WW-07565     2000  

Youth Run Enterprises: Successes, Barriers, and Policy Implications

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JAMES R. STONE III, CHRISTINE D. BREMER, AND BRENDA J. KOWSKE

Youth run enterprises (YRE) are an increasing presence in American schools and communities. YREs, which have a history going back to the eighteenth century, are in nearly 19 percent of K-12 schools and countless communities today. Twenty-two Minnesota YREs were interviewed for this study. The results show that YREs can contribute to building resilient youth as well as contribute to local economic development. YREs contribute to youth academic, social, and occupational development. Many YREs meet local community needs not served by the local business community. Many issues were identified that inhibit YREs initiation and growth, and call for state level action.

James R. Stone III is Deputy Director of the National Research Center for Career and Technical Education and Associate Professor, University of Minnesota Department of Work, Community and Family Education.

Christine D. Bremer is a doctoral candidate and Research Assistant, University of Minnesota Department of Work, Community and Family Education.

Brenda J. Kowske is a graduate student and Research Assistant, University of Minnesota Department of Work, Community and Family Education.

Introduction

In today's economy, the workplace opportunities afforded Minnesota's citizens are changing at a pace unseen in our history. However, within this frenetic economic activity lie systemic problems that inhibit the ability of some local communities to become or remain resilient. Some communities still have housing stock in disrepair, deteriorated public resources and facilities, or lack the local commercial services needed to build small businesses. The irony is that while much work needs to be done, there is insufficient private and government investment available to address these needs.

Increasingly, youth run enterprises (YREs) have demonstrated the potential for filling the void and enhancing community resilience. Every year, tens of thousands of young people across the country participate in YREs. They build houses, publish books, run restaurants, staff child care centers, provide business services, and offer other goods and services. Working with adult mentors and teachers, these students learn academic subjects and develop workplace skills while producing products and services valued in their communities.

Advocates such as REAL Enterprises and the National Center for Research in Vocational Education have shown the potential for youth run enterprises to contribute to local economic development. Some successful examples heralded in the popular press include the Oakland California Academy Enterprises; the hardware store in Rothsay, Minnesota; the Phantom Bike Shop in Minneapolis; and Food from the Hood in Los Angeles. Research is now emerging that supports the value of YREs to communities. Miller (1995) for example, argued that creating and sustaining collaborative partnerships with schools can contribute significantly to community revitalization.

The YRE concept of learning is not new. Pestalozzi (cited in Stern et al., 1994) argued more than 200 years ago that learning through production is an effective strategy for developing a variety of academic and practical skills. Perhaps in recognition of their value, the number of YREs has been growing. National reports show that 19 percent of schools currently support YREs (Stern, 1992). In addition to supporting local economic development, YREs also focus on teaching entrepreneurship, providing opportunities for application of classroom-developed skills, and enhancing social and personal development, (The REAL Story, 1992; Stern et al., 1994; Stone, 1989). Stern et al. (1994) concluded that YREs are underutilized tools that, if used properly, can achieve both economic and educational development goals.

The Present Study

Studies of youth development point to a small set of crucial protective factors for human development that tend to produce young people who are resilient, meaning that they are relatively invulnerable to negative forces in their environments (Masten, 1994; Masten, Best and Garmezy, 1990; Resnick et al., 1997). According to this body of research, the most important protective resource for healthy development is a strong relationship with a competent, caring adult. Meaningful adult con-nections are a hallmark of well-run YREs, and research shows that when youth are involved in addressing community needs, they develop relationships with adults and build skills needed for future education and careers (Stone, 1996). This study was designed to examine how YREs can contribute to a community's strategy for building resilience. A second focus was to identify and recommend policy initiatives that will foster YRE growth and development.

Twenty-three Minnesota school-based and community-based YREs were contacted for this study. They were selected from a list of schools or communities that received state funds through the Youth Entrepreneurship Grant program (1999 Minnesota Omnibus Education Bill, Article 3), sites nominated by state and local educators, and sites identified through news articles and web searches. Of the elementary, middle and high school and community-based sites contacted for this study, one had closed. Another had closed the original YRE, but reopened a new venture within a year. Each structured telephone interview in the study addressed the background of the business, the role of youth in the enterprise operation, the nature of the product or service provided, benefits of the enterprise, financing and legal aspects of the enterprise, and issues confronting YRE start-up and maintenance.

