offering would be based on a core membership model that

includes training and a baseline number of kitchen hours with additional a la carte

kitchen hours and technical assistance available to members and non-members

Core ComponentsService Offering

Membership

Hours a la

carte

Storage

> Receive 15-20 hours of kitchen use a month, but not inclusive of storage> With membership, tenants receive select business and kitchen training; additional

training / technical assistance purchased separately

> If adjacent classroom(s) are utilized, could offer businesses shared work / office space

> Members and non-members can purchase additional hours to use hot and prep space> Accurately assessing how many hours members and other users will require will be a

critical part of tenant intake

> Consider allocating a select percentage of prep space hours for food trucks

> Dry: Sell shelf space, lockable cages (small and large) and pallets> Cold: Offer shelf space and lockable cages within the standalone refrigerators and

freezer for members and non-members

Technical assistance (e.g., business education, kitchen training) for members and non-members


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TECHNICAL ASSISTANCE OFFERING

Discussions with stakeholders have highlighted the importance of incorporating

technical assistancee.g., business education and kitchen trainingas part of the

culinary incubators service offering

Examples of Potential Education / Training

Business plan development

Finance and accounting basics (e.g., QuickBooks)

Marketing and branding expertise

Assistance navigating licensing / food regulations Technology training

Business Training

Food safety training (e.g., ServSafe)

Equipment use and training

Product testing

Nutritional analysis

Storage training for raw / finished products

Kitchen Training

Peer mentoring and networking

Connections to financing assistance / capital resources

Internship opportunities

Industry workshops

BusinessDevelopment


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Next Street Financial LLC Copyright 2012 CONFIDENTIAL 18

QUESTIONS AND COMMENTS: WAYS TO GET ENGAGED

> Sector round table meetings (sign-ups available)

> Comment cards

> Personal tours of Gateway available (ask EDC staff)

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