1285: Kathy Terry on Employee Ownership Trusts: Why P. Terry's Chose Legacy over an Exit

Summary

Restaurant Unstoppable Podcast #1285: Kathy Terry on Employee Ownership Trusts: Why P. Terry's Chose Legacy Over an Exit

Date: August 10, 2026
Host: Eric Cacciatore
Guest: Kathy Terry, Co-Founder of P. Terry’s Burger Stand
Episode Focus: The journey from nearly selling P. Terry’s to private equity, to choosing employee ownership trusts (EOT) as a legacy move––how compassion and values can shape the future of hospitality, business succession, and middle-class opportunity.

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Episode Overview

In this thought-provoking episode, Eric is joined by Kathy Terry of P. Terry’s to discuss the company's pivotal decision to forgo a lucrative private equity exit in favor of establishing an Employee Ownership Trust (EOT). Kathy delves into the origins of this move, the reasoning behind it, the technical mechanics of EOTs compared to ESOPs (Employee Stock Ownership Plans), and the vision for legacy, compassion, and dignified opportunity in the hospitality business.

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Key Discussion Points & Insights

1. Compassion as Strategy, Not Just a Value

• Kathy’s Mantra:

  “Compassion can be a strategy, not just a value.” (05:33, Kathy)

• Manifestation at P. Terry’s:
  P. Terry’s has always prioritized employees and community, weaving compassion into decision-making. From day one, the business prioritized staff well-being, knowing their success was tied to the employees’ dedication.

• Empathy vs. Compassion:

  “Empathy is when you have the ability to understand and share another person's feelings... but compassion goes another layer where it makes you have the desire to help and alleviate that feeling.” (06:57, Kathy)

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2. Rejecting Private Equity for Legacy

• The Two-Path Moment in 2016:
  In 2016, Kathy and Patrick considered a significant private equity buyout.

• A Movie That Changed Everything:
  After seeing The Intern, a line hit Kathy hard:

  “No one is going to ever care about your business like you do.” (14:01, Kathy)

  Realization: Selling would jeopardize the “soul” of the business; community, staff support, generosity, and unique programs (like interest-free loans, birthday cakes) could be lost.

• Validation vs. Exit:
  The big offer validated their efforts, but Kathy and Patrick realized they wanted significance and relevance, not just financial exit.

  “You can't put a money value on relevancy or on significance. ... At the end of the day, you're on your deathbed...it's going to be, were you relevant? Did your presence matter in someone else's life?” (16:26, Kathy)

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3. The Dark Side of Private Equity & Capital Models

• Access, Opportunity, & Risks:
  They grew with personal and bank loans, avoiding fast capital.

  “You sell your soul when you sell to private equity because there's just a guy in a room looking at a spreadsheet trying to figure out how much debt they can take on for your existing assets ... It's all a five or seven-year turn, right?” (23:39, Kathy)

• Private Equity’s Short-termism and Effect on Mission:
  Private equity often pressures for fast growth and profit, risking the erosion of company culture and values.

• Staffing & Dignified Work:

  "There's not a shortage of jobs, there's a shortage of dignified jobs." (46:52, Kathy)
  Ownership and equity are presented as pathways to dignity and security for staff, beyond just job creation.

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4. Succession Planning — From ESOPs to Employee Ownership Trusts

Why Not an ESOP?

• ESOP mechanics: Employees own shares via a trust; works as a retirement plan.

• Challenges:

  • Ongoing need to buy back shares from departing employees—hard with high turnover and cash requirements.
  • Yearly valuations and heavy administrative overhead.
  • Vulnerable to being sold off to private equity, threatening long-term legacy.

  “Once that trust owns 51% of the business... if private equity comes in and makes them an offer, the employees can sell the business. So it doesn't protect the culture long term.” (40:00, Kathy)

Why an EOT?

• Origin & Mechanism:
  Common in the UK, EOT is structured so that company shares are transferred into a trust whose purpose is explicitly to sustain the culture, mission, and protections for staff.

• Guardrails for the Future:
  The trust embeds binding principles––quality, employee care, giving, reasonable growth, etc.—so future leadership is legally and ethically bound.

  “The whole purpose of the trust is to maintain the culture.... We're never going to expand faster than we can pay for it. It just puts limitations on future CEOs.” (52:29, Kathy)

• Profit Sharing Now, Not Just in Retirement:
  When the EOT was launched, P. Terry's implemented profit sharing: any employee with 2+ years tenure receives a check, scaled by tenure.

  “Our employees needed financial benefit now. ... Now any employee that has been with us for over two years is eligible for profit sharing. ... So that way they get the financial benefit of what they’ve built.” (53:30, Kathy)

• Technical Aspects:

  • Lifetime Gifting Limit: Currently $15 million/person in the US. Anything beyond is subject to estate taxes.
  • Gradual sell-down: Kathy and Patrick sell equity slowly to the trust for financing, not in a massive one-time exit.
  • Employees are trust beneficiaries: No individual shares; instead, they share in profit-sharing and, if ever sold, in sale proceeds based on a point system prioritizing tenure.

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5. Broader Philosophical Insights — Capitalism, Success, and Societal Change

• On Capitalism & Poverty:

  “Capitalism is a perfect tool to be used to eliminate poverty. But now it's unchecked...I feel like what we're trying to do is use it to eliminate poverty and eliminate the need of our employees relying on a broken system.” (71:56, Kathy)

• Redefining Power & Success:

  “We have to redefine what success is...and also reimagine power...It's not getting access to the elite rooms. It's realizing how many people you’ve impacted because you were in the room.” (77:58, Kathy)

• Connection vs. Belonging:

  "Belonging creates exclusion at every level because someone is always left out...but connection is based on our shared humanity, not our shared identity...we’re desperate for connection." (82:48, Kathy)

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Notable Quotes

• “I say all the time that we're in the human connection business. We just happen to sell really good burgers.”
  (18:35, Kathy)

• “The best way to provide security is to give them a pathway to ownership.”
  (47:15, Eric)

• “I'm trying to keep the business living way longer past me.”
  (57:00, Kathy)

• “I feel like I'm in a family business, but I have redefined my family to include all my employees, not just my kids. ...I am their safety net.”
  (69:54, Kathy)

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Timestamps for Key Segments

• 04:07 – Welcome & Guest Intro
• 05:33 – Kathy’s Success Mantra: Compassion as Strategy
• 12:16 – The Near-Sale to Private Equity & Turning Point
• 14:01 – How The Intern Movie Changed Kathy’s Perspective
• 23:39 – Risks and Realities of Private Equity; Capital Models
• 35:01 – ESOPs Explained; Why They Didn’t Work for P. Terry’s
• 49:52 – EOT Model: Structure, Safeguards, and Implementation
• 53:30 – Launching Profit Sharing as Immediate Benefit
• 62:39 – Do Employees “Own” P. Terry’s? Explaining Trust vs. Share Ownership
• 64:17 – Financial Literacy Initiatives for Staff
• 69:54 – Employees as Family; Capitalism’s Potential for Good
• 77:58 – Redefining Success and Power in Business & Society
• 82:48 – The Distinction Between Connection and Belonging
• 87:33 – Privilege, The $100 Bill Race, and What True Equity Demands
• 89:19 – Compete: To Strive Together
• 90:42 – Resource: Zoe Schlag at Common Trust for More on EOTs
• 91:44 – How to Connect with Kathy (LinkedIn)

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Memorable Moments

• Kathy recounting the anxiety and soul-searching after the private equity offer and using cinema (The Intern) as a mirror for business philosophy.
• Eric’s impassioned advocacy for creating pathways to ownership as a solution to the middle class squeeze.
• Deep dive into the technical mechanics of EOTs contrasted with ESOPs—rare, candid, and practical.
• Discussion on how redefining success as depth of impact, not just lateral growth, can change industries and communities.
• Story of the $100 bill race and Kathy’s challenge to redefine competition itself as collective fulfillment, not zero-sum victory.