Findings

A descriptive summary of the YREs in this study is shown in Table 1 at the end of this article. What follows is a description of our findings regarding benefits provided by YREs and issues related to starting and maintaining a YRE.

YRE Benefits to Students

YREs have been shown to contribute to academic learning (Stern et al., 1994). Many YREs are designed to address specific graduation requirements. For example, a YRE at a rural school in south central Minnesota operates on a project basis. Students choose to start and maintain enterprises that interest them while simultaneously fulfilling Minnesota's Profile of Learning graduation standards. Other YREs provide academic credit for participants, such as in southeastern Minnesota, where students can opt to fulfill their industrial technology elective by working in the school's print shop or bicycle shop.

Aside from the academic benefits, some YREs provide experience-based learning about the busi-ness world. As one YRE instructor noted, "Eighty percent of small businesses fail. The kids will learn from their failures as well as their successes." Other business skills mentioned were ordering from vendors, market analysis, advertising, press relations, merchandising, store layout, and customer service. Some youth learned to write bylaws or grants.

Several YREs partnered with local businesspeople to encourage mentoring relationships. YRE participants learn specific technical skills and the specifics of business operations. One respondent noted, "The kids are making the decisions, [by] looking at the budget, [and] understanding the bottom line of a business." YREs provide social and career development experiences for participants, especially the opportunity to realize they are competent at solving real problems. A common theme in our interviews was voiced by one teacher who said, "[Students'] self-esteem is through the roof!" Many youth develop a sense of ownership and pride in the work they do. Other frequently mentioned benefits include: learning how to work independently and with others; learning how to make decisions; and practicing communication skills, including public speaking.

YRE Benefits to the Community

Communities can also benefit when YREs provide needed products or services. In rural communities, YREs are providing web access where none existed before. A high school in west central Minnesota took over the Internet access component of the local electric company's business, which was understaffed and about to be shut down. A group of students upgraded the networking equipment and started a YRE that ultimately provided affordable community access to the Internet, a retail web page providing easy access to shopping, and student mentoring of senior citizens about using e-mail to help them keep in contact with their loved ones. The instructor summarized the value to students, saying, "We probably can't even fathom the benefit once these kids get out of here... They have wonderful doors opening for them."

In the Minneapolis metro area, public secondary and alternative school students operate a coffee shop that provides a safe place for inner city youth to go. Many local community and school-based groups also take advantage of the space and the affordable coffee provided by the YRE. The instructor described the benefits to the students: "They are in contact with city council people, they order from vendors, they do market analysis, they call the media. They know how to present themselves. There is a certain level of confidence associated with that. They are getting better at how to plan for the future. Their writing skills are improving because they have worked on business plans or grants, plus they do research on where to get grants. It's not just a book report but research that's directly relevant."

In a Minnesota metro county, youth grow vegetables to sell to the local, low-income population at the only farmer's market within 20 miles. Some YREs provide services to local businesses and partnering organizations. In a rural town in southeastern Minnesota, students answered a plea for help from the mayor when they opened a bike shop located at the head of a new bike trail in a state park.

These YREs are successful because most of the decision-making is in the hands of the students. These students are allowed to succeed or fail, facing the same opportunities and threats present in real start-up enterprises. This creates an emphasis on real-world learning, supported by high levels of trust, respect, appreciation, and responsibility.

Expanding YRE Opportunities

If YREs can provide benefits to students and to communities, what are the impediments to expanding these opportunities to serve more youth? Several important themes emerged from our interviews with Minnesota YREs.

Internal Issues

We found a number of internal issues that affected YRE start-up and ongoing operations. These included: determining the kind of business to operate; avoiding competition with local businesses; and dealing with perceptions that young people could not or should not run a business. In some communities, school administrators were unwilling to make the scheduling adjustments and other changes needed to enable student participation. In others, determining product distribution channels was an issue. Some respondents discussed the difficulty of remaining flexible in order to take advantage of opportunities for growth. Still others mentioned issues related to students managing other students, security and theft prevention, keeping students motivated and on task, and obtaining sufficient help to operate the enterprise.

Time was a critical issue during the maintenance phase of YREs. Difficulties included finding sufficient time for teachers to continue writing grants, arranging for community/industry experiences for the youth participants, and supervising students during non-school business hours. YREs that relied on donated or used equipment experienced problems when the equipment failed. In one agricultural YRE, the donor reclaimed the land provided at start up. Achieving or maintaining profitability also arose as an issue during this phase of operations.

