Phoenix Coffee Co op Operations

Welcome to the Sound of Ideas from Idea Stream Public Media. I'm Stephanie Haney, thank you for being with us. Maybe you've heard the term silver tsunami. It refers to the massive portion of our population made up of the baby boomer generation and how that group is quickly appro aching retirement age. Millions of these retiring boomers are small and medium sized business owners who are making the decision to sell their companies to their current employees for a variety of reasons. This is just one of the factors leading to an increase in employee owned business models. Almost twenty percent of American workers in the private sector work at a place that participates in some sort of employee ownership model . That's according to a recent study from Rutgers University. That might mean profit sharing stock options or possibly shared workplace governments through a co op. So today we'll look at the different possibilities for employee ownership at companies through out Northeast Ohio. And for this week's installment of the menu, we'll get into the details of how the Phoenix Coffee Co op operates in our area. With me now, in Studio for the Conversation, we've got Michael Palmier, he's thei Associate Direct or of the Ohio Employee Ownership Center at Kent State University. Michael, welcome. It's a pleasure to be on. Also with us we have Jonathan Welly. He's lead organizer and a founding board member with Cleveland Owns. This is an organization that helps organize cooperative businesses among other things here in Cleveland. Jonathan, welcome. Good to be here. And with us by video call, we've got another Mike. We've got Mike Miller. He's the owner of the Music Box Supper Club, which just recently transitioned to an employee owned model. Mike, hello, good to have you with us on the sound of ideas. Hello , thank you . If you want to be part of this conversation, you can give us a call at eight six five seven eight zero nine zero three . You can also email us at SOI at ideasream. org or you can message us on Instagram at the sound of ideas. Michael, we'll start with you and ask if you can talk briefly about the different forms of employee ownership. I understand there's kind of like three main buckets this falls into. Yes, absolutely. So when we say the term employee ownership and that stat that you mentioned, the kind of twenty percent of the private sector workforce . There's lots of forms. What we like to focus on are what we call broad based employee ownership. So these are companies who are allowing not just top management to participate in ownership , but anyone at the company like we like to set it from the C Suite to the shop floor. And what you have first is what we call employee stock ownership plans or ESOPs. They're definitely the most prominent form of employee ownership is about seven thousand across the US, three hundred and thirty give or take here in Ohio . And then you have what's called a worker cooperative . So it's another form of employee ownership. And then third , what Mike Miller has just transitioned his business into is what we call an employee ownership trust. They're all different in how they provide rights to workers , but all of them give workers some kind of say in decision making as well as a share in the success of the company be it through profit sharing, stocks, shares, you know , that's what varies. Okay . And with these different models, what are the reasons that a company might choose one or the other? Is it based on industry? Is it based on size of the company? Absolutely. So across the different models, size definitely plays a role. I think the other piece too is what model because of the governance, right? Fits with the culture at the company itself . There's another thing that comes into play, which is that for ESOPs and worker cooperatives, there's some tax incentives, both for the owner of the business who 's selling it to the workers , as well as the company itself as it operates like an employee owned business. And so you take it all together, it's really which one of those models is going to meet the goals and objectives of the selling owner , and that's a big part to play. And then which one is going to really help keep that culture alive that selling owner is looking to preserve when they transition to employee ownership? Thank you for breaking that down for us. We've got a great baseline to continue this convers ation now, Michael. Jonathan, can you talk about the mission and work at Cleveland Ones? Yeah. Cleveland Ones is a nonprofit that incubates cooperative businesses . And so we support groups of workers who want to start a new co op business and we also support workers at existing companies that want to buy the business from a selling owner . And we do that work because we think that who owns what matters . And while it might be inconvenient for wealthy people and powerful institutions to talk about who owns what, we think that it's time for that conversation and it's time to bring solutions like worker ownership to the fore so that we can build an economy that works for all. Okay , so it sounds like Cleveland owns very much worker focused . Michael, your organization that you're a part of, the Ohio Employee Ownership Center, is that more focused on the original owner side or is it collaborative as well? It's collaborative as well. The work that we do can really be broken out into, let's say, three pillars . One is what we call our succession planning program. And that is focused on working with selling owners, right who want to explore the option, maybe they're not comfortable with selling to an outside buyer, but they don't have an air to pass it to. They feel stuck . A lot of them don't know that there's this option to sell to their workers. So that part is business owner focus ed, but another piece of our work is education and training for existing employee owned companies. And that's where we work very closely with non managerial workforce all the way up to managers and C Suite and talk about what it means to be an owner, what it means to work at an employee owned business , what are the rights that you have? What are the responsibilities? And so it's kind of a mix right, t?erms In of that one part of our programming is very much focused on the business owner and the other piece