Food 4 Less Franchisee Forms ESOP
PAQ Inc., an independent franchisee of 14 Food 4 Less grocery stores, has created an employee-owned stock ownership plan (ESOP). Terms of the deal weren’t disclosed.
“By selling 100% of the company stock to an ESOP, the company became federal and state income tax-free, increasing cash flow dramatically and providing the funds to pay owners for their stock,” noted Roy Farmer, managing director at Capstone Headwaters, an international investment banking firm, with headquarters in Boston and Denver, that advised PAQ in the matter. “The tax savings also allow the company to be more competitive and continue to be the low-price leader in their markets.”
Patricia and John Quinn and business partner Glenn Evans, who together founded PAQ in 1995, decided to establish an ESOP to sell their shares of the company to their employees ahead of retirement. John Quinn will remain as chairman of the board.
Also at the Stockton, Calif.-based company, Bill Cote has been promoted from CFO to President and CEO, and Chris Podesto from executive director of marketing to SVP and general manager.
According to Cote, about 1,250 employees will become part-owners this year through the ESOP, and that number could rise to as high as 1,800, given the number of employees that could potentially meet the qualifications to be included in the ESOP. This would place Food 4 Less in the top 1% of employee-owned companies nationwide in terms of size.
“Since we’ve announced this internally, across the board, employees are excited about this opportunity,” added Cote. “We’re going to feel fresh energy from everybody.”
PAQ operates 14 California Food 4 Less stores in Arroyo Grande, Atascadero, Ceres, Lodi, Los Banos, Manteca, Paso Robles, Sacramento, Salinas, San Luis Obispo and Stockton (four locations). The Kroger Co., which operates stores under the banner in other parts of California, as well as Illinois, Indiana and Ohio, doesn’t have any administrative control over PAQ’s Food 4 Less stores. PAQ also operates six-store Hispanic supermarket chain Rancho San Miguel Markets.