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Drafting Farmers Market Documents: Market Rules

Written by Sierra Blachford under the direction and review of Chris Zdorovtsov (former SDSU Extension Community Vitality Field Specialist).

It is strongly recommended that new and existing farmers markets draft rules to govern the daily operation of the market. Although every market participant hopes that such a document will be unnecessary, it can be a useful tool if and when conflict arises. A positive way to regard this set of rules is to consider the purpose: to clearly communicate the expectations of all persons, including vendors, patrons and managers, at the market. Drafting rules for the market will create order and help maintain peaceful relations among market participants (1). Several South Dakota markets began without a set of market rules, but within the first selling season the groups regretted the decision and began drafting rules.

The rules are divided into three sections: 1. Operational, 2. Regulatory and 3. Product. This basic structure provides a flexible outline that can be tailored to each market.

Section 1: Operational Rules

This section explains rules for the daily operation of the market. Each of the subheadings, labeled 1.1 to 1.11, can be omitted, rearranged or edited to meet the specific needs of a market.

1.1 Membership and Dues

Membership privileges normally include the right to sell at the market, establish and maintain seniority, purchase a season stall, participate in meetings, vote, run for office, and to access corporate records.

The Market Association may choose to require annual dues as a part of becoming a member of the Market Association. Membership dues can be used to fund many projects: matching tents, signage for the market, a stipend for the market manager or an advertising budget.

Some markets require a membership fee, due on the first market-selling day or the first time a vendor comes to the market in a given season. The price of dues will likely be substantial, but should not be restrictive (2). The membership fee commits the vendor to the market in a positive manner and reduces the incidence of one-time vendors who flood the market or dump produce.

1.2 Stall Fees

Stall fees can be an important source of revenue for a market in addition to membership dues, although some markets do not charge a stall fee. These fees may be charged on a daily or seasonal basis. Seasonal stall fees, paid in a lump sum in the early season, can provide needed income for the market at a critical time. Market organizers should consider providing an incentive, such as a discount, to vendors who decide to pay a seasonal fee, rather than daily stall fees.

Stall fees may be a fixed figure, such as $5 per day, or a percent of the gross sales. In either case, a description of the payment structure should be included in the rules, as well as a brief explanation of how stall fees are spent.

In some markets stall fees and membership dues are combined into one fee. This can simplify the accounting process and limit the number of payments each vendor is responsible for making. Deciding to charge two fees or one fee is up to each market.

1.3 Stall Assignments & Appearance

The stall assignments rule should clearly define the available unit (stall, stand, etc.) in concrete terms. In addition, the rules may state how the stalls will be assigned. The vendor is required to keep the space clean during and at the end of each market day. The rules may state what times the vendors should set up, when selling can begin and when it is acceptable to begin tearing down. Rules can also include procedures on tents, tables, vehicles, unloading and loading and signage.

1.4 Seniority

The market may find that vendors expect stall selection to be based on seniority at the market. Seniority is determined by the date the vendor applications are received and based on number of continuous seasons at the market. For example, a senior vendor may expect to choose their booth location before a newer member. Stall assignment rules can be created in favor of or against a seniority-based policy.

If the amount of space is limited, seniority may not be a feasible structure for choosing stall spaces. In this case, the board of directors could recommend a vendor arrangement that will best promote the market system. This will be subject to the approval of the members at a pre-selling season meeting. This may also be a good option for markets who do not wish to use a seniority-based decision process.

1.5 Attendance

Some markets create attendance policies to make sure vendors are at the market every week. Last minute cancellation can be detrimental to the market if that vendor is the only supplier of certain products. Consumers who planned to purchase the vendors’ products may become frustrated because they are unable to purchase those products. To avoid this, a rule and penalty may be created regarding last minute cancellations.

Use a rule to outline the appropriate actions for a vendor who must miss a week due to sickness or unplanned events. For example, rules may require the vendor to contact the market manager in advance if they cannot attend the market.

1.6 Public Policies

Public policy rules can encompass anything that may affect the general public while at the market. Customers often want to bring pet dogs to the market; however, this is an issue at many markets. It can be troublesome if unruly dogs are disturbing the shopping of others. In some cases, having pets near the products becomes a food safety concern. Markets are starting to enforce a “no pets” rule, with the exception of service animals. A few markets created a no-smoking environment by posting signs. Additional rules regarding public policies can include topics such as grilling, music and vehicle etiquette.

If these situations have never caused disturbances, a market may not need these types of rules.