with the education and training. It's with the workforce. I'm intrigued with how you mentioned their rights and then also responsibilities because that surely is something that comes along with having more of a stake in anything. Jonathan, I want to go back to you on this. What do you see as the benefits of employee ownership models, whether that be the ESOP, the co op, the trust . Yeah, there's really compelling research that indicates that businesses that have converted to employee and worker ownership are more productive, more resilient. The people who work there generate more wealth. They feel a stronger sense of participation , self efficacy . There's also a broader sense of benefit, I think, from the worker ownership model, which is that folks have to step into a stewardship role. It's actually a different set of responsibilities from being a worker and having man agement to negotiate with, which might be more common in like a unionized workplace. In a worker owned workplace, which could also be unionized in a worker owned workplace, workers themselves have to assume the responsibility of caring and stryewarding this business forward. And that's a real mindset shift. It takes education to approach that in the right way . And when it happens , I've heard several folks who work at employee owned businesses say that they could never imagine working at a different type of ownership structure. Okay . So can we touch a little bit more on that responsibilities piece? I don't know if pros and cons would be a proper way to describe it, but certainly those additional responsibilities you. give C usan maybe just a high level what some of those responsibilities might look like? For sure. Yeah. So one example is I'll tell you about a specific example that illustrates this. Rose Electric is a group of three IBW union workers who just started a worker owned construction company. And Cleveland owned supported them for about a year with business support services and then connected them to non extractive financing to get this business started. And now the three of them are responsible for managing this thing. So that means that they had to write the bylaws. What are the rules? How are we going to make decisions? How do we know when we reach a decision? How are we going to share profits ? Conversations like that takes a lot of intention . It takes a lot of structure and good faith effort. That is a set of responsibilities that you might not experience at a traditional workplace, and it's something that sets a cooperatively owned workplace or employee owned workplace ap art because you're having to make some more high stakes decisions because you're stewarding this project together rather than having a boss make those decisions on your behalf. Okay, thanks for breaking that down for us. Let's bring our additional mic into the conversation now, Mike Miller of the Music Box Supper Club. Mike, for people who might not be familiar, can you explain to our audience what the Music Box Supper Club is, what kind of an experience people will have when they come there? Sure . We are a little bit unique. A lot of people are most familiar the fact that we do a lot of concerts every year . We do about three hundred concerts every year, but we also do almost three hundred private events from weddings to corporate events , you know, birthday parties and that sort of thing. So we really view ourselves as an event center . You know, we're we've got an amazing location right on the river in downtown Cleveland on the west bank. And so we have two venues. We have an upstairs larger concert hall where we then do our larger concerts, but it's also where we do a lot of our weddings and corporate events. And then we have our sucer club downstairs right on the riverfront with a deck right on the outside so you get the a garage door and literally be on the water while you're listening to a concert. It is a beautiful venue on the flats west bank if you have not been, I've definitely done some time in the Music Box Supper Club. Now Mike is a, new this move for the music boxes moving to this employee ownership model, specifically the employee ownership trust model. That's now a first of its kind here in Ohio. So can you tell us what led you to this decision to move to this kind of model? Well, actually Michael and you know, you guys have already been talking about it. This is a decision that the original owners need to make in terms of what their succession plan is, what their exit strategy is . We did look at , you know, we were approached by a number of people to buy us, but every single time we got in those conversations they didn't like something about what we were doing . And they wanted to change make some major changes , you know , either go all concerts or go all private events were some of the more radical ones . But it just kept getting more and more uncomfortable for the original owners. You know, I was the managing partner of a very large own ership group. There were over thirty owners of the music box . And there was a very high consensus that they wanted what we had created to continue And so after, again, many conversations with possible buyers, you know, we made the decision as an ownership group that the best way was to we had a very strong management team in place was to look at ways to turn it over to the employees. And to take that very broad approach that Michael talked about, making sure that even part time there's a lot of part time and hospitality, hourly workers. And we wanted to include them as to have an opportunity to , you know, participate. If you're just joining us here on the Sound of Ideas, we are talking about employee owned business models here in Northeast Ohio. Ohio is a state that is quite popular for employee owned business models, ranking third in the state actually in certain reports. If you have a comment or a question for us, the number is eight six six five seven eight zero nine zero three. You can also email us at SOI at ideas stream. org or you can send us a message on Instagram at the Sound of Ideas. And Michael, I know you worked with Mike in this transition . Can you tell us more about the particular model being used there, the employee ownership trust model and how that differs from other models? And as much as you can share publicly about what's happening