Case Studies

Why Employee Ownership Transition?

The two founders and previous owners were dedicating most of their lives to the store, but they wanted to spend more time with their young child. So, the Rocchinos started exploring ways to sell their business and, eventually, got connected with Oakland-based nonprofit Project Equity which offers programs to support transitions to employee ownership.

When they learned about this exit strategy in 2019, the Rocchinos wanted to transfer ownership to their deeply dedicated and hard-working team. They prioritized giving back to their workers and maintaining the store’s legacy of locally sourced meat for their customers. However, the transition was too costly for them to justify until the COVID pandemic disrupted the food industry. More people in their neighborhood started cooking their meals at home and the store’s revenue ramped up by 50% in 2020. The revenue boost allowed the founders to afford the employee ownership transition.

Worker-Owned Business

In January 2021, the “transition team” of five employees began to meet with Project Equity for weekly classes on business, finance, and worker cooperatives. The transition team included butchery manager Caleb Avalos, value added products manager Jason Fallock, butcher Koji Fujioka, butcher Merl Goodsell, and general manager Scott Miller.

Project Equity helped the transition team raise a grant through the City of Berkeley and partnered with full-spectrum impact investment fund manager Mission Driven Finance (MDF) to form the Employee Ownership Catalyst Fund that would provide financing for the transition.

The national Employee Ownership Catalyst Fund supports businesses throughout the U.S. that want to transition to employee ownership and need capital to finance the transition and transaction. Short term, the fund will also help companies that are transitioning to employee ownership with working capital to support their strong footing coming out of the pandemic and to bridge the costs associated with an ownership transition.

Employees don’t need to come up with the financing themselves; the Employee Ownership Catalyst Fund fills this gap. When business owners understand there is capital available to make this transition, more possibilities and opportunities open up.

MDF performed due diligence and underwriting, while Project Equity led the pre- and post-transition advisory. The Employee Ownership Catalyst Fund provided a $213k loan to the company for the transition.

In October 2021, The Local Butcher Shop became an employee-owned business. Overnight, the five transition team members officially became owners and the rest of the staff had the opportunity to buy-in and become owners until February 2022. The founders took a step back to focus on their family and transitioned from owners to board members and mentors.

The profit-sharing model of the worker co-op has helped retain the store’s staff and made it easier to afford to live locally with higher compensation.

Deal Terms

• Company: The Local Butcher Shop
• Investor: Employee Ownership Catalyst Fund
• Investment Date: November 2021
• Investment Type: Loan secured with a blanket UCC
• Investment Amount: $213,150
• Employee Ownership Structure: Worker Cooperative
• Ownership: None
• Interest Rate: 5.5% per year
• Grace Period: None
• Payment Schedule: Monthly
• Maturity: 5 years
• Board Seat: None
• Use of Proceeds: financing will be used for the transition to employee ownership