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Resources & Further Learning

• Common Trust – Consulting group specializing in EOTs. Contact: Zoe Schlag.
• LinkedIn – Kathy Terry (Primary method to connect)
• Book Recommendations:
  • Lost Connection by Johann Hari (on the human need for connection)
  • Grit by Angela Duckworth (on the true meaning of competition)
  • Sapiens by Yuval Noah Harari
  • A Brief History of Everything by Ken Wilbur

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Tone and Language

The conversation is open-hearted, philosophical, occasionally humorous, and unabashedly values-driven. Kathy speaks with warmth and clarity; Eric brings passionate curiosity and a “real talk” approach to systemic issues facing hospitality and the wider economy.

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Final Reflections

This episode is a master class not just in business succession planning, but in values-based leadership and the real meaning of hospitality. Kathy Terry's story is a call to redefine what it means to "win" in business––not through exits, but by building institutions that lift people up for generations.

Connect with Kathy Terry: [LinkedIn]
Learn more about EOTs: [Common Trust]

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“I feel like what we’re trying to do is use [capitalism] to eliminate poverty and eliminate the need of our employees relying on a broken system.”
—Kathy Terry (71:56)

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Transcript

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Welcome to restaurant unstoppable. For 10 years and over 1,000 episodes, I've been traveling the country chasing word of mouth leads and having in person only long form discussions with the industry's finest owners and operators. Our mission is to inspire, empower and transform the restaurant industry by bridging the gap between this generation's leaders and the next. Listen to today's guests and so many others and get one step closer to becoming unstoppable. One of my favorite parts of hosting Restaurant Unstoppable is hearing the stories behind successful restaurants and the operators making it happen. That's why I partnered with US Foods on their latest Food Fanatics magazine issue

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[B]

Allow me to introduce to you today's guest, co founder of P. Terry's, Kathy Terry, my lady. Kathy, are you feeling unstoppable today?

[C]

Oh yes, definitely I'm feeling unstoppable.

[B]

I am the a huge fanboy. I can't say biggest fanboy because I know you have a lot of fans out there. You, you have a lot of love for Pete Terry. But this is the fourth time I've had somebody on the show to represent P Terry's. The first time I connected with P. Terry's was back in 2020. I had your husband Patrick on the show. I had your new CEO, then Todd cover on the show. Those are episodes 691 and 692. If you want to go back and listen to these episodes, I highly recommend it. Then I had Patrick back on the show in 2025, just last year, episode 1121. Amazing conversations that most recent episode 1121. Like Patrick gets into the nitty gritty. Like I, I got a little more, I guess confident in my questions of getting into the numbers and he like open book. It was phenomenal. It was an amazing interview. I know you're going to be just as good today. We're going to be talking about Employee ownership trusts. A new topic for me and who else knows what we'll discuss today? I know it's going to be good. I can't wait to get into it. Before we dive into that, let's get that motivational inspirational ball rolling with a success quote or a mantra. What do you got for us?

[C]

I think, for me, I always say compassion can be a strategy, not just a value.

[B]

Compassion can be a strategy, not just a value. Get into that.

[C]

Well, I think so many things that we have done at PT Aries revolves around having compassion for our employees, for our community. And I think we built so many things based on that that most people don't, you know, that don't kind of fall into a typical business plan. And I think it's just worked for us. It's been a great. A great tool, great strategy.

[B]

I think that idea of values being strategy is like, universal. No matter what your core or your value is, whether it be compassion or, you know, fill in the blank, there's an infinite amount of words you can use to be a core value. But the whole reason we write our core values down is because those are. It's a filter for every decision we make going forward. Is this aligned with who we say we are? That's why we have a vision. That's why we have a mission. That's why we have a purpose. That's why we have values. So we are putting all those val. Those decisions through these filters. Is that who we say we are? Is this going to take us to where we say we're going? So.

[C]

Exactly.

[B]

Super.

[C]

It's the soul of your brand, right?

[B]

Yeah.

[A]

So what is compassion?

[B]

And, like, how does that manifest for you in Peter's?

[C]

Well, I think, you know, there's empathy and there's compassion. And I feel like empathy is when you have the ability to understand and share in another person's feelings. Right. But I think compassion goes another layer where makes you have the desire to help and alleviate that feeling. Right. And so I think so many things that we've done in P. Terry's is not only do we realize, you know, what our employees are going through day in and day out, you know, it's a hard business. Restaurants, I mean, are really, really hard.

[B]

Really hard and not getting.

[C]

I think. Yeah, no, it's. It's a. I mean, it's a hard business, and I would never recommend anyone getting into it, to be honest.

[B]

I like to joke. My. My first goal is to talk people out of it. Like, to inspire, empower, and transform and hopefully Talk you out of it.

[C]

Exactly, exactly. But. And then we'll get into this later. Like, you know, the whole reason we have an employee ownership trust was we wouldn't have a business if we didn't have employees that showed up every single day. And I remember the first day we opened. Oh, my God, I just looked around thinking, what in the hell have we done? Like, are we going to be, you know, are we really going to be able to pull this off? And I realized that there was no way we were going to have success without all those other people showing up to work. And so I think from the very beginning, putting them as a priority was always going to be, you know, part of our business.

[A]

Yeah.

[C]

Plan.

[B]

Hearing you talk, it makes me think of this social contract that I think was very prevalent in the past. And it feel. Again, I wasn't alive in the 50s and 60s, but I know after World War II, there was this strong sense of community, strong sense of America, strong sense of like, the social responsibility to take care of yours and to like. I think community and family were also more important back then than they are today. Naval. How is his name? Is like a bunch of names. So I think it's Noah Yuval Harari. Or maybe it's Harari. No, I can't remember which order it comes in. But the author of Sapiens talks about this in, like the early 20th century, we started to get away from family and community and we started to replace family and community with state and market, where we literally don't need each other anymore. And we. All we need is the state and the marketplace to take care of us. So I don't know if that's necessarily a good thing.

[C]

No, no. I mean, we can thank Milton Friedman for that. Right. He's the one that started this whole thing. So he wrote a. An article in the New York Post, I think, or something about the social responsibility of businesses to make the most profit at any cost.

[B]

Right.

[C]

Basically. I don't know if that was the exact title, but yeah, like, it just changed the whole trajectory and the whole, you know, goal of having a business. But you're right, like growing up. I mean, I grew up in the 70s and both my parents had their own business and it was all about providing a service or a product for your community, but also providing employee, you know, jobs. Beer, community. Yeah, it was a whole different way of life.

[B]

Yeah, I think it's the. It's the famous Adam Smith versus Milton Friedman. Is Adam Smith, right. The wealth of Nations. Is that the, the book or what Was that book he wrote, it was not the wealth of Nations. Is it Adam Smith? You know what I'm talking about?