at the music box ? Yeah, so I'll start with the model itself. So an employee ownership trust model, it's actually using what's called a perpetual purpose trust , which folks may have heard of. It's oftentimes it's a trust vehicle used to protect a very valuable or important asset . And in this case, what it's using or what it's protecting is the business itself . And so what an employee ownership trust is a perpetual purpose trust whose purpose is to benefit the employees to and how it benefits that can vary from company to company. In the case of Music Box Supper Club, I know , like Mike mentioned, they were very committed to allowing folks to share in the success of the company. So what they've set up is a profit sharing plan , where I believe the board is going to set out certain kind of rules and how it will be structured. And if they hit those key kind of indicators, right, it will they'll be able to share profits out with folks. The other piece that a trust is a bit different than a worker cooperative or an employee st ock ownership plan is in the flexibility that you're allowed to kind of use in setting up what those benefits are. For an ESOP company, it's regulated by the Department of Labor. There's certain things you can and can 't do. So it's highly regulated. There's a bit more oversight there. Likewise for a worker cooperative, there's certain pieces that need to be in place for it to be a cooperative. With an employee owned trust, there's just more flexibility to be creative. It's great for situations like Mike where you have multiple owners . And so there's a lot of benefits there. I would say the one difference is with the employee ownership trust. It's newer to the game and, for that reason , those same tax benefits that may come along with the ESOP or worker co op model aren't there . Even so selling owners like Mike still see the upside still beneficial , right? It's not just about the tax breaks. Those are always nice. And I'm sure EOTs will someday get there . But I would say that's the distinguishing feature of an EOT is that flexibility. Jonathan, we mentioned this is a bit of a first occurrence here in Ohio, this employee ownership trust model. Is that something that you see maybe picking up popularity? What do you think might happen for the future in this space? Yeah, we're really excited to see this transaction happen. So congratulations to Mike and the team at Music Box Supper Club. EOTs offer a new opportunity to expand the pie of worker ownership. And we think that has momentum. We expect to see that grow to.'re And ex wecited to see that momentum because we know that we know that the way we're doing economic development today in our region is really not working at building an economy that works for all. And so instead, we want to see models like worker ownership through any of these forms that Mike has laid out thrive so that we have new opportunities to build an economy that works for all by ensuring that people who are actually generating the wealth of our society , have a stake in determining not only where that wealth goes, but how the businesses they actually operate at, how they function day to day. And Michael, Mike Miller mentioned succession planning when deciding what kind of a path would move forward for the Music Black Supper Club. I mentioned in the introduction here that we do have people who are in the baby boomer generation approaching retirement. Is that something you see as something that is pushing forward the popularity of these models? Absolutely. So here in the in Ohio, I think it's around fifty four percent of all privately held businesses are owned by folks in the baby boomer generation. And surveys show that the in next five to ten years , the vast majority of those folks want to exit their business, want to sell their company . What we've also seen through research and surveys is that the ability to pass on that company to the next generation and families becomes less and less likely each successive generation. And so in a lot of cases there's companies who don't have that option to pass it to a family member, might not be comfortable with an outside sale like Mike Miller . And employee ownership can really help kind of fill that gap. What I'm seeing now though is that business owners are actually not going to employee ownership as a last resort because there was nothing else there , but are instead choosing it as a model, that's kind of the best option, right? If they're really concerned about maintaining that legacy, that's a piece that I think is great. Likewise, we're seeing a lot in uptick in interest from local governments, right? Who are looking around and know the numbers, which is over two thirds of all the jobs created in a local community at any given moment are coming from the existing businesses. So we see here and it's important a lot about attracting new companies. We need to do that. But what employee ownership allows you to do is to stabilize these companies that are going to transfer, the question is to whom and to Jonathan's point, keep them retained in the local community and because you're sharing the wealth with the workers , allowing that to kind of multiply from an economic standpoint, right? People go out and spend money on services and goods in the community. And so there's a lot of benefits that I think track perfectly with the silver tsunami. It could be a problem if we don't plan proactively for it, but I think the good news is both from the business community as well as local govern ment, there is interest in employee ownership and seeing the value that it could bring. Mike from the Music Blacks, I want to talk with you a bit more about the process to get to this point . How long did it take from the time you began these conversations to the time that you started working with Michael at the Ohio Employee Ownership Center to actually bring this transition to fruition and have it in place ? Well , it actually took almost a year, Stephanie, but I don't think we were typical in any way because of the fact that we had to a big part of the time it took was, you know, managing , you know, communicating all aspects of it to our large investor group . You know, we had to have a series of meetings , a lot of conversations , you know, because what was set up, again, this is the