External Issues

Perhaps more critical to the expansion of YREs to serve more youth is the availability of financial resources. Most of the YREs examined in this study relied on external grants to underwrite start-up costs. Writing grant proposals and soliciting business and community support were major activities. A few YREs required licensure (e.g., radio broadcasting, food sales). Finding appropriate space, both buildings and land, along with equipment, represented other hurdles in the start-up phase. Gearing up for a mass production proved difficult in one manufacturing enterprise. Several of the respondents mentioned human resource issues, noting that those involved in the operation (the teachers or adult volunteers) lacked the technical expertise or business operations background to take the YRE concept into practice.

Legal issues emerged in our interviews. Liability for adult volunteers, and for students working off school property, were concerns of several respondents. Several YREs were established as legal, nonprofit entities, requiring the drafting of bylaws and filing of necessary paperwork.

Most of the YREs in this study attempted to explicitly integrate learning into the enterprise. Conflicts arose when the needs of production and customer service began to outweigh the learning needs of the students. Balancing these conflicting demands is an important part of a successful YRE (Stern et al., 1994).

Connecting YREs to specific curricular areas and graduation requirements was common. However, short class periods and student scheduling conflicts presented problems for YRE operations. As the enterprises started, the difficulty of engaging students in learning all aspects of the enterprise operation through participation in work tasks became apparent.

Recommendations

The issues discussed above impede the success of YREs, and therefore the education of our youth. To minimize the impact of these concerns, we have two broad recommendations for future policy.

The majority of these YREs used both public and private funding to initiate the business. Many of the funding agencies offered their support for start-up activities, but not for ongoing operations. It is common knowledge that most traditional enterprises are not profitable in their first few years of operation, yet these youth are often expected to survive the start-up process on their own. Therefore, we recommend that the state expand its funding for Youth Entrepreneurship Education Program at two levels. The first level of expansion would support new YRE activity. The second level of expansion would support existing YRE activity.

The second recommendation addresses the confusion expressed by several respondents in this study regarding laws and legislation that may pertain to their YRE. YREs are a unique form of business in that they seek to maximize learning, not profits, yet they often generate revenues that exceed their expenses. Minnesota laws and statutes (http://www.leg.state.mn.us) itemize regulations that may pertain to YREs in varying and unrelated sections, with no existing organization or cross-reference. As a consequence, there are four areas of tax law that need to be clarified, amplified, or revised: sales tax requirements, the ability to pay youth who work in YREs, certain aspects of child labor laws, and liability.

Sales Taxes

Of the YREs required to pay sales taxes (excluding those that dealt with food or clothing per Minnesota state law), several argued against paying taxes. They felt that their school or nonprofit affiliation and the learning nature of their enterprise justified status exempting them from sales taxes. Moreover, many of our respondents were unsure of both the existence and details of tax regulations that do apply to YREs. We recommend that this information be made more accessible, perhaps in the form of a state prepared legal guide for YREs. In addition, we feel further investigation is warranted regarding sales tax-exempt status for YREs.

Pay for Youth

Youth involved in YREs may or may not be paid, but generally are not directly compensated. Although many respondents said that the youth involved in the YRE simply enjoy being there, others talked about how important it is that summer and after-school employment be available for these youth, especially in rural and urban core communities where employment opportunities for youth are scarce. Others thought youth could not be paid if they were working during school hours. However, many respondents told us that they are not aware of youth wage regulations as they apply to YREs, and chose to "play it safe." We recommend that existing statutes regarding paying youth who work in YREs be clarified and made readily accessible to YRE sponsors. We also recommend appropriate legislative action that would permit youth working in YREs to receive compensation.

Child Labor Laws

Many of our respondents were unclear about applicable child labor laws and safety regulations. If YREs are to compensate youth labor, exemptions from minimum wage requirements may need to be addressed as well. Alternatives may need to be developed so that compensating youth in YREs does not drive the enterprise out of business.

Liability

YREs do not solely exist within the confines of the parent organization or school. Often, youth are required to travel for conferences, to deliver products, and to offer services at the place of need, such as at a market or mall. In case of an injury to a student, whose insurance is liable: the school's, the organization's, or the parents'? Do liability waivers need to be signed for simple business functions? Who is responsible if an adult volunteer is injured while doing work for the YRE? These questions need to be answered in order for those operating YREs to feel confident that they have taken appropriate precautions and are operating according to applicable regulations.