[C]

I don't know that one who's.

[B]

Yeah. Anyway, like, it's. It's like the. It's the opposite of Milton Freeman, where he basically says, your job is to return stakeholder profit, basically. Whereas Adam Smith was like, you know, it's. It's about creating something that basically gives back, that adds value to community. Anyway, we need to go down that rabbit hole. But when I was listening to you talk about compassion, I was just thinking about that social contract. You know, it's that we have a responsibility to our communities, and it's just so obvious in everything that Pete Terry does.

[C]

We've talked about business. Oh, yeah, right. Like, because when you take care of your employees, they take care of your customers.

[B]

Yeah.

[C]

And they take care of the product and they take care of the culture.

[B]

Yeah. So when I was talking to Patrick in 2025, episode 1121, we were talking about where you guys were in 2018, and he was actually talking about you and the conversation he was having with you when you were at, I want to say, 18 locations. And basically, things were good. And you guys were having this conversation of, like, what do we do? Do we continue to scale, or do we just say, like, we're good with our 18 right here in Austin, and you guys chose to continue to grow.

[A]

Why?

[C]

I think that was really. I mean, it was really Patrick's vision, but I think we'd have to go back a couple more years, really, to 2016, because I think for me, that was the pivotal year. And I think that is what helped Patrick realize, you know, what he wanted this legacy to be. Because in 2016, we actually. Patrick was really, you know, it was. It was the day did a grind, and he came and said, you know, I think I. I might want to sell the business and get out. And I'm not sure if Patrick shared this story with you in that episode.

[B]

No, I don't think so. But this, I. I love it.

[C]

Keep going. So he kind of went out and did his whole dog and pony show, and we got some offers, and we got an offer from a private equity group, and it was a really big offer. And. And to be honest, I think Patrick and I were really excited about it. We were like, oh, my gosh, this is more money than we ever thought imaginable. Right.

[A]

And how many locations were you at in 2016?

[C]

Oh, gosh, I would say probably around 13 or 14. I don't know, that's really good question. I'm trying to remember how many we had. Yeah, but it was. And so two things happened. We got all excited about the exit and we really lost sight of the whole reason we were doing the business. And I think for Patrick, for him it was that light bulb that went, oh my gosh, I mean, like, wow, we have a business that has value. Because at the time he just had his head down doing work. Right. He was just in the daily grind and he doesn't really compare himself to other, other fast food restaurants in the industry. And so I think for him it was validation that what you've done, what you've built is really has value and is really, you know, important. And, and so for him that was an eye opening moment. And for me, you know, I actually kid. We were, I was on a plane to visit a girlfriend and we were really close to finalizing the, the offer letter and I had watched this movie, the Intern. Have you ever seen that?

[B]

Yeah, yeah.

[C]

And Robert De Niro. So at the end of his, at the end of the movie, he basically tells Anne Hathaway her, her character Jules, he said, he says, you know, Jules, no one is going to ever care about your business like you do. And I think that line just stopped me in my tracks. And that's what made me realize, oh crap, if we do this then, then the soul of our business will go away. Like all the things that we built, the, the interest free loans, the birthday cakes, the, you know, just the, the relationships that we had with all of these employees, you know, it would be profit over people. The, you know, quality would go down, prices would go up, and all the people that we loved would not be taken care of.

[B]

This is what I'm looking. Yeah, sorry, keep going. This is what.

[C]

Well, and that was what I realized was like, oh crap, we can't do this right? And, and so it was so funny. I called Patrick when I got off the plane and I was like, I don't think we should sell. And I didn't know what he was going to say. And you know, thank God he said, wow, I'm so glad you said that because I was having second thoughts as well. But he, I think one was going to go through with it because I think he wanted to provide security for me and the girls because we have two girls and they were small at the time. And so I can see why people, you know, take the offer because, you know, you get tired and there's pressure and all of a sudden you get this, you Know, big ass check. And you're like, wow, this is great. But for both of us, it was not what we. It was not why we built this. Right. We didn't build it for a legacy. I mean, for an exit. We built it for a legacy. And I think that was the moment. And so I think for Patrick, realizing that he got validation, right? Realizing that he did know what he was doing, he did have a great concept. It was something that we could, we could scale outside of Austin. And so I think that was two years when he said, okay, let's. Let's take this somewhere else.

[B]

So many people do do it for the exit.

[C]

I mean, yeah, and that's fine. That's totally fine. That's your, that's your choice. But I think there's so much more joy in not taking the exit.

[B]

Yeah. Why?

[C]

Because you can't put a money value on relevancy or on significance. And I think being a part of all of these people's lives, you know, the employees, like, I really look at them as my family.

[A]

Yeah.

[C]

And, and we, you know, I, I tell Patrick all the time, like, when you get to participate in someone else's life, it makes you feel relevant. Right. Like, at the end of the day, you're on your deathbed, you know, you're not thinking. I mean, everyone, you know, we all talk about that, right. No one's going to think about how much money they accumulated, how many things they have. It's going to be, were you relevant? Did your presence matter in someone else's life?

[B]

Yeah, this is exactly.

[A]

That's what matters 100%.

[B]

And I couldn't agree more. And this kind of where I'm at right now with this podcast of, like, who do I make an example of? Like, like, it's my job to go learn and to make an example and to capture stories. And I try to keep an open mind, but I can't help but notice that we're. We're heading in a direction.

[C]

Right.

[B]

Right now there's this increasing trend of people more interested in creating the next trend, you know, the next thing that they can build fast, make viral, and then sell the private equity and exit. And I just think to myself, like, that's not what the hospitality industry was born out of. That's not, I think, hospitality. The. It's to be seen and to see, to love, to give, to care. And it's a uniquely human thing tied to, like, just our, like, genetic makeup of, like, we are tribal animals. We need the pack. We are pack animals. And it's this thing that we evolved that it's so important to see and value people. It's. It's one of those high Maslow's hierarchy of needs of just, like, above, like, food and shelter and security.

[A]

It's like, do you see me?

[B]

Do I. Do you value me?

[A]

Like, we need it?

[B]

It's so important. I think that's what hospitality is, is seeing somebody in that moment and letting them know, I see you, I care for you, I love you, you matter, and we're losing that.

[C]

Yeah, no, you're right. And I say that all the time. You know, it's a. I say all the time that we're in the human connection business. We just happen to sell really good burgers.

[B]

Yeah. And.

[C]

And I built. And I believe that. I mean, I believe how we've built our businesses. The. The value of the. Of the meal, the quality of the meal, the experience. You know, I. I kid. You know, Patrick's vision was really to create memorable experiences for people. Yeah, that's it. And we just happened to do it with a burger.

[B]

It's like food is literally life. And I say this all the time. My poor listeners are like, oh, here he goes again. But food is literally life. You think about the things we put into our body for sustenance. The overwhelming majority of that was once alive. Plants, animals, with the exception of some, like, seasoning, like salt. We. We don't. That wasn't alive. But the. It's like, literally we are alive. We are life. The things that we are, you know, the things that are sacrificing to make sure that we keep going, you know, and it's. It's this transition or this transfer of life. And it's crazy that we look at food as literal commodities. It's listed next to natural resources like coal and, like, you know, silver, gold, salt. It's a commodity. And it was kind of crazy like this. These raw materials that we don't treat food a little bit more like just how we source it, how we deliver it. It's. I don't know, I feel like there's something special there. And I just want us to get back to the idea of, like, really just our relationship with food, our relationship with community, it all hinges around, you know, it goes back to food. It always goes back to food. Anyway, I digress. So 2016, you have this private equity offer. It's a big offer. Are you able to say what that offer is? I'm just curious. What did you, like, what did you walk away?