employees buying out the original owners like it would be in any employee ownership situation. So you know, each of the individual owners, you know, had their original ownership shares, but they needed a fairly long explanation of how this payback was going to work for them. And we spent a lot of time making sure that was fair on both sides. You know, we had to get to a financial forecast that people were comfortable with in terms of the projected forecast of the business , you had to come to an agreement on the value of the business, what's the selling price? How do you determine that ? So you had to crunch a lot of numbers to to numbers that you felt were fair on both sides to the original investors, the selling price, and of course making it something that the clearly could be explained to all the employees on again, the debt that was created in the company to you know, execute the buy and they had to feel it was fair and reasonable and that they would see returns themselves. So I think the most time was spent just explaining things to people Surely. Well, and so let me ask you now. So how long has it been up and running the employee ownership trust model that you have? And have you seen change in behavior in the staff? How are they reacting ? Great question . It actually it was the last week of February that we made the announcement and all the paperwork was signed. So they officially became owners the last week of February . One of the great services that the Kent State Michael and his team provided is they came up and really led the presentation to the entire staff . So they it was and that was very important I think to have this outside you know entity who were experts at employee ownership be there and explain it to them . And they explain the details of it . There were a lot of deer in the headlight in the audience, the , you know, the staff was a little surprised by it. And to answer your question directly, yes, we are definitely starting to see all the way through the organization this and I think it's just starting to take place . So it has taken, you know, three, two to three months here for them to fully start understanding . So I would for years talk about we needed to do in the business in terms of reducing waste to increase profitability or things that we could do to increase sales. And you know, I just thought I was a talking head at that point to the staff because of just in getting them engaged in something that from their perception was putting money in the owner's pockets , there wasn't a lot of motivation, but I'm seeing now that they're getting it and they're paying a lot more attention to the conversations about, okay, how do we improve operations here? How do we improve profitability? You know, let's make it real clear, Stephanie , you know, there's this perpetual trust that we are still a for profit operation. We did not become a nonprofit , you know , not for profit. So that's a critical thing to understand that while it's a purpose trust and there is a clear mission statement for everyone to see now , it's still a for profit business. And so I think the employees, you know, are starting to understand that at a very , you know , operational level. . Something he mentioned, Michael was that it took about a year once everything started. He said he thought that might be an outlier. What do you think typically timing wise? I think that Mike Miller's being tough on himself and that they've done a really great job. There's companies who it might take even longer . So what we see are really two kinds of companies in terms of that culture piece. There's companies who use employee ownership as a succession plan and maybe they didn't have that culture there yet and it's that transition to employee ownership that then is kind of the spark, right that leads to that building of a culture. And then there's companies who've already built that culture and the transition to employee ownership is almost the next logical step. Now, Mike, I'm sure has opinions on where he falls in that spectrum, but we've seen a few companies. And I think what I can say about the Music Box Upper Club is that they had really good management in place and they had folks there who were ready to accept the challenge once they learned about what that was . And in the grand scheme of things, I think they've done they're actually on the quicker side where they were able to get people to buy in. For some companies it, might take a year or two . It really does vary on the industry. What does the day to day work look like? You know, if there's a facility or a company that might have multiple facilities across various locations, obviously that could be a little bit tougher, get everyone rowing in the same direction . But the Supper Club, I would say, is actually right on track and doing a great job with what they're doing. Okay. We've got an email now in from Tom and J,onathan I'll ask you to respond to this. Tom says for each of the employee owned models, what are the compensation structures from the employee owner's perspective? Do they earn an hourly dividends, shares, et cetera? Tom also says are there employee non owners on a typical team in an employee owned business? Thank you for the question, Tom. So basically, does everyone have to be on board with the employee ownership in order to be at the place? And then also what's the compensation looking like . Often the compensation before and after a transition to employee ownership is unchanged . With one big exception, which is that when there are profits, there's often a profit sharing mechanism and that profit gets shared in proportion often to the amount of hours worked at a workplace or a different formula depending on the company. So of course, that can make in a profitable year, that can make a very big difference. And there are some great examples, I think you'll hear from some of our upcoming guests, if I understand correctly about how profit sharing works at co ops in a way that can be really transformational, especially for folks who are today in low wage jobs. While that wage may not change after a conversion to employee ownership, the opportunity to share profits can make a very substantial financial difference. And the second question was, can there be folks who are at a workplace that are part of the employee ownership