SHARING THEIR INVESTMENT
More Baltimore businesses are becoming worker-owned, but they still face economic and pandemic-related hurdles
Jennie Beecher loves her job. Whether she’s visiting plants in the garden store, learning about new equipment, baking cakes for co-workers’ birthdays, the Ace Hardware in Federal Hill has always felt like her home.
When the coronavirus pandemic hit, Beecher, a sales associate, made a chalkboard sign for incoming customers and workers. It read: “We’re in this together.”
“I’ve always treated it like it’s my business,” Beecher said.
Now, it’s official.
A Few Cool Hardware Stores, the group that owns the Ace Hardware stores in Federal Hill, Canton and Waverly as well as multiple locations in Washington, is transitioning to an employee-owned business model.
The transition is happening through an employee stock ownership plan, a system in which business owners sell shares in their company to a trust that distributes stock to eligible employees. The trusts typically borrow the money to buy the owner’s shares. It frequently benefits owners by helping them sell, especially when they don’t have an heir who wants the business.
In August, A Few Cool Hardware Stores transferred 30% of its ownership to employees, with the goal that they will become sole owners over time.
“It will help me get set up for retirement,” Beecher said.
Corey Rosen, founder of the National Center for Employee Ownership, said employee-owned stock programs and cooperative businesses, where employee-owners share in profits and make business decisions together, are increasingly popular options nationwide as industries and workers grapple with a widening wealth gap that has been exacerbated by the pandemic.
“There’s lot of concern about wealth insecurity and there’s a lot of concern about equitable access to wealth,” Rosen said.
Gina Schaefer, current owner and CEO of A Few Cool Hardware Stores, said she is optimistic about the transition because of the community ties the stores have. And being part of Ace Hardware — which allows stores to operate under its corporate umbrella while
remaining locally owned — helps keep prices low amid the rise of online retail.
The hardware stores are not the only Baltimore-area business that’s moved toward the cooperative or worker-owned model. In 2020, pizza restaurant Joe Squared transitioned into a co-op, and Taharka Brothers, an ice cream business, became employee-owned.
It makes sense that the business model has a foothold in Baltimore, said Jessica Gordon Nembhard, who studies co-ops at the City University of New York.
“Baltimore, early on, like from the 1800s, was known as a co-op city,” she said, particularly among Black people. “There was so much mutual aid associations happening and other kinds of Black co-ops.”
In fact the very place Frederick Douglass entered the city as a slave later became the site of a black-owned cooperative known as
the Chesapeake Marine Railway and Dry Dock Co., which was in business from 1866
to 1884, according to the Maryland State Archives.
“Banks don’t understand worker-owned cooperatives. Banks get a little squirrelly when you say, ‘Oh, we have 12 owners, do you want all of their information?’”
— Kate Khatib, worker-owner at Red Emma’s, a cooperative bookstore and cafe
But for modern businesses, becoming employee-owned, whether that be through employee stock ownership or a cooperative business model, isn’t as easy as simply deciding to.
When Aisha Alfadhalah and her co-founders began Mera Kitchen Collective, a community kitchen and caterer, they envisioned a cooperative environment where members made decisions together and shared in the profits. The business’ goal was to support immigrants through food.
“The majority of us come from collective cultures, so it’s not about ‘How can I survive?’ but, ‘How can we as a community survive?’ ” Alfadhalah said.
But when it came down to the logistics, they realized having multiple co-owners listed on things such as tax forms, loans and licenses can pose barriers.
Many of its employees rely on Medicare or Medicaid for health care and if the Mera Kitchen Collective became employee-owned, they would no longer be eligible, Alfadhalah said. The business can’t afford to provide the type of health care its employees need.
“If we were paying for medical expenses, we would go under tomorrow,” Alfadhalah said.
Mera’s largely immigrant workforce also created a barrier to legally becoming a cooperative because the collective’s employees have differing immigration statuses.
As a result, Mera Kitchen Collective is solely owned by co-founder Emily Lerman, a white woman from the United States.
“It just highlights the systemic issues that we have in this country that it’s much easier for me and much less riskier for me to be an owner,” Lerman said.
Despite Lerman being the sole legal owner, Alfadhalah said the business still functions internally as a cooperative, with the staff making decisions together about everything from COVID protocol to pop-up shop schedules.
Kate Khatib, a worker-owner at Red Emma’s, a cooperative bookstore and cafe, said businesses in Baltimore have been facing economic hurdles to becoming and remaining worker-owned for years.
When Red Emma’s tried to expand its café in 2013, Khatib said the business couldn’t get a loan.
“Banks don’t understand worker-owned cooperatives,” Khatib said. “Banks get a little squirrelly when you say, ‘Oh, we have 12 owners, do you want all of their information?’ ”
CUNY’s Gordon Nembhard said a lot of lenders don’t understand it.
“Lenders want a CEO or executive director, who can sign all the loan and be the one in charge of providing collateral,” she said.
Some want co-owners to take out a private personal loans instead, which shouldn’t be necessary, Gordon Nembhard said. Policy adjustments could ease the lending process for co-ops, but, generally, more education is needed — from childhood on — about cooperative structures, she said.
Realizing this, Khatib co-created the Baltimore Roundtable for Economic Democracy, an organization that helps finance and design cooperative businesses.
“We didn’t want to replicate the same logic of financial exclusion or the same concentration of financial power in the people that already have resources,” Khatib said.
The pandemic has brought additional challenges. Deciding whether to remain open, what COVID policies to enforce and how to support a staff can be uniquely challenging for worker-owners who have to weigh their multiple interests.
“Workers have been put in the position of having to grapple with these two questions at the same time of ‘What is the decision that I make as a business owner?’ and ‘What is the decision that I make as a worker?’ ” Khatib said. “In a worker-owned cooperative, those two things have to work together.”
At Red Emma’s, Khatib said the business structure allowed for some workers to transition to at-home jobs instead of losing their jobs altogether.
But like restaurants throughout the country, Red Emma’s has faced an employee shortage.
“We definitely have had people opt to not come back to work,” Khatib said. “Even in worker-owned businesses, these are still low-wage jobs.”
Because of conversations between its worker-owners, Khatib said Red Emma’s is changing its benefits and pay. Before the pandemic, the café and bookstore didn’t offer paid vacation time, but is now restructuring its pay scale and adding vacation time benefits.
For Thread Coffee, a cooperative coffee roastery in Woodberry in Baltimore, the pandemic meant the permanent closure of its café and the loss of some employees who were not yet owners.
“We had to think about the health of the company,” said Nani Ferreira-Mathews, a worker-owner there.
Many worker-owners said the silver lining through the emotional toll of the pandemic has been the voice worker-owners had in making decisions about their health, safety and jobs.
“Everybody sat around and mentioned their perspective,” Alfadhalah said. “There was a consensus.”