Denver restaurants Linger, Root Down and El Five are now employee-owned

Well before the pandemic closures, the furloughs and the price hikes, Denver restaurateur Justin Cucci was planning for the future of his six Denver restaurants in a way that few others have attempted.

About five years ago, Cucci and his closest team members started putting together a plan for employee-ownership of Edible Beats, which includes the popular Denver restaurants El Five, Root Down, Linger, Vital Root and Ophelia’s Electric Soapbox.

He wanted to create an ESOP, or Employee Stock Ownership Plan, a term that might be familiar to Coloradans who know the history of the Fort Collins brewery New Belgium. But Edible Beats is the first restaurant group in Denver to convert to this employee-ownership structure.

In business terms, it was an answer to Cucci’s lingering question of succession that provides a “win-win” for everyone, he said.

“When we went over some longer term (succession plans), none of them seemed attractive,” Cucci added. The idea of ​​selling to an outside investor, or even to one or two high-ranking employees didn’t sit well with him. But with employee-ownership, “the ownership wins, the employees win and, in theory, the guests win.”

At a time when restaurants are coming off of a shattering industry-wide crisis, and are still struggling to find and retain workers and keep menu prices down amid inflation, Cucci thinks the employee-ownership model is an intriguing, if initially costly, solution. Colorado’s Office of Economic Development and the Governor’s office are also behind the plan.

“We are saving employee-owned companies money with up to $100,000 in tax credits on qualifying costs of converting, and I am proud to congratulate Edible Beats for taking this exciting step,” Gov. Jared Polis said in a press release on Wednesday.

Edible Beats joins around 100 other Colorado-based employee-owned companies, according to the National Center for Employee Ownership. Of around 6,000 ESOPS in the US, just 1% are in the accommodation and food services industry.

“It’s really, pretty much non-existent,” Cucci said, adding, “the process is by no means easy, simple or effortless.”

Provided by Edible Beats

Justin Cucci is the founder and CEO of Edible Beats restaurants in Denver. His six local businesses just became employee-owned, but Cucci will continue to be active in them. (Provided by Edible Beats)

For Edible Beats, the process took five years, including a pause once the pandemic started, during which Cucci stopped trying to secure a bank loan for the restructuring process. It cost him more than $400,000 to set up the ESOP and will continue to cost between $75,000 and $100,000 to maintain, Cucci estimated.

But the benefits include significant federal and local tax breaks and, hopefully, a viable business model for years to come. By February, Cucci switched to 100% employee-ownership, with 330 employees enrolled in the program. Workers become fully clothed after five years with the company; if they have already been with Edible Beats for at least five years, that back-tenure counts toward ownership status.

“We thought, what a great thing,” Cucci said. “We can do the ESOP and reward the people who have been on this journey.”

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