program and others who are not? The answer to that is yes . Every workplace looks a little bit different in a worker co op, which is where my team at Clebenons focus our energy. That is often a possibility. It's encouraged, however, that as many folks as possible who are consistently working there and who have met that criteria, there's often like a probationary period of say a year or two before you're eligible to become a worker owner. It's encouraged that as many folks as possible become owners so that they can shift into this new role, have access to profit sharing and become stewards with their fellow peers at the organization. Okay, thanks for breaking that down for us, Jonathan. We'll bring in another voice to this conversation now. We've got Hannah Scott, joining us. She's program director for the Ohio State University 's College of Food, Agricultural and Environmental Sciences Center for Cooperatives. Hannah, welcome to the show. Hi, thank you so much for having me. Hannah, we appreciate it. Can you tell us a bit about little the purpose for for the Center Cooperatives at Ohio State? Yeah, absolutely. I'd be happy to. So our team, myself, and my colleagues are really focused on assisting entrepreneurs, educating the community and generating knowledge around the cooperative business model. We do that with a special focus on food, agriculture and rural communities because of the important role that cooperatives play in those spaces, which I'm happy to talk more about . And we do that as a part of the extension mission of Ohio State University as a land grant organization. Thank you for mentioning that. So I would like to talk more about how business ownership models for employees look in this particular space in food and agriculture. What trends do you see? Does there seem to be a trend toward one other model versus another . Well, as your other guests have shared, the cooperative model is actually quite diverse , which is part of what makes it interesting. I have a colleague who used to say if you've seen one co op, you've seen one co op because there is such diversity and how the model is applied . And so in agriculture and food, we see the model applied in a number of different ways , whether that is , for example, producer owned cooperative , where the farmers who are producing milk, for example, or grain are themselves the owners of their cooperatives that markets their goods on their behalf . Those can range from very small scale three family farms to very large scale businesses . And then we also see other models of cooperation, for example, worker ownership. There's a very longstanding worker owned cafe and restaurant in the southeastern part of the state, of course, that is very involved in the food supply chain. So we see that model actually applied very in very diverse ways . And so there are cooperatives have existed for decades and they continue to exist and play really important roles in the agriculture and food supply chain . And then we also see, for example, interests at least in the work that we do , particularly in local food systems and folks who are interested in the cooperative model and what it might be able to do for them in accessing the local food system, for example, as a producer or as a restaurant worker or in other ways as well. Thank you, Hannah. Jonathan, back to you with Cleveland Owns, I want to ask you about employee ownership funds. Something Mike Miller at the Music Box mentioned is that there is a there's a buyback happening. There is some sort of a, you know, remuneration, remuneration that's happening for the pre vious owners . So employee ownership funds are something that you have a program at Cleveland owns that deals with. So just tell us about that. What do we need to know about that? Yeah, converting to employee ownership is a business transaction. So there's often an exchange of some compensation for that, like you said. One of the things that we have access to at Cleveland Ones is what we call the Cleveland Co op fund. It's part of a national CDFI, which is called Seed Commons that lends non extractive financing to folks who are starting a co op or transitioning a co op. Non extractive financing is a specific type of financing that enables that operates like debt , but is only payable when there's profits. So in that sense it's debt that functions a little bit like equity . This is unique and meets the needs of co ops in unique ways. It's also focused on non extractive terms, which include no personal guarantees, no credit scores. So there are ways to make it more accessible for folks who've historically been denied the opportunity to access wealth through asset ownership. These are black and brown working class communities to access financing that allows folks to shift from earning a wage being owners at a workplace where they work. And through Cleveland Ones, we've been able to lend out nearly a million dollars in non extractive financing to three different co ops for projects like these . Wow. How long has that program been in place? Seed Compens has been around for about ten years and we've been working with them for about five. Okay . Hannah, I'd like to ask you, do you see employee ownership filling some sort of gap or a need in the market as it pertains to the agricultural sector specifically ? That's an interesting question. Employee ownership is a really broad model, right? And so cooperatives fall into one kind of those, worker cooperatives in particular . And so some of the places where I've seen worker cooperative fall in food and agriculture , at least in my experience has been in the restaurant space or coffee shop space even. I know that Jonathan and Mike have also seen examples of that where, there's opportunity for folks who are engaged in that workplace and working really hard to either keep that business operating as they've talked about the employee ownership model being such an important opportunity in that way as a succession strategy , but also to be democratic owners of their workplace for other benefits as well. So that's one I would say that's one area where I have seen worker cooperatives in particular plug into the food and agriculture space . We also have seen it in here in Ohio , there's actually an example of it in the grocery retail space in what we call a multi stakeholder