[C]

More than I could Have. It's more than I could have spent, I think. I mean, I don't. I mean, I think that was the whole. I think that's the whole idea is how do you determine what's enough?

[B]

Was it more than 20 million? Yes. Was it more than 50 million?

[C]

I'm not kidding. Kill me if I told you. No, it was, it was. It was, yeah. Substantial. It was very. I mean, like, we used to kid that we were going to go run off and buy our own private island.

[B]

Yeah. Well, I mean, it's.

[A]

It's just.

[C]

It was more money than. I mean, we both grew up in West Texas with, you know, I was working class. Patrick was, you know, middle class. Like, this was. Yeah, it was, it was a huge exit.

[B]

Well, I respect your, you know, trying to keep that, like, because it's not about the money. Right, right. But I do think that it's just significant to show what people are willing to sacrifice to save face and to save integrity, and it's just huge. But I do remember in the conversation I had with Patrick that he, the. The. The topic of private equity, I think you were talking, or he was talking about, like, how he was scaling and how both you and Patrick are the sole proprietors of Peter's and you, you did it with only just taking out loans, but it was always private loans, personal loans. It would like. He never went outside. And when I mentioned private equity, he scoffed at it. And I noticed that. And I don't, I didn't pick up on it then, but the more I'm learning about private equity, I'm not surprised that he kind of scoffed when I say, asked if private equity was evolved, and he said, no, we don't do private equity.

[C]

Yeah.

[B]

Why, what is it that the, you

[C]

know, what, why, why not private equity?

[B]

Yeah.

[C]

Or why.

[B]

What is the dark side of private equity?

[C]

Yeah. Well, I think the whole conversation comes to capital, Right. Like, you have to have capital to grow. And Patrick and I, you know, this goes back to access. You know, access determines opportunities. And Patrick and I were lucky enough that we had savings to start off to, and so, but, you know, yes, we went out and got SBA loans to expand to our second and third store. And then once we started validating the business plan and the model and showing, you know, that this works, then we could get out loans from. From the banks. But when we started growing in 2018, we actually did take on some private. Some investing, some investors, but it was just a friends round. And I think the problem right now is you have slow Capital and, and fast capital and there's not really access to slow capital anymore. Even, you know, even savvy investors want a huge ass return. So it's not, I mean, I don't want to throw private equity under the bus. I mean, I've had conversations with a lot of investors and you know, they want, I mean, you know, a 10x return in seven years. Well, what a private equity does and what these fast, you know, investment models do is they, they put on a lot of debt on your books, right? They're all looking for assets because they want to leverage the assets. It's all about leveraging and putting on debt. And so if, if any business, if you can get capital where you're not having to, you know, have that kind of return, I mean, it's outrageous, right? And that's why, you know, going through a financial institution or a bank is so much easier because you don't, they're not, the expectation is not a 10x return, an 8x return, 17x, whatever it is, right? And so we had the benefit of being able to grow slowly and not everyone now has that opportunity. But that's really how you maintain your culture. That's how you maintain your soul, right? You sell your soul when you sell to private equity because there's just a guy in a room looking at a spreadsheet trying to figure out how much debt they can take on for your existing assets so they can double those assets and sell it to the next guy down the road. It's all a five or seven year turn, right?

[B]

Buy low, sell high.

[C]

Yeah, but you can only do that. You can only flip that so many times and we're at the position in our society where everything's, you know, going bankrupt because you can only do that. You can only squeeze it so many times, right?

[B]

We're also driving up the value of property. Like now it's getting to the point where property value is so high that your average American can't even buy a house or the other thing or buy their, like own the property that you're building your business on because you have

[A]

private equity going up there.

[B]

Buying up all the opportunities for real estate, driving up the market value and making it. The rich are getting rich, richer and the poor are getting poorer. And that's one thing I'm freaking terrified of right now. And what I'm trying to blow the whistle on, I'll tell you what, it's not easy to make money when you're blowing the whistle on the people who are paying your bills.

[C]

Yeah. Well, and I think it goes back to. At the end of the day, you know, you still. You know, you can have a billion dollars and still feel hollow. You can have a billion dollars and still not feel seen and valued. Right. Like. And that's the whole idea. I agree with you. I mean, I have. My stand is that every. Everyone should be part of a beloved community where they feel seen and valued and have access to all that they need. Right? And. But just because you have money doesn't mean that you're being seen. Right? And I say all the time, you cannot be seen unless you can see your reflection in someone else's eyes. That's it. Like it. We become mirrors for each other. Right? And you can't just keep, you know, thinking that you're the only one in the room. And because it's just hollow. Right? It goes. It goes back to that whole thing about feeling relevant. Right. You, like, you want to feel like your. Your presence mattered in someone else's life.

[B]

This is why I drive across the country to do these interviews. And I'm so sorry we couldn't do this one in person, but I wanted to make it happen because it's big news. Because, I mean, I'm such a fan of Pete Terry's. I would be out there in Austin if I could, but you just announced, like, a couple weeks ago or. Or maybe was it a month ago now that you went to an employee ownership trust model. And I want to get more into that. I did want to point out that in 2018, when you guys were talking about, should we just slow down here at 18 locations and just kind of. This is what. These are Patrick's words, and you kind of just nurture what we have or should we continue to scale, continue to grow? And what he said that you said was that, no, we need to continue to grow because we're able to help so many people. We're creating opportunities. We're creating this institution where people can come. Come and have opportunity and get security, and we need to do that for as many people as possible. And I think that is the only reason why you scale, in my opinion.

[C]

Yes. Yeah. I mean, I know every store we open, there's, you know, 50 more people that we get to take care of.

[B]

Yeah.

[A]

So these are Patrick's words.

[B]

Do you agree that that's why you continue to push forward?

[C]

Oh, for sure, for sure.

[B]

Yeah. This is also around the time you. You pulled on a CEO and Todd Culver. Or Culver.

[C]

Yeah. Yeah. Cver came in.

[B]

Yeah. Why did you think you needed a CEO? Was it like, was it because you were looking to slow down?

[C]

Like, no, this goes back to, you know, feeling validated. Right. Like, Patrick didn't feel like he had the skill set to take this outside of Austin because he had never done it right. You know, it's. It's like everything. You know, I think we all feel like at some point we have the imposter syndrome. Like, oh, do I really know what I'm doing? Like, everyone else knows what they're doing, and I don't, which is false. Nobody knows what they're doing. But I think for Patrick, he was like, I need to bring someone in who has that experience. And so we interviewed. I mean, we spent years, I think a year or two trying to find a CEO and found Todd. And that was the whole idea was that's why we took on minority investors, because we wanted to build up capital. So if we're going to bring in a new CEO to go outside of our market, he's going to have, you know, have enough bandwidth.

[B]

You got to build a house before you move into it.

