What Changes When Employees Take Over a Company?

Nov 6, 2017

After nearly 90 years in the grocery business in Northeast Ohio, the Buehler family announced last month that it is selling its stores.  But the 13 Buehler’s Fresh Foods markets likely won’t seem much different.  That’s because the people who already manage and work in them are the buyers.

Roy Messing, Director of the Ohio Employee Ownership Center at Kent State University
Credit Tim Rudell / WKSU

The deal is an ESOP : an Employee Stock Ownership Plan. Roy Messing heads the Ohio Employee Ownership Center, a first-of-its-kind research and advisory organization based at Kent State University.

“An ESOP is actually a qualified retirement plan, much like a 401(k).  There’s a trust created that owns the shares for the benefit of the employees."

"And they would have those earnings when … the accumulation of their value would come to them when they retire.”

Beuhler family decision

Of the deal, Dan Beuhler, president of his family’s holding company, said in a statement that "our generation of Buehlers are reaching retirement age, and we think this a better option than selling the business to outsiders.

“We want these supermarkets to be here serving customers and providing good jobs well into the future.”  

Historic photo of Buehler's Market circa 1935
Credit Buehler's website

Roy Messing says that's not an uncommon view in home-grown businesses.

“Often times what we see when a company sells to their employees, they have a company that is stable, it has an image, a brand, and they want to maintain a legacy in the community. So, in reading what I’ve read or heard about Buehler’s over the years, they’re very engrained in the community, so this is a logical step.”

Filling in the details

'They have a company that is stable, it has an image, a brand, and they want to maintain a legacy in the community.'

Buehler’s Fresh Foods has markets in Wayne, Ashland, Medina, Summit, Stark, Tuscarawas and Coshocton counties.  It employs 2,100 people.  WKSU tried asking some workers about the sale after it was announced Oct. 18th, but all said they didn’t know enough details yet to comment.

Roy Messing says that, too, is not unusual.

“There would be certain levels of the organization that were familiar with this. The folks in the stores, probably not. And that’s a delicate balance for the owners because sometimes that information is valuable for a competitor. So they have to kind of manage how that comes out.  But, at some time, they’ll reveal more of this to the employees.”

The basics of how ESOPs work for employees
Generally, ownership shares are to be accumulated in the ESOP but what determines distribution? Kent State's Messing it's often just a straight salary -- plus.

Bowman Hall at Kent State University houses the Ohio Employee Ownership Center
Credit Kent State University

"It’s a percentage based on salary and divvied up.  Sometimes they’ll look at hours; or as well, years of service may come into play. So they create a formula up front built in to compensate people.” 

So far, no one is publicly voicing skepticism of the Buehler sale. 

Messing believes that may be because the timing of the family’s decision to sell does not appear to be based on a perceived weakness in the business or lowering of company prospects.

“If I look at it, the generation that’s in place right now, that’s been running it for years is looking to retire. And, they’ve had a couple of professional managers outside the family in place for a few years. So maybe this is just a logical time for the family to step back but keep the company moving forward.”

So, is this a good thing or a bad thing for Buehler’s employees?
Messing says you can’t know for sure how it will work out, but historically the basic ESOP structure has been successful.

“These sort of transactions are funded through the company.  So the employees don’t write a check for their ownership. That accumulates over time. It should be a good thing for the employees that will help them accumulate wealth over time. And then, when they’re ready to retire they can tap into that wealth.”  

Shoppers and area communities
The decision to sell the grocery chain to the employees could be good for Buehler’s customers and communities, too, according to Messing.

“If somebody else came in ... their competitors, certainly they put in place their parameters how to run the stores. And I think that would really disrupt because Buehler’s is so different.  So this is a way to ensure that what they’ve created stays in place.”

The new “Buehler’s Fresh Foods” will retain the old name.  It will also continue to be headquartered in Wooster.