While one corporate coffee chain is known for its stellar treatment of employees, one independent cafe has now given its workers the chance to actually own part of the company.
Bob Mastin, owner of Custom Coffee Shop in Middletown, Rhode Island, wanted to ensure the future of his business and reward his employees for their loyalty.
So, out of concern for the “sustainability and continued viability” of his 15-year-old eatery and roasting facility, he decided to create a plan that would allow eligible workers to purchase shares of his shop.
“It’s a way to sustain the business and keep it operating the way I want to operate it,” said Mastin.
While employee-owned businesses are a fairly rare and radical concept here in the United States, it’s an idea that’s slowly starting to spread. One study conducted in 2000 showed that companies who implement an Employee Stock Ownership Plan experience growth 2.3% to 2.4% faster after the fact than they would have experienced otherwise.
However, Mastin didn’t want to use an ESOP, opting for something with fewer complications and more individual control.
“I didn’t want the IRS to dictate how I could sell my company to my employees,” Mastin added.
So Mastin made 2,000 out of 10,000 total shares available for purchase by eligible employees. Shares were sold at $31 each, and 13 out of 16 eligible employees took advantage of the offer. Altogether, Mastin’s employees purchased 538 shares.
In order to be eligible, an employee had to have worked one shift per month, minimum, for the past year. Mastin’s formula rewards more long-term employees, as it uses a given employee’s gross wages earned since 2011 to calculate the percentage of the shares that individual can purchase.
Mastin noted, “I felt [the system] rewarded people who had been here a long time. It’s easy to calculate and easy to defend.”
The shop’s assistant general manager, Jessica James, bought the maximum number of shares she was allotted. She now owns 239 shares in the company and is the second-largest shareholder. After careful determination, store manager Katie Aultman bought all 43 shares she was allowed. She plans on purchasing more in the future, stating, “This place is thriving and I see that everyday. I see that we’re growing.”
Mastin echoes his manager’s sentiments, citing the company’s consistent growth. By his estimation, Custom Coffee House grossed $900,000 last year, reflecting a $100,000 increase from the year prior. In addition to the caffeinated beverages and tasty food they serve on-site, they also supply 50 other markets, restaurants, and cafés throughout New England with 1,500 pounds of roasted coffee every week.
Effective January 1, Mastin’s employees now own about 5% of the company. Mastin has also created an executive council, which will eventually help determine dividend distributions, acquisitions, and employment status of managers. While a rare occurrence for smaller businesses, other thriving local companies should take note of Mastin’s plan and explore whether such a business model could be utilized to ensure success and employee satisfaction.