[C]

Yeah, yeah. So we took on some minority investors so he would have the capital to expand. And. And what was interesting is, you know, unfortunately, you know, nine months in, Covid hits. You know, Todd. You know, we hired Todd, and I think it was, you know, less than a year. Covid hits. And so, of course, that just throws everything off. And then we had supply chain issues. But I think it was Patrick being able to kind of pull out and. And see the business as a whole, that he realized that he actually could do this and he could do it better because it was. He built it right. And, you know, unfortunately, we had to part ways with Todd just because things weren't going in the right direction. But, you know, Todd's a great guy. Nice guy, super nice, super nice guy. But I think for Patrick, he needed to be able to see that he was capable. Like, it was another validation opportunity for Patrick. You know, the. The offer, the private equity offer was one and the second one, you know, that validated the business, and then the second time was Todd, and it validated his ability to actually run this business and expand his. On him on his own.

[B]

What direction was it going and why wasn't that the right direction?

[C]

Oh, it's so interesting. Well, I think it just. It's. It was more of operations. It was more of just management style, just having the right people in the right place. And I think Patrick had done it for so long, he didn't Realize that he actually knew who was the right people in the right place. And I think for Todd, he just didn't have that history. He didn't have that. That ability to see, you know, like what Patrick could see. And so, you know, we just had people in the wrong place. You know, it's like anything. Managing. Managing people is hard. It's really hard. And making people, you know, it's like I say all the time, I love to keep everyone on the bus, but you might have to have a different seat. Right. This, you know, this position might not be great for you, but let's try to find another one. Right. It's just, It's a puzzle piece.

[B]

Got it.

[C]

And some people are really good at it. Some people are, but it's, you know, at the end of the day, it's all about operations.

[A]

Right.

[C]

And if you're not strong operation wise, it just.

[B]

It'll eat you up 100%.

[A]

So.

[B]

So when I last spoke to Patrick in 2026, sorry, 25 last year, almost exactly a year ago, you're at 36 locations. The majority of all of your locations are in Austin, Texas. You have San Marcos, San Antonio, Houston. Where else are you?

[C]

Yeah, we're, we're, you know, between Austin, San Antonio, we have a handful of. In all those little towns and then. And in Houston. Yeah. So that's.

[B]

Are you still at 36? Have you opened more?

[C]

Well, we were at 38.

[B]

Okay.

[C]

And we had to shut down a store just last month because of highway expansion. They took it, you know, imminent domain. So we didn't really have a choice, unfortunately, so we had to close that one down. So now we're back to 37. But we're about to open another store in Houston, so we'll be at 38.

[B]

Cool. So we haven't really starting to get into employee ownership trust yet. But, you know, I'm finding this fascinating. I'm happy, I'm having fun, just kind of letting the conversation go wherever it wants.

[A]

When.

[B]

When did you start looking into employee ownership? When was that something that was on the table for you?

[C]

Well, I think for me it was 2016. It was all of a sudden realizing we had an asset that had a lot of value. And I think this is what happens with a lot of family businesses. You just put your head down and grind, and all of a sudden you look up and you're like, oh, crap, like, I have this successful business. And then you have to have think about secession planning. And that's something I think a lot of people try To AV especially, you know, my husband, he didn't want to have a conversation. He's like, who cares? Like, you know, I'll be dead. It won't matter. And I'm like, no, it does matter. And. And fortunately for us, when we were contemplating the offer, that's when everyone says, oh, you need to talk to a wealth manager. You need to talk to, you know, an estate planner. And so I started having all these conversations with people realizing, oh, wait, we do need a succession plan. Like, oh, wow. Like, I didn't understand, you know, there's a lifetime giving limit. Right. And then anything over that, it falls under estate taxes. And so for me, it was this realization that, oh, okay, so if something happens to Patrick and I, then, you know, the girls, our girls are going to have to sell the business to pay the estate taxes. And that for me was like, enough motivation to be like, hell, no, that's not going to happen. Because I didn't want to burden the business because we didn't make the right decisions and didn't plan. And so that's when I started looking at different options. And of course, you know, everyone. Estate planning is like, oh, you need to put some equity in trust. Which we did. But, you know, I didn't want to leave everything to my kids. I mean, I want them to create their own path to success and have their own opportunities. And. And I. I know we didn't want to leave the business to them, which is. Which a lot of family businesses do. Right. You have second generation, third generation, which is fine, but I thought it was insulting to bring for my kids to come in and run a business that they had no experience doing or. Right. And they were young.

[B]

Do that. Like, you can't assume that they want. Yeah, you got to get it, want it, and have the capacity to do it. I'm sure they have the capacity and they can understand it, but do they want it? And, like, right. When you build it, when it's your baby, when it's your brainchild, nobody's gonna want it, like you, you know.

[C]

Right, right. And it's. And also, they're still young. They're still young right now. And 10 years ago, they were really young. And so. So I just started looking at different avenues. Right. Like, and I looked at the ESOP model. Like, back then, that was a big option to, you know, to sell equity to esop. But when I did all the research, I realized that that was not an option for us. And also it wasn't going to protect our legacy and our Culture. Because I think that was the most important thing is who am I going to bring in as a partner who's going to make sure that what we have built is going to sustain way past Patrick and I's lifetime. Right. And. And an ESOP model is. I'm not sure if you're familiar with it, but it's more of a retirement plan. And so you sell equity into an ESOP and then you give you. Each employee gets shares.

[B]

Yeah, I've looked into it. It was around 2018 when I looked into it.

[C]

Yeah.

[B]

So it stands for employee stock ownership or. Sorry.

[C]

Right.

[B]

Yeah. An employee stock ownership program, I think is the P. Right.

[C]

But what happens is, you know, it's a lot of bookkeeping. You have to get evaluation every single year. Because what happens is when your employees leave, you have to buy back their shares. So you always have to have capital on hand because. And especially in our business, we have a lot of churn. Even though we don't have as much as most fast food restaurants, you still have that low level of churn.

[B]

So dive in a little bit more.

[C]

Keeping a nightmare.

[B]

Yeah. So explain ESOP and like how it works and try to explain it so I can understand.

[C]

Okay. So instead of selling equity to an investor or to private equity, what you do is you sell it to a trust. And that trust, the whole idea of the trust is to maximize the value of those shares for. On the. For the benefit of the employees. So all the shares in the ESOP are owned by employees.

[B]

How does a trust maximize value?

[C]

Well, that's just, I mean. Well, I'll get to that.

[A]

Okay.

[C]

That's why. That was one of the reasons I said no to the whole idea.

[A]

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[C]

I can get into that later. But what the trust does is it's a retirement plan for your employees and so it holds equity and shares for the employees. And so the employees don't get a financial benefit in the moment, they get a financial benefit when they retire. So it's basically a retirement plan for your employees. But the problem is, is when your employee leaves, you have to buy their shares back. So it, it's a drain on your capital, your cash, because you always are having to buy shares back and then you have these yearly valuations.

[B]

So you're not staying liquid, right? Or you are liquid, but just to be able to buy someone's shares back in case they leave, right, because you

[C]

have to have that cash to buy them back. So it's kind of a drain on your cash supply. You always have to have capital Cash on hand and then to pay somebody to manage it. Right. And then it's a managing nightmare because you have to have valuations every year. And, and so it's just kind of a bookkeeping. It takes a lot of bookkeeping. I mean, there's a lot of tax benefits to it. But, but, but what I saw as kind of an issue for me is once that trust owns 51% of the business, they have control of the business. And so if private equity comes in and makes them an offer, the employees, the employees can sell the business. So it doesn't protect the culture long term. There's so much research out there that shows that businesses that have ESOPs run better because like employees have financial benefit in the business. Right. So they're going to perform better performance. ESOP businesses perform better over non ESOP businesses in the same industry. And private equity is actually using it now as an incentive to, you know, I mean, there's a lot of private equity now that are pushing the ESOP model because those businesses run better so they have more value so then they can sell them.

