A Summary of the Summary (SOS) of the QW ESOP Trust

By: Dennis W. Quaintance – November 17, 2016

It isn’t surprising that there are a lot of words and complexity related to something like this ESOP Trust.  We need to be sure that it is fair, that it considers all sorts of things that could happen and that we comply with all of the rules — all of that takes a lot of words.  However, a boatload of words can cause confusion, so I thought it might be helpful to offer up a somewhat simpler summary of the QW ESOP Trust than the Summary Plan Description (SPD).

This is just a brief summary intended to be helpful. If anything isn’t clear, please first refer to the Summary Plan Description (SPD) which you already have; then, if you still have a question, please call one of the QW Administrative team members or me and we’ll attempt to help. We can even get you the 74-page QW ESOP Trust Plan if you’d like.

What is an ESOP?

  • ESOP stands for Employee Stock Ownership Plan
    • Yes, Quaintance Weaver Management, LLC (QW), is now effectively owned by us, the QW staff members!
      • Technically, QW is now owned by what’s called the QW ESOP Trust. This trust entity exists to provide retirement benefits for QW staff members.
        • This change will not cause changes with our priorities here at QW or the leadership team; more about this topic later.
      • Eligible staff members participate in the ESOP and gain what we are calling Retirement Units (RUs) as a function of working here, not by making a financial payment.
        • Other companies call RUs “stock.” We call them RUs because QW is a Limited Liability Company (LLC), not a corporation, so QW has membership units rather than stock.  We added the “R” for “retirement” because we want to emphasize that this is a retirement program.
        • FYI: Eligibility and vesting are discussed just below this section.
      • You’ll get the value of your accumulated “vested” RUs when you retire, or if you leave prior to retiring, starting five years (or in some instances longer) after you leave QW.
      • The value of the RUs is determined primarily by the profitability of QW.
        • When we all cooperate and collaborate in helpful and constructive ways and the result is a lot of happy guests; that will usually translate into profitability. It is profit that enhances the potential value of the RUs. Now we are all in the same boat: If a dollar is wasted, part of that dollar comes from all of our accounts. If we gain a dollar because of your good effort, or one of your colleague’s good efforts, part of that dollar will end up in all of our accounts.

So, what does this mean to me as a staff member?

  • It means that after you’ve worked with QW for one year (if you are over 18 and you have worked more than an average of 19¼ hours per week), then, in most instances, you will be eligible to participate in the ESOP retirement plan.
  • To be clear: You will not be asked to put money into this plan.
    • You get to participate based only on working here and meeting the simple participation qualifications.
  • The number of RUs that will be allocated to your account will be determined by your earnings.
    • Bonuses and gratuities are valued at 100% of the amount earned for your participation calculation.
    • Wages are valued at 120% of the amount earned.
      • We did this because not everyone has the opportunity to receive bonuses or gratuities.
    • Note: People who fall into what the rules define as “highly compensated” have all of their earning valued at 100% of what was earned and there is a cap on how many RUs per year these people can gain.
  • If you are eligible, after your first year with QW, you’ll get a statement of how many RUs you gained. That statement will also show the value of each RU.
    • You will not have the rights to the value of those units until you’ve been with the company for a total of three years. That is called the “vesting” time.
      • This delay is to reward folks who stay with QW.
      • If you leave prior to being here for three years, the value in your account will go to zero.
    • If you leave prior to turning 65, you’ll get the value of your RUs after you’ve been gone for five years (or, in some instances, longer). In most cases, the value of your account will be paid to you over the five years following the five-year wait.
      • This is a retirement program. It isn’t intended to be a savings plan that a person can just dip into.  If you have not reached retirement age when you are getting the money, then you’ll face a tax penalty if you don’t roll the money from your RUs into another qualified retirement program, such as an Individual Retirement Account (IRA).
      • When you turn 55, if you choose, you can move part of the value of your RUs into other investments, such as mutual or index funds.

Why did Dennis and Mike transfer their ownership to the QW ESOP Trust?

  • Mike Weaver and I like to think long term, not just months or years out, but decades ahead. We’ve sold our interest in QW to the QW ESOP Trust because we believe that the optimal way for QW to be owned and managed in the future is with this sort of arrangement.  We think this because:
    • We LOVE the idea of having a retirement benefit program for our colleagues. We so appreciate the people who help QW keep the promises made in our mission statements. With this program, all of us who work here will have even more reasons to take great care of our guests and colleagues.  That ought to make QW even healthier and keep it vibrant for decades to come.
  • This ESOP arrangement also allows for Mike and me to sell our interest in QW without worrying about how our colleagues would be treated or how (and if) our founding values would be honored. We didn’t even consider selling to another company, because it would be unlikely that other owners would share our values.  If QW didn’t stay focused on the values that got QW where it is today, it would break our hearts.
  • BTW: Even though Mike and I sold our interest in QW, we are not going anywhere. As a staff member of QW, I’ll be an ESOP participant and I look forward to continuing to play the same role at QW that I played prior to this change. I talk about this more below.  Mike will also be with us, as he has been for these past 28 years, as our cheerleader, biggest fan and as our partner based on his continued ownership interest in the hotels we manage. 