format, for example, where both consumers and workers together in a cooperative model own their grocery store . So that multi stakeholder model is not as common as other forms of cooperative ownership , but it is an interest in that particular space where food access through supermarkets and retail food outlets is so important to communities and the, cooperative model, particularly in a consumer or worker or some kind of multi stakeholder format , might offer an avenue for communities to own and have a part in their local grocery . And the example of that that I mentioned is in the Dayton community. . And you were getting a lot of agreement here in studio on a lot of the things you were saying there, Hannah. Michael, I would like to ask you, are there particular businesses that make more sense for being employee owned and other businesses that don't make sense for being employee owned? For example, I'm thinking, you know, Mike Miller from the music box did clarify for us they have not become a not for profit organization, it's still a for profit organization. Can non profits be employee owned? What about union shops? Yeah . Well, so the question of the nonprofit being employee owned. There is just some law governing nonprofit organizations, which by definition don't have profit. And so distributing profit might be tough. However , there are nonprofits who maybe they don't use the financial piece of employee ownership, but they might adopt some of those governance models, where they're allowing workers to have some autonomy or some say in decision making. So nonprofits still have some way to participate in the ideas we're talking about. In terms of the kinds of companies that we see adopting these models , I think oftentimes because of the research that Jonathan had mentioned at the top of the show, companies who are employee owned outperform their peers in both sales and retention, attraction, engagement with their workforce . And all that's great. However, the really important piece there is that employee ownership is not a magic bullet. So it's not just a company who's doing really poorly, has bad management, treats workers pretty terribly, becomes employee owned and suddenly it's a light switch turn great, right ? Instead, the kinds of companies that are great for employee ownership are the ones who have some kind of management team in place . They don't have excessive debt on the books. They have a good customer base so they're not super concentrated because in the end and Mike kind of underscored this , it's important that the sale to the employees isn't burdening them , rather it's a benefit. And I should mention too , important point of clar ification. A lot of times when we talk to business owners, they say, our workers don't have the money to buy me out, there's no way that's possible. The way that these transitions actually occur is you get outside debt from a bank or some a loan fund similar to what Jonathan was mentioning to pay that selling owner and it's the company through its future profits that pays down that debt. So workers are not going into their pocket. That being said, you need a very stable company, good financials. It's been doing well, projection show, it'll continue to do well because that is what's going to support the transaction itself as well as the profit sharing with workers , right? So if a company's not making any profits, there won't be much to share . And we always like to kind of highlight that is these are businesses who need to operate like a business . One question here for Mike Miller from the Music Box before we take a break and transition to the final segment of our show here today. I'm wondering, Mike, you did make an announcement at one of your recent shows when this did happen when you did transition to the employee ownership trust model . What's the customer reaction been like? Has anyone that you are aware of noticed a difference or have they mentioned anything to you? That's another great question, Stephanie, because the customer reaction has been extremely positive . You know, we just a show last night I was talking to a guest and she brought it up to me proactively saying you, know, when she heard we were had become employee owned, she's committed to coming to more shows now . So we're hearing it on the private events side as we talk to some of our companies that are looking at doing events . They're commenting positively about it. So I actually think for our business, the hospitality business , you know, we are going to see a positive impact on sales because of the move to employee ownership. So I've been very pleased with you were in the audience and heard that every time we have announced it from the stage there's loud cheers. Sure . All right, well we will close out this portion of the conversation right now. Mike Miller from the Music Box Supper Club. Thanks for the time today. We appreciate it. All right, thank you. Also joining us, Hannah Scott for the OSU Center for Cooperatives. Hannah, thanks for joining us. Hey, thank you so much. My guests here in studio with us, Jonathan Welly from Cleveland Ones and Michael Palmyr from the Ohio Employee Ownership Center at Ken State, you'll be staying with us for the next segment, so sit tight right there. We appreciate you for that. We'll take a quick break. Now when we come back, this week's installment of the menu focuses on one co op keeping Northeast Ohioans caffeinated. This is the sound of ideas. I'm Stephanie Hane. We'll be right back. We are good, all right. You're with the Sound of Ideas from IDSTREM public media. I'm Stephanie Haney. Thank you for staying with us. Today, we've been talking about different models of employee owned businesses and how they operate and why some companies are moving in that direction. In this week's installment of the menu, our food series, produced with the folks at Cleveland Magazine, we turn our attention to one locally run co op, Phoenix Coffee. If you're a coffee drinker, perhaps you've picked up a cup from one of their multiple cafes across Northeast Ohio or grabbed a bag of beans roasted at their roastery. So with me now to talk about their business functioning and employee owned cooperative is Toby Rif, the general manager at Phoenix Coffee. Hi, Toby. Hello, thanks for having me. Thank you for being with us. If