Contact Us (858) 444-2300


ESOPs for California Grocery Stores

Posted by Marc S. Schechter | May 03, 2019

Supermarkets and grocery stores are especially well-positioned for employee ownership. Three of the top 5 largest employee-owned companies are grocery stores. Employee stock ownership plans (ESOPs) can benefit privately-owned grocery stores in California, providing incentives for founders, owners, and employees.

Employee-Owned Supermarkets

The largest ESOP in the U.S. has more employee-participants than the next 10 largest combined. Publix is a grocery store chain headquartered in Florida with over 1,000 locations throughout the South. According to the Publix website, the company's founder created an ESOP so that employees had the formal opportunity to take an ownership interest in the company.

Other supermarket chains amongst the 100 largest ESOPs include:

As an ownership model, ESOPs can be beneficial to a number of industries, including engineering firms, architecture companies, and defense contractor businesses. However, grocery stores may be unique among ESOPs because employees have the opportunity to not only act as workers and owners but also as customers.

ESOPs can also benefit the community at large. Employee-owned companies keep capital in the community through employee benefits. With lower rates of turnover, employees can also be more invested in their local community over time. In many ways, a grocery store acts like a micro-community. A grocery store is a place where local residents gather regularly, interact with neighbors, and see the familiar faces of long-time employees.

Employee-Ownership for the Bottom Line  

The benefits of an employee-owned company extend beyond employee benefits. An ESOP can have a number of benefits for company owners, founders, and the company itself. For the company, contributions to an ESOP may be tax deductible. Surveys have also shown many ESOPs report increased productivity after converting to employee ownership.

For owners, an ESOP provides a fair market value buyer where the market may offer limited private company buyers. Owners may also be able to defer capital gains after selling their interest in the company to an ESOP.

Founders often have a personal interest in the company, especially after years of building up a company from scratch. The founders' family name and reputation may be attached to the company that continues even after the founder retires. An ESOP allows the founders to maintain some level of influence during the transition to show employees, customers, and the community that the business will continue as before.

Southern California Food and Grocery Companies   

California is a leader in the food, nutrition, and health industry. Many of those unique businesses were started in California in the 1970s and 1980s. The founders of those companies may be looking to retire while leaving the company in capable hands.

Passing the company on to the founders' children may not be viable. A beneficial alternative may be converting the privately-owned company to employee ownership through an ESOP. A business founder may not want to risk selling the company to another private firm for fear of having the company gutted or a change of ideals that could tarnish the company the founders worked so hard to build.

ESOP Law Firm for San Diego Businesses

If you have any questions about employee ownership and ESOPs for your California company, Butterfield Schechter LLP is here to help. We are San Diego County's largest law firm with a focus on employee benefits law. Contact our office today with any questions on how we can help you and your business succeed.

About the Author

Marc S. Schechter

Marc Schechter specializes in the areas of employee benefits, ERISA, and business matters.


Subscribe to our Newsletter