The Rock City crew — 17 of the 30 employees decided to become worker-owners (Photo Courtesy Rock City)
The Rock City crew — 17 of the 30 employees decided to become worker-owners (Photo Courtesy Rock City)
When Susanne Ward and her late partner Patrick Reilley moved to Rockland from California in 1991, they knew it wasn’t easy to make a living in midcoast Maine and they had to get creative.

“Two of the things we really missed were good used book stores and coffee houses. It just wasn’t a thing out here at all,” said Ward. “There weren’t many used book stores and there weren’t any used bookstore coffee houses out here. So we just thought, ‘What the heck? Let’s do it!’”

And with that, in the summer of 1992, Second Read Books and Coffee — the first espresso bar/bookstore/coffee house in Maine — opened its doors on Main Street in Rockland.

“The locals gave us six months to last, but somehow we tapped into a community of artists, writers and musicians who really wanted a focal point to talk, read, play music and have book clubs,” said Ward.

Over the next several years, the coffee shop moved twice, changed its name to Rock City Cafe, added a coffee roastery on South Main in 1999 and eventually sold off the book portion of the business. Then in 2010, Reilley died after a battle with cancer.

In her early 60s, Ward began to think about retirement, but she worried that if she sold the business, the new owner might not know how to run Rock City properly. If the coffee roastery was sold to one of her competitors, it would likely be shuttered and all of the jobs would be moved out of town. And if she couldn’t find a buyer, she would be forced to shut down a beloved community institution. But there was also a third option: selling it to her employees.

“I thought, ‘Who better to run it than the people who built it? It’s the employees,’” said Ward. “They have all been with me for a long time, so it just made sense to me.”

After meetings with business development specialist Rob Brown of the Cooperative Development Institute four years ago, Ward decided to pitch the idea to the employees.

“The room was full of mixed reactions,” said cafe manager BJ Chamberlain of that first meeting. “There were people who were terrified. There were people who were really excited, and there were people who would have rather been someone else that night.”

Not all of the employees were interested in joining the cooperative. After all, they would have more responsibilities if they became members. In addition to the $2,500 membership fee, they would also participate in important business decisions. Some of the employees preferred to just pour coffee, while others didn’t think they would be working there long enough to take advantage of the profit-sharing. In the end, 17 of the company’s 30 employees chose to become worker-owners in the business.

The next step was to educate and train the employees on how to run a cooperative enterprise. The new members had to understand finances, communication, cooperative culture and conflict resolution. Ward knew that ownership can’t really be taught, it has to be experienced. But she says she also knew that many of her long-term employees had in a sense already taken ownership of the company because they poured their hearts and souls into their work.

Finally, last Friday, March 8, Rock City Cafe and Rock City Coffee Roasters officially transitioned from a single-owner corporation to The Rock City Employee Cooperative. Ward will stay on as the company’s manager for another year, but after that, they’ll be on their own. With all of the legal and accounting fees, technical assistance and business training, Ward estimates that the entire transition cost about $20,000. Having partially financed the deal, one of the advantages for Ward is that she will continue to receive an income stream. And the employees will get a share of the profits at the end of the year according to the number of hours they work, which is how they build equity in the business beyond their initial membership fee.

“It’s an opportunity for them to actually build equity in a business and also create a type of retirement for them,” said Ward. “If one of them decides to leave 10 years from now, they’ve got a vault of equity in the business that will be paid out to them.”

But for the employees, it’s not just about the profit sharing, but also about bringing democracy into the workplace. Roaster Kevin Malmstrom said the members have begun forming different committees in charge of promotion, merchandising and field sales.

“Even someone who may be a barista who works part-time has a stake in the company and the direction it’s going to go in,” said Malmstrom. “I think that is really appealing to people. Instead of being told what to do they actually help make the decisions.”

Production assistant Dave Butler said that while the day-to-day operations of the business probably won’t change, the new cooperative structure will increase morale and productivity.



“We were all in love with this place, which is why we were all working here, but when we all have a stake in the ownership, none of us are scared in doing what needs to be done,” said Butler. “Everyone has stepped up. It’s amazing to see the community of the owners that we’re forming now.”

A Solution for Retiring Boomer Business Owners?



But worker cooperatives aren’t just a more equitable way to run a business, they could also be a valuable economic development tool for rural economies facing the demographic cliff. The Democracy at Work Institute (DWI), an arm of the US Federation of Worker Cooperatives, estimates that 85 percent of all business owners do not have a succession plan for when they retire and only 15 percent of businesses get passed along to children. As a result, 70 percent of privately held businesses will be sold or closed. That “silver tsunami” is particularly pronounced in Maine, where there are about 12,790 Maine businesses employing 108,000 people that are owned by baby boomers facing retirement.

“We talk about Maine’s aging workforce, and that’s individual workers, but what about the business owners themselves selling and liquidating businesses in small rural towns?” said Rob Brown of the Cooperative Development Institute. “That’s a real problem, and it’s completely avoidable.”

Currently, worker cooperatives are a small, but growing sector of the economy, with about 300 democratic workplaces employing 7,000 people in the US, according to DWI. The majority of worker co-ops are small businesses employing between five and 50 workers, although Bronx-based home care agency Cooperative Home Care Associates has 2,000 workers. In Maine, there are around 10 worker cooperatives, including Local Sprouts and Hour World in Portland as well as Clinton-based Fedco Seeds, and Crown o’ Maine Organic Cooperative in Vassalboro, Jet Video in Portland, Baldwin Apple Ladders in Brooks and Clean Bee Housekeeping Cooperative in Portland. Brown said he is currently working with between 10 and 12 businesses seeking to transition to cooperatives, and he expects Pittsfield-based Insource Renewables will become a worker-owned enterprise within the next two months.

Brown said that worker cooperatives are uniquely beneficial for business owners in Maine because it’s becoming increasingly difficult to sell rural businesses, particularly as more and more people are looking to retire. He said the most common business plan for small rural businesses is simply to liquidate and close, causing layoffs and a loss of goods and services in small towns. Brown said Rock City is a model to emulate because most of the employees are in their 20s and 30s. So by owning the business they are more likely to put roots down and stay in Maine, stemming the demographic tide.

“If the business owners themselves, economic development people or state policymakers don’t pay attention to this, all the job training programs in the world are not going to solve that problem,” said Brown. “You have to do something about ownership, not just skills. And that’s a different and unique problem we’re working to address.”

Currently, CDI is lobbying for a bill (LD 1338) that would incentivize employee ownership by exempting the sale of business assets to cooperatives and other employee-owned enterprises. The measure, which just passed unanimously in the Legislature’s Taxation Committee, would also provide a tax break on interest income earned from financing the sale of a business to employees. Brown said he is also encouraging small business owners in Waldo and Knox counties to take the Midcoast Leadership Academy’s survey on their growth and succession plans at www.surveymonkey.com/r/5MF35SM. He said the survey will help inform policymakers about the region’s future economic development.

Susanne Ward’s advice to business owners who are considering the cooperative option is to start exploring it at least five or 10 years in advance because it takes a few years to get it right. But she says the rewards to both the owner and the employees make it all worthwhile.

“I just hope that we as a co-op are an inspiration for people because I think we’re frontrunners in many ways,” said Ward. “As Rob would say, it helps to spread the wealth. It spreads it among a group of people that might not have an opportunity for that. Nobody here could have opened a business on their own, but as a group they had the power to buy a business. And as a group they have the power to move it forward.”