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

By: Dennis W. Quaintance

Revised June 2021 to consider amendments made to the plan that are now incorporated in the Summary Plan Description (SPD) of 6-23-21… and to clarify some points.

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 and can be found on our QWPeople.com website. 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 effectively owned by us, the QW
      staff members!

      • Technically, QW is owned by what’s called the QW ESOP Trust. This trust entity exists to provide retirement benefits for QW staff members.
    • Eligible staff members participate in the ESOP and gain Retirement Units (RUs) as a function of working here, not by making a financial payment.
      • QW ESOP Plan Participants are the beneficiaries of the trust. Your portion of the beneficial value is reflected by the number of RUs that you gain and the current value of the RUs.
      • 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 qualified (meaning tax advantaged) 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, the year after you leave QW.
      • In future years, the amount of time between when a person leaves QW and has the value of their account fully available to them for a rollover may, and probably will, be extended.
    • 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. 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 being beneficial to the value of the company.

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 have worked more than an average of 19¼ hours per week – 1,000 hours/year), 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 earnings 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 a participant for 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 “participation” years, the value in your account will be forfeited and will go to zero.
  • If you leave prior to turning 65, you’ll get the value of your RUs after you’ve been gone at least a year, after the next annual valuation and distribution of the account statements. In future years this time frame will likely increase and the value of your account might also get paid out over a number of years.
    • This is a retirement program regulated by the government. It isn’t a plan that a person can just dip into. If you have not reached retirement age when you are getting the money, you’ll face a significant tax penalty if you don’t rollover the money from your RUs into another qualified retirement program, such as an Individual Retirement Account (IRA) or 401 (k) Plan.
    • 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 sold our interest in QW to the QW ESOP Trust in 2016 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 beyond QW’s 401 (k) program. We so appreciate the people who help QW keep the promises made in our mission statements. With this program, all who work here will have even more reasons to take great care of our colleagues and our guests.
  • This ESOP arrangement also allowed Mike and me to sell our interest in QW without worrying about our founding values (refer to our “How to be a Lucky Star” guide book) being honored and enthusiastically pursued. The ideas held in QW’s Fairness Doctrine and Sustainable Practices Initiative are particularly important to us. 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 have not gone anywhere. As a staff member of QW, I am an ESOP participant. I play the same role as I played prior to the sale. Mike is also with us, as he has been for these past 32 years, as our biggest fan and as our partner based on his continued ownership interest in the hotels QW manages.

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) 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 that includes Mike and me. The hotel owners lease the restaurants to QWR and hire QWH to manage the hotels for a fee that is a percentage of revenues and of cash flow.
    • The Lucky 32 restaurant buildings are owned by Mike and/or me and they are leased to QW.
    • These are the same arrangements as prior to the sale of the company to the ESOP.
  • 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 do with keeping our promises to our colleagues and our guests to be of genuine service to them. That is the neat thing about it. We all have aligned interests with each other.
  • Let’s all work together to make great profits by taking great care of our guests and colleagues.
    • Happy guests come back. Happy colleagues take great care of our guests. Those are the keys of this restaurant / hotel game that we are enthusiastically playing.
    • 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 firm 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.
      • This was evident when the value of the RUs increased from 44¢ in 2016 to $4.03 in 2018 then dramatically dropped to 37¢ for the 2019 valuation because the valuation firm could see that the pandemic would negatively impact QW’s ability to earn good profits for a few years.
  • Again, if we all work well together, it is more likely that the value of the RUs will increase! Let’s do that!
  • Although I don’t know how much money this might add up to for anyone, I am encouraged when I read about the amount of money some participants in some other ESOPs gained when they stayed with the company for a good while and the company did well.

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

  • Not necessarily. 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. Over time 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 where it is and it will get us to the good places that we want to go!

Some other information that might be helpful:

    • QW has a Board of Directors, just like it has from the beginning. But rather than the Board being just Mike and me, it has five people — and two of them are “outside directors,” meaning that they don’t work for QW or have other significant business dealings with QW.
    • I’m still playing the role that I’ve been playing for 32 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 and colleagues” has always been and will continue to be our company’s highest priorities. Our third highest priority has been and will stay “to be of genuine service to our owners” (and now our owners are, in effect, our staff members…so our priorities are combined. Pretty neat, eh? What is best for our owners is best for our colleagues because they are one and the same). We’ll also continue having a sincere interest in treating our vendors fairly and to “the Earth and her People” through our QW Fairness Doctrine and our Sustainable Practices Initiative which directly touch and inform our top priorities. Those ideas will continue to guide me and QW.

Again, this is just a quick and incomplete summary of the QW ESOP. 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: Whatever the official Plan says will be the rule. Plus, the Plan will probably be modified several times 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 version of the Summary of the Summary inaccurate.