[B]

You're making me so happy right now. Sorry.

[A]

Keep going.

[C]

And so the trustee, so as a trustee of the, of the esop, when you get a private equity offer and it's going to be better than your valuation because your valuation, you're trying to maintain, you don't want a crazy valuation because that is going to deplete more money as you're buying the shares back for the employees, right? So you're having these yearly valuations and you're trying to keep it at a fair market value. And then private equity comes in and, or someone else comes in and makes you an offer. Well, the employee, the ESOP is going to take the offer, right? And then you have the same issue. I mean, the good news is the employees benefit. They, whatever that offer is, those employees get that check and get to go, which is great. But, but it's not great for the business.

[B]

Keep going.

[C]

Because the business, you know, then that's what happens with private equity. Then the business just is part of the whole cycle.

[A]

So if you want legacy, I was trying.

[B]

You need to protect it from itself. Almost exactly.

[C]

So that's exactly why I didn't choose the ESOP model, because very smart one, my employees need financial benefit now. They're trying to pay off debt. They're trying to pay about had, you know, medical bills, they're trying to buy cars, they're trying to buy houses. They, they don't need a retirement plan. They need A lifestyle benefit. Right now, one thing I'm curious.

[B]

Sorry, keep going.

[C]

No, go ahead.

[B]

This is why it's so much better in person, because you'll see me start to like, talk and like, it's the, the connection digitally. It's. I remember why I travel all over the country now. So one, one thing I'm curious about. Do you think this might be a play on private equity? Not only because they see that employees who have stake in the business perform better, but also if they want to buy out that business, they only have to do it at 51%. Like, I guess what I'm trying to say is it does it. Maybe I'm not understanding the math, but if. Is it easier to buy out in an ESOP than would it be to buy out somebody who owns 100 of the business?

[C]

You know, I don't know. I mean, that's a really good question.

[A]

Is this.

[B]

And yeah. Is it a play just to. Is it a way to be like, kind of have in your back pocket? Like, if, if we do this ESOP thing, we want to buy the whole thing, it's actually an easier buy than having at 51%.

[C]

Yes, you're right. I'm not sure. I'm not sure if they, if they worry about the 51%. Like, I don't know if it's just we need an ESOP because the business is going to run better, the numbers are going to be better, and then there's a benefit for the employees, which is great. There is a benefit, but it's the legacy part, right. Then the business gets thrown into this, into the system.

[B]

I don't know if I trust equity. I always think there's an angle being played. So, like if.

[C]

Oh, I think the angle is to sell. I mean, the angle is to. The angle is to run the best business and to sell in five to seven years.

[B]

Well, that's what I'm curious. If it's an esop, and would it be. Are they going to come out with a better deal at the end? If they're dealing with a whole army of people versus just.

[C]

Oh, probably, yeah.

[B]

That's kind of what I'm thinking. So not only is it going to perform better and have better numbers, but when it's time for them to buy out the employees, it might be a better deal at the end. I'm curious. I don't know.

[A]

So that's the kind of stuff I'm

[B]

just like, I give it everything a side eye. So I've been, I've been saying this Sorry, go ahead.

[C]

Oh, no. And that's why. And that was the reason we walked away from the esop. I was just gonna say that was

[B]

so one thing I've been kicking around, and I don't know, this is. I think this might be an Eric Cacciatore original, is that we need more owners, less restaurants. I'm worried for the middle class right now, and we need more entrepreneurs. We need more owners. The way you build back a middle class is you make it possible for more people to own things. More people need to own assets. More people need to have stake in the businesses they're working for. They need to have property, they need assets. And it's getting harder and harder for the middle class person to buy an asset. So how do we create and promote business models, ownership models that allow more people to have security? The. The best security you can provide somebody is an asset.

[A]

That is the best way or the

[B]

best path to security is making sure everybody can have an asset that appreciates something that builds value over time. Do you agree or disagree with that statement?

[C]

No, I totally agree. I mean, that goes back to, you know, access. Right. Access determines all opportunities. And unfortunately, we're all not born to the same level of access. So if you have access, I think you have an opportunity, you have, you know, somewhat of an obligation to share it.

[B]

Right.

[C]

And there's always the joy in sharing that. But yes, I mean, everyone. Everyone deserves a chance to improve their lives. Everyone deserves a dignified job. Everyone deserves economic mobility.

[B]

Right.

[C]

For sure.

[B]

Well, you. You hear the biggest challenge in the restaurant industry right now, hands down, what's the hardest thing for restaurant owners right now? I bet you can guess it.

[C]

Staff.

[B]

Yeah. Finding people to work. And you hear a lot of people talk about, hey, like, we need to scale because we're creating so many jobs for people. It's a great thing. We're creating all these jobs. The last time I looked. Kathy, I don't think we need more jobs. I don't think there's a job shortage in America, do you?

[C]

No, there's probably not. I mean, there's just a shortage of dignified jobs.

[B]

Bingo. And what is the best way to. I think to give somebody dignity is to. To. To treat them as an equal. Right?

[C]

Yeah. So let them. Yes, yes. I mean, let them create their own path to success. You have to give them an opportunity for them to create their own path.

[A]

So it's.

[B]

I would even say, like, a lot of people say we need to create more careers. I'm like, no, I don't think that's it either. I think you need to, yes, that doesn't hurt a job. A career is better than a job. Right. But the next best thing is to create an equal, to create a pathway to ownership. And does everyone get ownership? No, probably not. Right? Because not everybody wants to stay there. Maybe they just need a job for now until they figure out what they're going to do. But for those people that are cut out for this industry that love it, like, the best way to, to provide security is to give them a pathway to ownership. And one model I've heard of that I really like is this idea of like somebody has to, I don't know what they would call it, but it's basically just a pathway to partnership, right? Where they say, okay, like if you've been with us for five years, if you have, you know, if you're clearly talented and you're going to go on and make this your career, maybe you'll go somewhere else to do it. If you've been with us for five years and you're willing to buy like at least 1% of the value of the EBITDA of that, this business to buy in as a partner, I think and all the other partners have to sign off and agree to make you a partner partner. So like, so this is what they're doing at Uptown Social or I think it's what's the name of the restaurant group? Crap, I can't remember the name of the restaurant group. It might come to me, but maybe it's Uptown Hospitality. They basically just let people buy like say the, the ebit of a restaurant's two million dollars. Well, if you can go out and get a twenty thousand dollar loan or maybe put away and save ten thousand and get a ten thousand, ten thousand loan, then you can buy 1% of the business and become a partner in that business. Maybe it's a restaurant group, they have 10 restaurants, but you're just investing in this one restaurant, you're a partner in that restaurant and then you teach people. So now like you're getting 1% of profit or whatever that might work out to take this money, put it into a high yield savings account and build wealth and invest in another percent and then another percent. And when we open another restaurant, maybe you're the opening partner and you can be a 49% partner, you know, but it's this idea of creating, and that's how you scale by creating opportunity for others and finding partners who, who you've given their, their education, they've Learned everything from you. They have your values because you taught them how to, you know, you brought them up, you developed them and now you're just investing in them so you can do more together. I think that's. But that's another model I like. But now that we understand what ESOP is and like what partnerships could look like, why is a employee stock, sorry, an employee ownership trust? The way you went, how is that different?

