It has been a little more than two years since Praveen Madan, co-owner of Booksmith, the San Francisco bookstore, took over as CEO of Menlo Park, Calif.’s Kepler’s Books and Magazines, in an effort to keep the iconic but struggling store from closing. To ensure the future of Kepler’s, he engaged a team of “community champions” to help forge a new independent bookstore model. PW checked in with Madan recently to see just how close he is to reaching that goal.

“The days when bookstores can rely on selling print books at full list prices to stay profitable are numbered,” Madan said, “because that core revenue model is going to continue seeing more and more challenges from new innovations like book subscription services and same-day delivery models, to name just a few.” But that doesn’t mean stores are doomed; Kepler’s has been profitable since its reopening in fall 2012, and the CEO believes it is outselling every store in the Bay Area on frontlist, including Booksmith. “This is a community that’s hungry for new ideas. Very type-A,” he said.

Madan’s biggest move away from traditional bookselling has been the creation of a nonprofit arm, Peninsula Arts & Letters (PA&L), which presents roughly 250 events a year. He also involved customers and members of the book industry in rewriting Kepler’s mission statement two summers ago. What emerged from their conversations was that Kepler’s goal shouldn’t be simply to sell more books, but instead to create a gathering place, do community outreach, support lifelong learning and literacy, and embrace technology. At the same time, customers made it clear that they didn’t want scarves and trinkets in the bookstore; they wanted books. “We had to give up a half million dollars in business a year,” said Madan, speaking of the cost of cutting back on sidelines. But by taking them out, he was able to increase the store’s book inventory, from 18,000 units in the April–June quarter of 2012 to 47,500 units during the same quarter this year.

Although many indie booksellers say that Amazon is their biggest competitor, Madan disagrees. He’s even contacted Amazon about selling e-books and Kindles, as well as Kobo e-readers, in order to offer books in more formats. “It doesn’t make any sense to judge people on what format they’re reading on or where they bought them,” said Madan. He noted that 42% of Kepler’s Literary Circle members also have Amazon Prime membership and that an early Kepler’s investor was on Amazon’s board for 10 years. (Kepler’s is located in Silicon Valley, after all.)

Madan is much more concerned about the cost of appropriate compensation for staff, which he believes could slow Kepler’s current resurgence, and that of indies nationwide. The minimum wage in Menlo Park is $9 per hour, and Kepler’s own minimum is $11, which Madan plans to raise. “I used to work in corporate America. Christin [Evans (Madan’s wife)] has done that, too. We’ve seen the good life and lived the good life. One of the things we were shocked at was wages,” said Madan. “We need smart, talented people to work in the business. How can you get them if you can’t pay good wages?”

To that end, Madan is considering turning the whole operation into a nonprofit. He can’t afford to keep Kepler’s a for-profit business and pay employees more, although in June he did distribute part of the store’s profit back to the staff, giving each bookseller two to four weeks’ pay. Another argument for going fully nonprofit is that bifurcating the business has created more complexity. As the business is now configured, on the nonprofit side, PA&L doesn’t just produce events, it also actively works on behalf of literacy. Thanks to a local investor, this fall Kepler’s, through PA&L, began working with seven schools in East Palo Alto to bring in authors and give away books.

Madan believes that bookstores are for-profit because people are used to that model. “I remind people that I’m not the owner. We’re committed to making this a community store,” he said. That means as much transparency as possible. Last October Kepler’s held its first State of the Union meeting for customers, a concept Madan borrowed from public companies that hold annual shareholder meetings. He plans to make it an annual event, with the next address tentatively scheduled for spring 2015.

Going nonprofit would also mean turning the store’s ownership back to the community, something Madan would like to do in honor of the store’s 60th anniversary next year. Among the options he’s considering is to fold the store into PA&L. Another possibility is to do something along the lines of REI, the outdoor gear and clothing store, which operates as a co-op, and which anyone can join as a lifetime member for $20 (among other benefits, members can vote for the company’s board of directors). A third possibility is to set up a program under the Jumpstart Our Business Startups (JOBS) Act to sell stock directly to the public.

But the main thing Madan wants to ensure is that the community continues to have a great bookstore that’s responsive to the needs of customers, no mater which model of ownership Kepler’s adopts.