you're just joining us now, we also have continuing with us in studio, Jonathan Welly, lead organizer and found board memingber of Cleveland owns, Jonathan, thanks for staying with us. Glad to be here. And we've got Michael Palmieri, associate director of the employee the Ohio Employee Ownership Center at Ken State University. Michael, thanks for staying with us. Happy to stick around. Okay, let's learn a bit about what's going on at Phoenix. So tell us a bit about the decision for Phoenix to be operated in this way. Sure. So I can speak to some of it. So I started at Phoenix three years ago. They started the conversation about employee ownership much earlier than that . The conversations began serendipitously right before a certain pandemic sort of nuked our industry. So we had kind of a perfect storm of what could go wrong with the transition We're customer service based, we're food service, our entire industry sort of went away in the flash right as that transition was happening So it was challenging , but it was as most of these things happen, it was just owners looking to step back and hand it off to the next group of folks. Sure , sure . And it has been flourishing . It has, yeah. You know, kind of in spite of everything we came out of the pandemic . We look a little bit different. We've got a few different addresses, but you know, between the pandemic and the supply chain crisis it also managed to spook our industry pretty bad last year . Yeah, we've had a couple of really solid years in spite of everything. Sure. Can you tell us a little bit about the size of the company and what the organization looks like? How the workers are part owners and what kind of benefits and responsibilities come along with that specifically at Phoenix Coffee? Sure. So at any given point we, have about forty employees. We've got thirty nine right now, and at any given point, we've got about fifty percent employee owners . So at Phoenix , the way that we structure our employee ownership is that anybody who is a full time owner for a year is eligible to become an employee owner. There's an offsetting deduction for your paycheck . That goes every pay period into buying your share of the company . Once that's paid off, that raise then goes right back into your paycheck and you're an employee owner. At that point , you are fully eligible for profit sharing . We also have then quarterly meetings with our employee ownership group where we do some broad reporting on the health of the company. We kind of introduce some strategic visioning things. We don't necessarily make strategic strategic visioning decisions with all the employee owners, but you know, we loop people in kind of broad stroke subject matter there. And then amongst that group, we also have a board of directors that governs the entire company . And those are elected positions that are elected from our pool of employee owners. So that is the organization that for me as a general manager, if I were you need to hire or fire somebody in my position, that happens at a board level, and that board is composed of mostly employee owners , we worked with a different local nonprofit called Evergreen that helped us with that transition . So they also had some of the board seats, which as they get paid back for helping us out with the transition, we buy those back, taking back more and more governance of the company. Okay . And I know that the structure predated you joining the company at Phoenix Coffee . Do you have continuing support for many of the organizations are aware of that helped set up the trans ition? We do, yeah. And it is that support kind of it's kind of what we ask of them at this point now. There was a when I started we had folks in our office from Evergreen every day and they were awesome, you know , whether it's like I need to get legal eyes on a lease agreement or just I need help putting coffee in a bag. You know, those folks were awesome, down to show up, down to help . Now it's, you know, usually just once a week, once every other week, we'll sit down, kind of do some broad like this is what's going on . There's a lot of I've been in the service industry for most of my life. So I don't need to ask for, you know, help getting product from point A to point B, but this business has been handed to a bunch of us who are by and large industry lifers, but not necessarily business ops lifers . So just little things like hey, do I press this button or this button to make sure that taxes are payrolled? The little things around the edges that you don't pick up when you're behind the bar , make sure that those happen. And they've been fantastic on that front. That sounds like that's very much in the spirit of not only the service industry in general, but also the co op model, all hands on deck. Totally. Fill the beans, check the lease, make sure the p thataychecks go out. Yeah, I kind of describe it as a car that learned how to fly. Like we're all up in it. We're not necessarily sure how the car got up there, but we're all committed to keeping the car in the air . Absolutely. If you're just joining us here on the Sound of Ideas, we are talking about employee owned business models. And we are also specifically talking about that in the food space here in our latest installment of the menu. If you want to be a part of this conversation, if you have a comment or a question, the number is eight, six, six, five, seven, eight zero nine zero three. You can also send us an email at SOI at ideas stream. org or you can send us a message on Instagram at the Sound of Ideas. So Toby has just described for us, Michael a bit about some of the ongoing support that Phoenix Coffee has received. Michael, can you tell us about some of the ongoing support that your organization might provide once a company decides to make this transition to employee ownership? Yeah, absolutely. I mean, so kind of going back to my comments in the earlier segment, which is that adopting employee ownership isn't just a light switch that then turns on and every worker there is now like, yep, I'm an owner, I'm thinking like one, and I'm going to go and give all my ideas, right? It's something that needs to be intentionally supported and kind of grown . And so that's one of the main pieces of the work that we do at the Ohio Employee Ownership Center is to go to