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Owners Rewarding Employees in California Specialty Food Industry

Posted by Marc S. Schechter | Jun 10, 2019

The benefits of employee ownership can extend beyond the financial advantages for owners and workers. The focus of ESOPs for business owners is often limited to the financial value, namely providing a ready buyer for the company at fair market value and the tax benefits of selling to an ESOP.

Many California consumers see the benefits of shopping at stores with a social purpose, including taking care of employees, giving back to the community, and protecting the environment. This includes taking their business to benefit corporations, local mom and pop shops, and employee-owned companies.

Employee-Owned Specialty Food Businesses  

Employee ownership has a foothold in the specialty food industry. Oliver's Market in Sonoma County is not only ESOP owned, it is also a social purpose corporation (SPC). Like a B Corp or benefit corporation, SPCs (formerly flexible purpose corporations in California), corporate directors account for the benefit mission in decision making, in addition to financial motivation.  

According to Eric Meuse, General Manager of Oliver's Market, the company decided on an ESOP after considering other succession plans. There were offers to buy the company by other grocery store chains but the company was concerned about what would happen to the employees and positions after being bought out by a larger firm. The ESOP was a viable succession option, a way to give employees an equity interest in the company, and motivator to increase productivity and reduce turnover.

An article from the Specialty Food Association highlights some of the benefits of an ESOP beyond the bottom line. “Many employee stock plans are made because company owners want to share ownership and profits with employees they've come to view as an extended family of sorts. They want the businesses and value systems they've developed over time with loyal staff—what they view as their legacies—to continue.”

In an op-ed by Bob Moore of Bob's Red Mill, Moore discussed his consideration of retirement after a destructive fire at the mill. Moore says he thought of all the employees who had helped make the company a success and what would happen to them if they were suddenly out of a job. With his wife coming out of retirement, they re-established the company and later made what Moore claimed was one of the best decisions of his life: ”to give ownership of Bob's Red Mill to the amazing employees who make it what it is, by creating an Employee Stock Ownership Plan (ESOP) and making everyone an employee-owner.”

Of course, a business transferred to an ESOP is not simply given away. The ESOP trust buys shares from the shareholders and owners for fair market value. This is one of the unique benefits of specialty food companies moving to an ESOP. The ESOP provides a buyer for fair market value when other strategic buyers may only offer a fraction of the value or are looking to liquidate the company assets or do away with the current employees.

Other examples of employee ownership in grocery stores, specialty foods, and breweries include:

Employee Ownership as Succession Planning Option in Specialty Food Companies   

California specialty food and beverage companies can benefit from employee-ownership as a succession planning option when looking towards retirement. If you have any questions about how an ESOP can help your business or other succession strategies, the law firm of Butterfield Schechter LLP is here to help. We are San Diego County's largest law firm focusing its law practice on employee benefits law. Contact our office today.

About the Author

Marc S. Schechter

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


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