What will the ESOP own?

  • 100% of Quaintance-Weaver Management (QW) is owned by the QW ESOP Trust.
  • QW owns:
    • The two Lucky 32 Southern Kitchens (Lucky 32 Group).
    • The companies that operate the QW restaurants and hotels:
      • Quaintance-Weaver Restaurants, LLC (QWR), which in turn owns the Green Valley Grill and Print Works Bistro.
      • QW Hotels, LLC (QWH), which manages the two hotels for a fee.
    • QW Admin (QWA) provides the administrative services for QWR, QWH, the Lucky 32 Group and the hotels.
    • QW Craft Guild (QWCG), formerly called QW Services, is part of QW. QWCG provides the services of their craftspeople to the restaurants and hotels so that we can present extraordinary facilities and furnishings for our guests and colleagues.
    • QW ESOP Trust does not own any real estate.
      • The actual hotel buildings and their adjacent restaurants are owned by a group of people that includes Mike and me. The hotel owners lease the restaurants to QWR and hire QWH to manage the hotels.
      • The Lucky 32 restaurant buildings are owned by Mike and/or me and they are leased to QW.
    • In summary, the QW ESOP Trust owns QW, and QW owns the companies that operate the QW restaurants and hotels.

As a potential participant, it would be natural to ask:  So, how much might this add up to?

  • That’s a fair question. The answer is: I don’t know.
  • It depends on how much money QW makes. It is profits that will allow the QW ESOP Trust to build up value. How much profit is made is largely a function of how well each of us performs in keeping the promises we make to our guests and colleagues.  That is the neat thing about it.
  • Let’s all work together to make great profits.
    • Let’s ensure that all of us here at QW take great care of our guests. Happy guests come back. That is the name of the game.
    • If our guests are delighted, and if we don’t waste money, we ought to make a good profit. If we all work together, we can make those two things happen.
  • Each year the QW ESOP Trust’s independent trustee will have a company that specializes in valuing companies figure out what QW is worth. It is from this calculation that the RUs are valued.
  • There are two important points about this:
    • The value of the RUs will likely change from year to year. Generally speaking, if QW makes a good profit, the value of each RU will probably increase.
    • If QW doesn’t make good money, then the value of each RU will probably decrease.
  • Again, if we all work well together, it is more likely that the value of the RUs will increase! Let’s do that!

Does this mean that QW wants all of its staff members to stay on till they are 65?

  • No, we want everyone to stay as long as they wish…provided they are enthusiastic, happy and positively contributing toward our efforts to take great care of our guests and colleagues. If any of us are not getting to experience ourselves as enthusiastic and happy here, I think that we (and that includes me!) ought to find something to do elsewhere that we can enjoy and be enthusiastic about.  I can’t think of anything good that comes from a lack of enthusiasm and happiness.  Enthusiasm is what got QW to where it is and it will get us to the good places that we want to go!
    • I believe that enthusiasm is a choice. And, if making that choice is consistently exhausting, then that could be nature’s way of saying it might be time to find something else to do.
  • This next point is important: RUs will continue to be valued each year, so helping (and, obviously, not hurting) QW even after you leave, is in your best interests.

Some other information that might be helpful:

  • QW will have a board of directors, just like it has from the beginning. But rather than the board being just Mike and me, it will consist of five people — and two of them will be “outside directors,” meaning that they don’t work for QW or have other significant business dealings with QW.
  • I’ll keep playing the role that I’ve been playing for 28 years, and I’ll still do that using the compass of our founding values for direction. (See the “How to be a Lucky Star” cultural guide book if you have any questions about our founding values.) In other words, having a sincere intention “to be of genuine service to our guests” will stay as our company’s highest priority, and our close second priority will still be “to be of genuine service to our QW colleagues.” Our third highest priority has been and will say “to be of genuine service to our owners” (and now our owners are, in effect, our staff members…so our second and third priorities are sort of combined.  Pretty neat, eh?  What is best for our owners is best for our colleagues).  We’ll also continue having a sincere interest in treating our vendors fairly and to “the Earth and her People” through our Sustainable Practices Initiative and our QW Fairness Doctrine.  Those ideas will continue to guide me and QW.
    • I plan to keep playing my role until I get objective feedback that I’m not the optimal person to play this role or until I’m not enjoying it. (That’s not a bad mindset for all of us.)  If, on average, I’m not skipping to work at least seven out of ten days, I’ll move on.  My ratio for the past 28 years is 9.7 days out of 10!  (That’s a guess – but I’ll bet it is pretty close.)

Again, this is just a quick and incomplete summary of the QW ESOP Trust Plan. This isn’t a comprehensive or complete overview of the Plan. If I’ve said anything that conflicts with the Summary Plan Description (SPD) or the Plan itself, or if I’ve explained something poorly, I’m sorry and I refer you to those documents or to one of the QW Administrative team members for clarification.  Please note, though, that whatever the official Plan says will be the rule.  Plus, the Plan will probably be modified at one or more points in the future.  You will be notified if and when it is modified.  Any future changes will obviously make some of what is said in this Summary of the Summary inaccurate.