[C]

Yes. So the employee ownership trust is the only tool I've been able to find that will protect the culture of our business for gratuity so long after Patrick and I are gone. The whole purpose of the trust is to maintain the culture. And, and so it's a tool that started in the uk. It's been a tool that they've used for a really long time. And I was introduced to it from a friend who kind of knew I was looking at different options. She actually ended up being our consultant. She runs Common Trust. And so the whole, their whole business is to help businesses transition to an employee ownership trust model. And so when I started the process, the. So let me try to explain what an employee ownership trust is. So basically we sell. So that's Patrick and I gifted because you have a lifetime giving limit. Each person does up to, I think right now it's like 15 million. So we gifted shares to this trust and then it allows us, and then we sold shares. So this is a way for us to get equity off the table. We are selling basically our equity to the trust and so we finance, so we're financing it and so the business is paying us back. So we converted shares to employee ownership shares which receive a dividend. And so that dividend that that trust receives pays us back for our equity. But in doing so, the trust, the way the trust is defined is basically puts guardrails on future leadership. So basically the trust says is that Pterry's is always going to provide high quality food at an affordable price. It's always going to take care of its employees. It's always going to have interest free loans. It's always going to have a profit sharing which we implemented when we started the eot. It's always going to give back to the community because we have a day of giving where we donate all of our profits one Saturday every three months to a nonprofit. It's always, I mean, so those are the values and the core, the guidelines of the trust. And so it, you know, we're never going to get ahead over our skis. We're never going to expand faster than we can pay for it. Right. So it just puts limitations on future CEOs who come in. So someone can't come in and say, oh, we're going to start selling frozen French fries. So we're going.

[B]

It's got a principle. I'm sorry, it's guiding principles.

[C]

Exactly, exactly. So it can't say, okay, well, we're going to expand and we're going to. We're going to go to Denver. Well, no, we can't go to Denver. Right. We, you know, we have a commissary. Right. We can't change the business model and we can't take away the profit sharing. So it just makes sure that the culture survives long past, Patrick and I, and also protects the employees because that job never changes for them. They're always going to pay. Be paid above industry standards. They're always going to be. As long as we're financially stable, they will receive profit sharing. And so, yeah, it just. And it's. And there's a stewardship committee that makes up, that is built to protect the trust or to oversee the trust. So. And that's made up of employees and Patrick as a founder. And so that stewardship committee makes sure that the board, if there's ever a board in the future, or the leadership to. To make sure that they're following the guidelines of the trust.

[B]

Okay.

[C]

And so that way their job doesn't change, the experience for the customer doesn't change. And so we wanted the employees to have ownership because they're not going to have a financial benefit of this trust unless it's sold. So 50 years from now, if they decide this is the best thing for the business we need to sell, then that money would be distributed among all the employees based on our profit sharing system. So what we decided to do was our employees needed financial benefit now that when we implemented the eot, we also implemented profit sharing. And so now any employee that has been with us for over two years is eligible for profit sharing. And it's based on tenure. So the longer you're with us, the bigger your check. And so that way they get the financial benefit of what they've built.

[B]

Okay, I'm gonna try to see if I fully understand. So basically, at the core, what you're doing is you're selling equity to the trust. So you develop this trust, you sell a percentage of the business to the trust. Now the trust owns. What percentage of the business did you sell to the trust? You said it was $15 million. What percentage was that?

[C]

And, oh, it's Not. I said I didn't. It's not a. No.

[B]

The.

[C]

The lifetime giving limit is 15 million.

[B]

Oh, gotcha.

[C]

So, like. Yeah, so. So when I die, I can only have gifted 15 million to my kids, to the employees. I mean, every. It. So there's a lot. There's a cap on how much you can give, which they could think is crazy that I can't give my business to my employees.

[B]

Right. So you. And you set that cap of 15 million?

[C]

No, the. The government does.

[B]

Oh, really?

[C]

Yes. So the government sets a limit of how much you can give for your whole lifetime. So I can only give up to 50 million for my whole life?

[B]

5, 0 or 1 5, 1 5, 15.

[C]

And Patrick, everybody, every person gets a lifetime giving limit. But congress can change that, right? They can change the law and they can reduce it.

[B]

So if I die tomorrow and I'm worth a hundred million dollars, I can only give 15 million of that away?

[C]

Well, yes. And then the other 85 million is going to be taxed at 30% estate tax.

[B]

And where does the after tax. Where does that go?

[C]

Oh, wait, so if you have an asset. Yeah. Then that's why I was trying to protect buteries, because our biggest asset is futaris. So if something happened to Patrick and I, they would have to sell a portion of the business to pay those estate taxes. So I didn't want to put a burden on the business to cover our estate taxes. So, I mean, a lot of family businesses get sold that way because they don't realize, you know, I know people that have had to sell the family businesses to pay estate taxes.

[B]

So I want to make sure I understand. So If I'm worth $100 million and I die, only 15 million. 15% of that 100 million can be gifted and untaxed.

[C]

Correct. The other 85% will be taxed at 30%.

[B]

Got it.

[C]

So, yeah. And if it's all cash, great. I mean, great. If you have $100 million sitting in a bank account, great. I mean, I'm not. I'm. I'm not trying to avoid taxes at all. I think all of us should be paying taxes and probably paying more.

[B]

Right.

[C]

But. But I didn't want to burden the business because that would, you know, I'm trying to. To keep the business living way longer past me. Right.

[B]

Got it.

[C]

So that was why. And so the EOT allows me to sell equity over time. If I needed to take a. A lot of money off the table, then you could get a bank to finance it. You could get another Investor to finance it, and then that trust could pay that investor off or that bank off. So there's other tools you can use to take equity off that. We, we don't need to take a ton of money off the table right now. So we're doing it. And that was the, that was the challenge really, to be honest, is pulling all the debt levers like we were having to model out, okay, our five year projection. How much do you think we can make? How much can the trust, how much can the business afford to pay dividends to the trust to buy our equity? But also we want enough money to be able to have profit sharing for employees. So right now we're taking 5% of operating income and distributing that among the employees for profit sharing with the goal of getting up to 20% in four to five years. So we had to model all that out to figure out, like, okay, how much equity can we sell? How much profit sharing can we do? And so that took a lot of time to model that out.

[B]

So you sell this trust to the business, or, sorry, you build a trust and you are basically selling the value $15 million to, to the business and the business.

[C]

Well, we can sell as much as we want. That, that's the, the gifting. The lifetime gifting minimum is 15. So Patrick and I, we didn't gift all of our 15 million. We gifted a portion of that 15 million and then we sold, then we sold equity to the business. And then by having that model already set in place, after we pay off that equity off the trust pays the equity, then we can sell another tranche of shares. So it's just, it's basically just whittling down equity slowly where the business can buy the equity, not private equity. Got it. Like, I don't need a $50 million check or $100 million check or whatever it is. Right. I don't need that right now, but I need to sell equity because I don't want, you know, I don't want to die with it and then burden the business. Right. So I need to get equity off the table, but the trust allows me to do it. Yes, but this. But the employees will own equity now, right? The trust will own the equity, right? Yeah. So I'm selling my equity to a trust that protects. That basically is the benefit of the, of the employees.