Summary

Most YREs have their origins in a school class or school activity; others are started by community-based organizations. Regardless of origin, most YREs start small and remain that way. If we wish to encourage the growth of YREs to support the development of resilient youth and communities, the findings of this study suggest there is a role for state level action.

Many YREs require external financial support to initiate and maintain the enterprise. Although some find this support through foundations and local donations, reliable and consistent funding sources are desperately needed. State support, such as that provided through Minnesota's Youth Entrepreneurship Education Program, remains important to enable the growth and expansion of YREs.

Confusion over state laws may impede the growth of YREs. Questions concerning business taxes, child labor laws, pay for youth workers, regulations, use of profits, and the legal liability of sponsoring agencies and adult volunteers arose in this study. Supportive legislation would reduce this ambiguity. Clarification and explicit language at the state level would aid schools and nonprofit agencies in their efforts to implement YREs.

School-based, youth run enterprises ought to be connected to the curriculum. Both school-based and community-based youth run enterprises should also be contributing to healthy youth development. These connections can be made through state or local graduation requirements, community service and service learning requirements of schools and youth organizations, and through application of research-based "best practices." Finally, if YREs are to support the development of healthy, resilient young people who contribute to their community's resilience, we believe that such enterprises ought to be grounded in meeting community needs.

Table 1. - Descriptive Analysis of YRE Sites
Site	Product or Service	# of Kids Served	Student Focus	Original Purpose	Start-up Capital	Customer Focus	School Connect	Legal Status	Longevity
Site 1	Pumpkins while trees mature, then apples.	12	All	Means for students to make money, education	Sustainable Agriculture grant	General Public	POL (1) - biology & business	None (2)	3 Years
Site 2	Seedlings & Plants	4	All	Project-based learning opportunity	School	Parents, General Public	POL - business & business	None (2)	2 years
Site 3	Embroidery business	5	All	Kids decided to open a business, fulfill a community need	SE MN Initiative fund grant	General Public	POL	None (2)	3 years
Site 4	Fresh Vegetables	37	K-7th grade At risk kids	Food and resources for low income youth.	Donations; county money	General Public	None	None (2)	8 months
Site 5	Value added Agriculture products (hot sauce, etc)	30	Open to all	Familiarize urban youth with Agriculture	AURI Grant and school district	Grocery stores, parents, faculty	POL - business plan, interpersonal communication	None (2)	2 years
Site 6	Coffee shop and teen center	20	Above average students	Teen hangout	Foundation Health System MN; 1000 individual donors; school district, CFL grant	Hopkins teens	School district is partner. No credit, teachers use site as tool.	Legal nonprofit	2 years
Site 7	Coffee shop	35	Second language, at risk; mix of all	Teach entrepreneurship alternative to fundraising; teen hangout	St Paul Chamber; STW Partnership COP grant	General Public	Skills for Tomorrow (Alt. Learning)-school credit.	None (2)	1 year
Site 8	Customized consumer products/servi-ces on request basis	12-15	All "right" kids	Give kids hands on experience	School	Local businesses	Entrepreneurship class for credit	None (2)	2 years
Site 9	Contract manufacturing	70	Vocational students	Local business needed short term contract welders	Southwest MN Foundation	Local business contracted them.	School credit in 3 different curriculums	None (2)	Closed - Insufficient Orders from business partner 1.5 years
Site 10	Started as fitness center now a corporate umbrella for individual enterprises: button maker, business cards, signs, snowmobile accessories	18	Some are at risk; open to all	Started with no focus; empty building provided opportunity to find & fill community need(s), learning and economic resource for kids.	NW MN Initiative Fund Grant	General Public	POL High Tech Writing	501c3	First version - years; New version - 3 years
Site 11	Bank	50	All	Hands-on experience in running a business, More choices for kids' curriculum.	Bank partner donated supplies	Students and staff	Next semester- POL, Now-business class, school credit	Reports to Chamber of Commerce-Special legislation	2.5 years
Site 12	Wood products (baskets, crates)	61	All students in school	Bring students, community and school together.	Donations from local businesses	Students, faculty & general public	School credit	None (2)	20 years
Site 13	Internet Service Provider	23	Some at risk; open to all	Community need for internet service	Student prepared grants	General Public	No school credit POL	None (2)	1 year
Site 14	Wood products	61	All students in school	Bring students, community and school together.	Donations from local businesses	Students, faculty & general public	School credit	None (2)	20 year
Site 15	Cinema concession stand	8	Open to anyone but want to involve special education; plan to involve K-12	Opportunity to renovate a local theater and operate concessions, theatre served community need	Initiative Foundation and the Center for School Change (Humphrey Center)	General public	School credit, POL career investigation	Nonprofit holds state business license	1 year
Site 16	School-Store	50	High-achievers. Have to apply.	Hands-on learning, money for school & extra-curriculars	Borrowed from school	Students and faculty	School credit	Nonprofit	3 years
Site 17	DJ Business	7 operating, 40 in-training	High-achievers.	To support student-run radio station	Northland foundation	Students, General public	School credit	Nonprofit under Kids Plus	5 years
Site 18	Vegetables	10-12	Court appointed youth	To be supplier for farm market, to raise nutrition awareness for highly diabetic community	NW Initiative Fund. School for change	Internal market for food grown	Foundation gave money to school, school gave it to program.	None (2)	1 year
Site 19	Wooden crates	15	All enrolled in work experience curriculum-prerequisite to work-study	Workforce skills for youth	NW Initiative Fund	General Public	School credit. POL-research and market-ing	None (2)	3 years
Site 20	Re-sell used, donated items-clothing, small appliances.	12	At-risk kids in job training program. Open employment not connected to school	Money for kids and community, teach kids about running a business	Northland foundation	General Public	None (3) school credit	None (2)	3 years
Site 21	Sell BBQ Sauce	25	All - but have to apply	Teach kids to start-up and run a business	School district grant, SW Initiative Fund	General Public, businesses, school itself.	School credit	Nonprofit	4 years
Site 22	Print weekly newspaper, announcements, brochures.	25-30	All	Meet printing needs of community, career exploration for youth	Grants from the Center for School Change, Center to reduce rural violence, CFL, Chamber.	General Public	School credit, Industrial Technology class	Nonprofit	1 year
Site 23	Sell bikes and bike parts.	15-22	All	Education and employment for youth	Grants from the Center for School Change, Center to reduce rural violence, CFL, Chamber	General Public	School credit, Industrial Technology class	Nonprofit	3 years