companies. So we have a bunch of program ming throughout the year itself that any company can come to. And we call that kind of multi company training, right? But you can think of it as year round events. The other piece that we do is we'll go into companies. Specifically go to them provide them whatever training they may need. Maybe it's to understand basic financial statements because now as an employee owner you might be seeing those and need to understand what you're looking at. Or it could be how to think about how very small changes reduction in scrap or an increase in sales impacts the bottom line. At a typical company, who cares? I'm a salaried employee. I'm still going to make what I make. At an employee owned company, you now have skin in the g ame. And so it's interesting. One of the things that we did, we partnered with Evergreen cooperatives who helped kind of stand up in Phoenix Coffee with that transition , is we actually created a set of videos that employee owners have to watch. And I apologize if you had to see me on those videos . But the idea being to learn those basics, and it's part of being able to become an employee owner is to do that education piece because in the end it's not enough to just tell new employee owners, we want to hear from you. We want to hear your ideas and then be upset if there's none that are given. You need to give workers the tools, the resources and support so that they can give you really quality ideas and when you commit to that part of it, to the education and training, that's when you start to see that ownership mindset emerge and people kind of learn to find their voice . And Michael, there's also a rumor of a co op game that you guys may or may not have put together. Yes, yes. So another thing that we've done at the center is created game where you run a fictional company through three years of operation . And again, this was a joint partnership between the Ohio Employee Ownership Center and Evergreen Cooperatives and get a bunch of people sitting down at a table. They have a profit and loss sheet. They have to make decisions on investing in a new company or I think one of the twists we have there is will you invest in PPE and so people do or don't. And we'll find out in year two COVID hits. The companies there was an element of training or no training, new equipment or no new equipment? Yeah . And the idea there again is to allow workers to understand that there's a balance going on between letting allowing the company to make money in the current moment so we can support the workforce there right now , but also an eye to the future for all the new employee owners that are going to enter the co op five, ten, fifteen, twenty years down the road. I mean, Ohio has employee owned companies that have been around for over fifty years some. of And those companies were companies themselves for longer than a hundred . And so this is the kind of model that can perpetuate itself long into the future , which I think is one of the beautiful pieces of it, right? Whether it be a flying car or we always say rowing in the same direction, but it creates this kind of community within the company that I think is really special. You just don't see it in other places. Is there a name for this game? We call it the co op game. You know, happy if there's anyone wants to email with a cooler name but . Right. I'm getting Oregon Trail vibes, but for twenty twenty six, right? Like no one gets the bending plague, but you're P PE gets wiped out with COVID. We can laugh a little bit about that now for sure. That did make me laugh. That's great. I want to ask a quick question about the ecosystem of co ops here. So for example, Jonathan R Ridesersp,a thatu's a company Cleveland owns has helped out with. I think Respel Riders has sold some soil at Phoenix Coffee. If I understand, so Jonathan, can you tell us a little bit about the interconnectedness of this space? Thanks. Yeah, there is a big and growing ecosystem of coops and co op supporting organizations in Northeast Ohio. One of those is a group that Cleveland's the part of called Co op circles, where for a couple of years now we've been providing public education. Several hundred folks have attended these events. And overall, what we're seeing is that we know that this model is powerful. And when regions adopt this model of employee ownership, we know that it has the power to transform regional economies. One powerful example of this is in northern Italy, the region of Emilia Romagna went all in on co ops a couple decades ago, and today co ops generate more than thirty percent of the region's GDP. Inequality and poverty are low, productivity is high. It's a real success story about what happens when we put cooperation over competition and focus policy, effort, energy and systems on building a cooperative economic structure at the heart of our economic life . And it's something that we need to do right here in Northeast Ohio because we know that it works and that we have the opportunity to do that. And the seeds of it are all around us. We've got just a couple moments here left, but Toby, I want to ask you, you joined Phoenix Coffee a few years ago. I presume you've worked in non co op environments. What's your take? Yeah. Buy in at any company is challenging from the ground up . And I've worked in plenty of service industry , companies where you're a grunt, you're deeply skeptical looking up . And when I started there was a lot of skepticism . And a lot of that was due to the fact that the pandemic took away any of the profits that would have been the profits we'd shared . So for three years we operated as a co op with nothing to show. So once we had the buy in, it was like a light switch and you can contextualize every single decision you make from the top down against that. And you know, it's it's like it truly is like a before and after. Once there is one example of it working, it's every single decision gets framed against, oh, this is one more dollar in your pocket. Sure. I want to thank our panel for being with us here today, Toby Rife from Phoenix Coffee. We appreciate you . Also , Jonathan Walley lead organizer and founding board member of Cleveland Oms and Michael Palmieri, associate director of the Ohio Employee Ownership Center at Kent State University. Thank you for the time.