Pizza Today - August 2022 - 28

Worker-owned restaurants can be
structured several ways. Regardless of
type, success is defined differently when
employees own a business. Rather than
enriching one person, the company exists
to provide a secure living for multiple
people who have invested their time and
talent into it. The Democracy at Work
Institute describes it as a " values-driven
business that puts worker and community
benefit at the core of its purpose. "
Types of Employee Ownership
The employee stock ownership plan
(ESOP) is unique among these options
in that it requires no financial investment
from members, making it very accessible.
Under this structure, the company
purchases all shares and holds them on
behalf of workers. However, its relative
complexity comes with high set-up costs,
making it a poor match for companies
with teams smaller than 15 to 20.
Another popular option is the worker
cooperative, which suits smaller companies
committed to democratic corporate
governance. Usually worker-owners must
pay a membership fee to join and receive
dividends. Built-in profit-sharing is based
on hours worked.
Both of these structures offer longterm
incentives, because employees can
only cash out their shares when they
leave the company. As a result, these two
types of ownership are best at retaining
and rewarding staff, incentivizing them
to perform their best and stick around
for the long haul. The better the pizzeria
performs the more valuable their ownership
stakes become.
There are other options. Equity grants
typically offer rewards and incentives
only to selected workers, who typically
have no role in company governance.
With an employee ownership trust
(EOT), the EOT owns all shares and
disperses money via profit-sharing. With
both employee stock options (ESOs) and
employee stock purchase plans (ESPPs),
team members need to have the financial
resources to buy in, and should they sell
their shares for immediate gains, they no
longer have skin in the game in terms of
company success.
Complex Structures Demand
Due Diligence
Crafting a worker-owned pizzeria is
a complex process that requires careful
investigation and analysis, along with
experienced legal and financial advice.
Because these types of businesses are
outside the norm, seek out banks and
other institutions that are experienced
with these legal entities.
" It's a great decision and completely
worth the time to explore because
employee ownership brings so many
things to a business beyond retirement
security, " says Pflieger. He recommends
speaking with a local specialist on the
topic and attending a chapter meeting
of The ESOP Association or a similar
organization, where you can meet people
at all stages of the transition, as well as
professional advisers.
The many aspects to consider include:
* Set-up costs
* Long-term incentives
* Governance implications
* Employee benefits
* Tax implications
* Valuation
* Financing implications
* Number of workers
* How to allot equity, if applicable
* Vesting timelines, if applicable
Benefits of Employee Ownership
According
to a study funded by the
Employee Ownership Foundation and
conducted by Rutgers University during
the COVID pandemic, worker-owned
firms were:
* Three to four times more likely to retain
non-manager and manager employees.
* 3.2 times more likely to retain staff-
even when other businesses received
funding through the Paycheck Protection
Program and the employee-owned
firms did not.
* Significantly less likely to reduce
employees' hours or pay.
" Communities retain a company -
including its jobs, products, services and
economic contributions, because
employee-owned companies tend to be
very rooted in their communities, "
28 / PIZZATODAY.COM / AUGUST 2022
according to Pflieger. In short, these
companies outperform the competition
while also keeping more money in the
area.
Employees feel more valued and more
invested when they're owners. " You're
empowered and your opinions carry
much more weight than within a typical
hierarchical structure, " says Radcliffe
Eccleston, community liaison for The
Cheese Board. " You have the capacity
to basically implement any changes you
want, if you can convince the group that
it's the right decision. It's a lot more
responsibility but it's reflected in the pay. "
The company's profit-sharing model distributes
profits annually in proportion to
the amount of hours each person worked.
Eccleston emphasizes that " employee
retention is so much stronger here and
we have fantastic benefits, but we have
also cultivated this strong sense of
community which makes it a really, really
enjoyable place to work. "
Resources
There are a number of local and
national organizations that are dedicated
to providing resources about employee
ownership, including:
* The Employee Ownership Foundation -
employeeownershipfoundation.org/
* The ESOP Association - esopassociation.org/
*
The Democracy at Work Institute, representing
the US Federation of Worker
Cooperatives - institute.coop/
* The US Federation of Worker Cooperatives
- usworker.coop/home/
* Worker Ownership Resources &
Cooperative Services - workercooperatives.org/
*
Sustainable Economies Law Center -
theselc.org/
* Becoming Employee Owned -
becomingemployeeowned.org/
* Project Equity - project-equity.org/
* National Center for Employee Ownership
- nceo.org/
ANNELISE KELLY is a Portland,
Oregon-based freelance writer.
http://www.employeeownershipfoundation.org/ http://www.tion.org/ http://www.institute.coop/ http://www.usworker.coop/home/ http://www.tives.org/ http://www.theselc.org/ http://www.becomingemployeeowned.org/ http://www.project-equity.org/ http://www.nceo.org/ http://www.PIZZATODAY.COM
Pizza Today - August 2022

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