1.7 Grievance Policy

Every market, regardless of organization structure and the clarity of its rules, will suffer from conflict at one time or another. It is important to include details of the procedure that must be followed whenever grievances arise. Complaints are often directed to the market manager. After the market manager is made aware of the complaint, he or she should conduct an initial investigation of the complaint. The investigation should include an attempt to obtain detailed information from the complainant, the alleged violator and the other witnesses before determining if a violation of the market rules has occurred (1).

Potential grievances can include a variety of issues: violation of stall width, failure to label a product, not following state or local regulations, or late arrival. There are certain issues within farmers markets that tend to create frequent conflicts; these include pricing policies, conduct of vendors, or vendors’ stall spaces and displays.

A grievance policy pre-identifies conflict-prone topics that may be addressed often. By taking this proactive approach, the marketplace tends to control the types of disputes that will be supported for fair resolution. It prevents the grievance procedure from becoming bogged down with repeated issues or petty arguments. In a sense, this wording preserves the integrity of the grievance procedure. The market may also choose to assign a sliding scale of fee-based penalties or a strike system that may involve removal from the market.

1.8 Market Manager

Typically, the rules will describe the role and the authority given to the market manager or management team and how the market manager will handle conflicts. It may also describe the manager’s term and how a new manager is chosen or appointed by the group.

1.9 Outside Organizations

In some cases, South Dakota markets have been asked by outside organizations for permission to participate in the market. Some examples include; a club fundraiser, a local group of volunteers, special interest or activist groups, or a one-time bake sale or entertainment from a local school group. Political groups circulating petitions and brochures may also want to attend the market, taking advantage of the crowd the market draws.

First, the board should decide if these types of activities are allowed. If so, the organizations must meet the standards set by the board. For example, outside organizations may only attend the market if room is available. The board should determine if the organization wants to sell a fundraising product at the market, and decide if the product(s) must comply with market rules.

1.10 Vendor Conduct

Clear expectations for the conduct of a vendor during hours of operation should be expressed in the rules. Many times this section includes rules on good etiquette, customer service, and salesmanship.

1.11 Insurance

Some markets require that each vendor have a liability policy and proof of their policy, while others simply suggest it. Most vendors have an on-farm policy, yet this may not cover their activities at the market. Both the vendors and the market management should strive to ensure the market and vendors are properly protected with the correct insurance policies.

Section 2: Regulatory Rules

This section of the rules addresses regulatory issues, such as sales tax and South Dakota Home-Processed Food Law. This section will potentially need to be updated annually to keep current with regulatory changes.

2.1 Sales Tax

State law requires that each vendor obtain a sales tax license and display it each week at the market. If a vendor does not pay their taxes, the market will not be held liable; the SD Department of Revenue will pursue the vendor for the amount independently of the farmers market. However, it is still in the best interest of the market to require that proof of permits be posted each week by vendors.

2.2 Weights & Measures

If a product is sold by weight, then a South Dakota certified scale must be used and it should face the public. The use of a non-certified scale is prohibited. However, in some cases vendors choose to sell items in a specific container size, such as in bunches or on the vine. When products are listed in a grouping rather than by weight, a scale is not needed and the price is listed for the grouping without listing the weight.

2.3 Food Samples

Some markets allow samples to be distributed by vendors, while others do not allow this process. For markets that allow samples, the vendor must follow the sampling rules set forth by the SD Department of Health.

2.4 Potentially Hazardous Foods and Product Temperature

Foods served or sold at market must comply with all rules set forth by the state. Market vendors should follow the SD Dept. of Health Food Service Code section 44:02:07:18 titled “Potentially Hazardous Food.”

A potentially hazardous food is a natural or synthetic food capable of supporting rapid and progressive growth of infectious or toxigenic microorganisms. Potentially hazardous food includes a food of animal origin that is raw or heat-treated, a food of plant origin that is heat-treated or consists of raw seed sprouts, cut melons, any other cut fruits or garlic and oil mixtures. Other examples of foods commonly sold at the farmers market that must be from a licensed kitchen include, but are not limited to frozen or freshly baked potpies, kuchen (custard based pies), and fresh apple cider.

The SD Dept. of Health regulates temperatures at which potentially hazardous foods must be stored or served at market. Foods in this category must be prepared and served with a foodservice, temporary or mobile license from the SD Department of Health Office of Health Protection.

2.5 Home-Processed Foods Law

In 2010, the South Dakota “Home-Processed Foods Law” was approved, allowing for the sale of home baked goods at farmers markets and similar venues. Markets should create rules to ensure that their vendors’ products are following the statutes listed in this law regarding labeling, products and processes.

Section 3: Product Rules

This section of rules will help markets to define what products can and cannot be sold at the market.

