GRAND FORKS, N.D. — There’s been some speculation over the years about what Grand Forks businessman and civic leader Hal Gershman would do with his family business, Happy Harry’s Bottle Shops.
Gershman has put that question to rest, and told the Herald details of a meeting he had with a number of employees a few months ago.
“I said, ‘There’s been a lot of speculation. I sold the business. I’d like you to meet the new owners–look at each other,'” he said. “Many of them got it.”
What Gershman was referring to was the establishment of an employee stock ownership plan, commonly known as an ESOP. The former Grand Forks City Council president said the ESOP allows him to manage the ownership transition and give back to deserving employees.
Gershman is remaining as the company’s president and board chairman, however, and he said his role won’t really change.
“The beauty of it is that nothing changes,” Gershman said. “Everybody is clicking along just like before.”
Happy Harry’s traces its roots to 1944, when Harry Gershman, Hal’s father, opened the Central Package Store in downtown Grand Forks, according to the company’s website. Hal Gershman took over in 1976, and the business now has five locations selling beer, wine, spirits and cigars in Grand Forks and Fargo.
‘Time and talent’
The number of Happy Harry’s shares an employee has depends on their salary and how long they’ve worked there, Gershman said. But the employees don’t have any financial investment in the company.
“Their investment is really their time and talent,” Gershman said. “This really is a transfer of ownership without any investment of money that happens over time.”
Gershman sold his shares of Happy Harry’s to a separate holding company, which employees vest in over time.
Gershman said he has had offers for the business over the years. But he worried that the first place a new owner would look to cut would be salaries and benefits, given the good pay and generous health care coverage Happy Harry’s provides.
“My wife, daughter and I could not do that to them,” Gershman said of the employees. “They’ve been wonderful, dedicated people.”
Happy Harry’s employs between 110 and 120 people, Gershman said.
Gershman said he still loves the business and is healthy, and the ESOP allows him to continue in his role. But he added that change can come unexpectedly, and that his family decided to “manage as much change” as they could.
“I decided to put my hands on the steering wheel, with my wife, and say, ‘Alright, we’re going to manage this change the best way we can while we’re still in good shape,'” Gershman said.
An estimated 20,000 companies have installed ESOPs since 1974 and about 13.5 million employees are currently covered by the arrangement, according to the Menke Group, an ESOP advisory firm.
And Happy Harry’s isn’t the only business in town that has gone through the process. Lunseth Plumbing & Heating Co. and its sister company, Dakota Fire Protection, have established ESOPs within the past decade, said Tracie Ivesdal, human resources director at Lunseth.
Corey Rosen, founder of the National Center for Employee Ownership, said the number of ESOPs “has sort of leveled out,” although anecdotal evidence points to “significant growth” this year. He said aging business owners may be one reason for that.
“There are a lot of baby boomers who are reaching the age that they need to do something about business transition,” said Rosen, adding there are a number of tax benefits of choosing an ESOP. However, he said the main motivation for many business owners is their legacy.
“Maybe you could sell your business to somebody else or a private equity group, but it’s not going to be what it was,” Rosen said. “A lot of business owners just feel a real strong sense of loyalty to the people who helped them build their business.”
That seems to be the case with Gershman.
“They deserve it,” he said of his employees.