(1) POL = Profile of Learning: Activity meets graduation requirement
(2) Denotes fiscal agent is office governing program (i.e. school district, county extension office, etc.)
(3) Will implement next year.

References

Masten, A. S. 1994. "Resilience in Individual Development: Successful Adaptation despite Risk and Adversity," in M. Wang and E. Gordon, eds. Risk and Resilience in Inner City America: Challenges and Prospects. Hillsdale, NJ: Erlbaum, pp. 3-25.

Masten, A.S., K. M. Best and N. Garmezy. 1990. "Resilience and Development: Contributions from the Study of Children who Overcome Adversity." Development and Psychopathology. 2, pp. 425-44.

Miller, B.A. 1995. The Role of Rural Schools in Rural Community Development. (Report No. EDO-RC-95-3). Charleston, WV: ERIC/CRESS. (ERIC Document Reproduction Service No. ED 384 479).

The REAL Story. 1992. Newsletter of REAL (Rural Entrepreneurship through Action Learning), Chapel Hill, North Carolina.

Resnick, M. D. et al. 1997. "Protecting Adolescents from Harm: Findings from the National Longitudinal Study on Adolescent Health." Journal of the American Medical Association. 278:10, pp. 823-32.

Stern, D. 1992. School-to-Work Programs and Services in Secondary Schools and Two-Year Public Postsecondary Institutions: Findings from the National Assessment of Vocational Education Survey. Berkeley: School of Education, University of California.

Stern, D. et al. 1994. School-based Enterprise: Productive Learning in American High Schools. San Francisco: Jossey-Bass.

Stone, J. R. III. 1989. Learning from School-based Work Experience Programs. Paper presented at the annual meeting of the American Education Research Association, San Francisco, March.

Stone, J.R. III. 1996. Continuous Improvement in Programs Connecting School and Work. Paper presented at the Annual Meeting of the American Education Research Association, New York, April.

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