3.1 Product Approval & Claims

Vendors should be able to demonstrate that they meet the rules for the sale of their specific products as outlined in the market rules document. They should also be willing to allow inspections of their operation to ensure compliance of the rules. All vendors using the term "organic" should follow the federal regulations for the use of the term. Any claims made by the vendor must be within local, state and federal laws regarding food safety and labeling.

3.2 Defining Permissible Products

It is important to identify products permitted for sale at the market and those that are not. Some markets clearly limit the sales to agricultural and by-products only, while others permit the sale of non-agriculture goods such as artwork or crafts. Some allow home-based businesses or foodservice vendors to sell at their market.

While crafts may add to the diversity of the product line offered at the market, they may undermine its ultimate purpose to provide high-quality food and farm products directly to the consumer. Although the presence of crafts may attract a greater number of customers to the market, these customers may not be interested in the non-craft items offered at other stalls – that is, the food vendors may not share the same target customer with craft vendors. It is at the discretion of each market to determine what kinds of products will be permitted for sale (2). Some markets compromise by allowing a limited number of non-food vendors.

3.3 Product Source Restriction

Markets may decide to limit the geographical area where the products for sale originated. In some cases, this means the market will have to create their definition of “local food.”

Markets may reserve the right to inspect vendor farms to confirm that products are raised on the vendor farm and in the manner stated. Completing this task for every vendor is an expensive and time consuming requirement, but sometimes it becomes necessary (2). However, in most cases an inspection is only completed after a complaint has been made. This can limit the time and expense involved in farm inspections.

3.4 Reselling Restriction

Reselling is the when a vendor purchases an item from another grower or producer resells it at the farmers market. For example, purchasing watermelons produced in the south to resell at a local farmers market. Some markets allow reselling and others do not.

Producer-only markets do not allow reselling. These markets can capitalize on the growing interest in local food. They are able to cater to a customer who places a high value on supporting the local growers near or within their own community.

Markets that allow product to be resold may have a wider variety of produce. This can please a customer who values convenience, because they only need to shop in one location. However, when purchasing resale products customers lose direct contact with the grower. This can be negative because knowing the grower is often listed as one of the primary reasons customers decide to patronize a market.

Markets should decide which policy – producer-only or resale – suits their market best. To make this decision, consult or survey potential vendors and customers. Keep in mind the customer base in your community. What would be most important to market patrons? The final decision will be the most successful if the needs and desires of vendors and customers are considered.

A market that decides to be producer-only may elect to permit resale products when the resale product does not compete with a product that can be grown by a local vendor. These products may be used to supplement, or round out other produce offered at the market in order to manage supply, particularly in the early part of the season when locally grown produce may be sparse.

If resale items are brought in from outside the local area, consider providing customers with information about the farm it was produced on. Customers enjoy knowing where their food comes from and how it was grown. This will help maintain the feeling of connection and confidence in the products.

3.5 Pricing

Pricing is a challenging task for individual vendors and the group of vendors collaborating at a market. It is important to recognize the rights of each vendor to establish their own prices for products; it is illegal to fix prices. However, it is equally as important to recognize the effect of pricing on the market as a whole.

Vendors are vulnerable to a practice called “price undercutting.” Price undercutting refers to the action of one or more vendors to establish a price for their products that are far below those of comparable products sold by other vendors at the market. It is a tactic often used to dump large quantities of vegetables quickly; it is also used to create a loss leader that attracts the attention of the customer to a particular stall where they may purchase other, more expensive items. Experienced farmers market vendors identify this practice as the single biggest threat to the health of a market as a whole (2). Charging a daily stall fee or dues for market membership can limit the occurrence of product dumping.

Conclusion on Market Rules

Once the market rules have been drafted, consider having them reviewed by an attorney. Whether that person is a supporter of the market willing to provide the service pro bono, or paid for the work, he or she can revise the document to meet legal standards.

References:

  • Hamilton, Neil. “Farmers’ Markets Rules, Regulations and Opportunities.” National AgLaw Center Publications. June 2002: 1-47. 13 Feb. 2013
  • Homitzky, Claire and Beckman, Jana. “Starting a Seasonal Open-Air Market in Kansas.” Kansas Rural Center, K-State Research and Extension, Kansas State University. September 2008: 1-22. Feb. 18 2013.
  • Stephenson, Garry; Lev Larry, Brewer Linda. “Understanding the Link between Farmers’ Market Size and Market Organization.” Oregon State University Extension Service. Dec. 2007: 1-18. 30 Aug 2013.

Related Terms

Farmers Market Operation