Progressive Grocer Independent

AUG 2016

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36 | Progressive Grocer Independent | August 2016 Next-generation Transition/ESOP Business until we started this process, and I'm in the wrong business. I need to be in the ESOP business," she laughs. Proceed With Caution While there are no legal sales requirements, David Schoeder, prin- cipal at Food Partners, in Bethesda, Md., actually cautions against small companies setting up ESOPs, simply because they're often not large enough to sustain new competi- tive forces. He's been the adviser for several companies that have had to unravel their ESOPs or have gone bankrupt, leaving employees without retirement funds. e owner who sets up the ESOP often has the right intentions, but it can be difficult to ensure that managers running the business after the owner exits have the same mindset. "Retailers really need to enter this with an abundance of caution," Schoeder says. He often recommends that smaller retailers wanting to become ESOPs instead sell to another company that already has an established ESOP pro- gram, which preserves the desires of the owner. May agrees that selling to a company with an established ESOP is an easier way forward. However, that may not always be an option. If an independent does decide to go forward with developing its own ESOP, the first thing Schoeder asks is, "Why are you doing it?" e correct answer is because it fits the attributes of the company and is a tool to take the company to the next level. Incorrect answers would be that the owners want the tax break or want to change how the business is run. Instituting an ESOP doesn't change anything in the store, Schoeder notes. "If you believe employee owner- ship could be a key component of your culture, then it's something you should go forward with," he adds. Making the Announcement Once the advisers and attorneys have been hired and a plan has been hashed out, one of the most impor- tant steps of rolling out an ESOP is telling the employees. Newport Avenue Market held a manda- tory company meeting to make the announcement. "We just said, 'We believe in you, we want to share the success in this company with you,'" Johnson says. "We are so excited for the future and maintaining Newport Avenue Market's legacy." e store was ready right away to make the an- nouncement to the commu- nity through signage and T-shirts, as well as in the store's ads. e management team has talked with the staff several times about what ex- actly the ESOP means for them. Employees received a handout of what an ESOP is during the meeting, and management reiterated that the op- eration of the store wouldn't change: Job duties and responsibilities would remain the same. Johnson and her team also stressed that the ESOP that Newport Avenue Market established was a plan that had no cost for the employees. en another brochure was sent out that explained exactly how the employees would benefit and to reiterate that it wasn't a savings account, but rather a retirement account. e store also Annual sales grow on average 2.4% after a company enters an ESOP, compared to sales pre-ESOP, and annual employee growth is up 2.3%. — National Center for Employee Ownership

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