When I was the fund raising chair at our preschool we had a similiar problem. we solved it by providing a parent's expo day for all the parents to share their "wares". This allowed parents sell their products with a small portion benefitting the school. In conjunction with this we instituted a policy that the school could not enter into a fund raising agreement with a parent at the school. We intentionally sought outside vendors.
The parents like it because they get a chance to sell their products and support the school with their businesses and the school wins because there are no hard feelings on the part of the parents as vendors.
I'm not sure how to handle this. We are looking at a Spring fundraiser which would be reasonably low-key. We've explored selling flowers, GCs for plants from farm markets, that sort of thing. Turns out, two of our active members are involved in the business, one has a large garden center, another a mom-and-pop farm market. They both want to sponser something. How do I handle this without alienating one or both of them?