[B]

So I guess one thing I don't fully understand, and you can help me understand it, is that the title is employee ownership trust. So technically, the employees do own pteries, but they. Or they just own the trust.

[C]

Well, they own the equity that's in the trust.

[B]

Okay.

[C]

So over time, you know, right now it may be 10%, and then in five years, we may sell another 5%, and then another 5%. And then, you know, and then at some point, the EOT will, will eventually own more than 50. Maybe at some point even my kids can start selling equity. Right. If I die, then they can start selling. If I've left them any, they can start selling equity to the trust. So eventually, over time, the trust could actually own all of the business.

[B]

Got it. And I guess. So what happens if you and Patrick die tomorrow? God forbid, you're gone. You're out of here. And you know, what would happen with like your, like this, like, I'm not doing this stuff. Can you tell? Like, this is why I'm really curious. Try to learn more.

[C]

Yeah. Oh, and it's. It's really complicated. And I think that's why a lot of people, you know, or say, forget it. Just give me a big ass check. Yeah, right. Like, it's, it's really complicated. And, and it's. And, and so what would happen if something happened to Patrick and I? Right now we have, you know, we still have a lot of equity in Pteries, but we have put some in trust. We have the trust for the, you know, for the employee ownership trust, and we have small trust for them for the girls, but we still have a lot of exposure. And so what the IRS would do is that they would look at all of our assets and figure out the valuation of them and then take the 15 million. 15 million. Reduce, you know, reduce the amount. And then they would say, okay, 30% of this valuation needs to be paid in taxes. And if the, if the majority of your asset is in a business, in a commercial business, then the IRS will give you 10 years to pay it off. So right now we would have to. The business would have to pay it, but they would get 10 years to pay it off. So hopefully as we, you know, so the goal is to just keep reducing that exposure. Reduce. I mean, yes, it's wonderful that we have a very. A huge asset that's worth a lot of money. But at the end of the day, it's pretty sad that I just can't gift it all the way to my employees, because I would if I could.

[B]

Yeah. So this is how you're circumnavigating that.

[C]

But the IRS doesn't allow me to do that. Right.

[A]

How.

[B]

I guess what I'm still not fully understanding is like, do your employees actually own the business. Business.

[C]

No, they. So like, if an employee leaves. Yeah, they don't get. They. They don't get there. It's not like an esop where we buy their shares back.

[B]

Got it.

[C]

So with the. So they don't own individual shares. So it basically is. It protects their job, so to speak. Like I was saying, it puts guardrails on how fast we grow, how we run the business. So their job is always protected. What happens is that's why we have the profit sharing, because we wanted them to have financial. We wanted them to have a stake in the business. Right. And so we wanted. So they get profit sharing. And so that allows them to feel the. That allows them to feel the ownership,

[B]

what they do with that cash flow. I think. Do you guys take it beyond that of saying, hey, this is profit? This is how you treat profit? This is how smart people treat profit. They. Profit's only used for two things, to pay off debt and to buy assets. Go get a high yield savings account. All the money that's coming in from your profit share, put that into a high yield savings account and pay off your credit card. Whatever your highest interest loan is right now that you're paying, use this, pay your monthly bill and whatever extra. Threw this on top of it until that's gone. And then take that $50 a month plus the profit you're earning and throw it towards your next high interest. And this is like, do you.

[C]

Right, but that's the whole goal of the profit sharing is for them to have to. For them to build their own wealth.

[B]

So do you teach them? Like, are you. Is. Do you guys take it next level and teach, like, wealth management?

[C]

Yes, we will. Yes, we will. I mean, we've partnered with a local credit union that our employees can work with. And yes, we're building out financial literacy classes. We, you know, we definitely are building all that out to where they understand how you make the profit. And then also, how do you. How do you build economic mobility? How do you. How do you accumulate wealth? Right. And how do you build up your. What's the word I'm looking for? I just went blank.

[B]

Your assets, your value.

[C]

Your assets, but also portfolio. Yeah, but also to. Oh, my gosh, I can't even think about, like, your credit when you apply for a loan. Your credit. Thank you. Oh, my gosh. I'm like, hello? No. But yes. So the whole idea is to teach them financial literacy, also to accumulate wealth. Right. And as this profit sharing grows and the longer you're there, I mean, we have an Employee who's been with us for 21 years. She's going to get the biggest check every year. And how long? 20 years, I'm hoping 21 years.

[B]

21 years. And that's about as long as you've been open, right? You guys started.

[C]

Yes, she's been with us from the beginning. Yes. And we have a lot of employees who've been with us 15, 16, 17 years. So those employees are going to get the biggest check every year.

[B]

Let's point something out real quick. You are at 37 locations right now. From my conversations with Patrick, I know you're doing. All of your locations are doing over 20% profit with some the better performing stores doing closer to 30% profit. And I'm assuming you're doing at least 4 million a year in revenue. Between 3 and 4 million a year in revenue per location. Is that safe to say?

[C]

Well, Patrick's better with the numbers per location.

[B]

Well, I'm assuming, yeah. So you know, 3 million times, you know, supposed to say 3 million times 35 or easier math, you're looking at close to. It was 110, 105 million a year of revenue. That's good money. So you get 105 million. This is random numbers. These aren't the actual numbers. And 5% of that 105 million is going to profit share. So you know, that is correct. A little over 5 million a year. That is being distributed between how many

[C]

people that have been working with you for more than two years? 1800. We have 1800 employees. For right now a little over 400 are eligible. So you have to work two years with us to become eligible. So right now that would be distributed among 400 people. A little over 400. And the longer. And it's a point system. So you gain points as you're with us. Right. So the longer you're with us, the more points you have.

[B]

Wait, how many people did you say or 400 are eligible?

[C]

Yeah, a little over 400. Yeah. And so yeah, especially when it gets up to 20%, that check is substantial.

[B]

Right.

[C]

And hopefully life changing.

[B]

So just.

[C]

And that's my goal for context.

[B]

Approximations. Right? These are approximations. I rounded it up to 5 million. 500,000 is going into the profit share every year and with divided by 400, I.e. 13,750 additional revenue approximate. And keep in mind, I. There are some people making more, some people making less because it's.

[C]

And that 5 million may be high for 5%. But yeah, I mean for, for this,

[B]

just for like, just for an example. Right. I mean, that's $13,750 year that you can put into a high yield savings account. Maybe it's only 7,000. That's still pretty significant.

[C]

Oh, yeah. No, it will be.

[B]

And if you teach people how to. What to do with that money and how to make it. So now say, I mean, that. That's just how you build wealth. Right. It's. So it's a pathway, which is what

[C]

we're trying to do for all of our employees.

[B]

So what happens? Let's play a devil, not devil's advocate. Let's go 50 years into the future. You and Patrick are long gone at this point.

[C]

Yeah.

[B]

Maybe not with the way healthcare is going. I don't know. They're figuring out some really cool stuff of like regenerative, like, I don't know, it's kind of scary. But let's assume you're gone in 50 years from now. In the. Say the trust owns 51 of P. Terry's and somebody buys P. Terry's. Do these 400 people or maybe more in the future get.

[C]

Oh, yeah, it'll be a lot more. Yeah. So say it'll be distributed. It'll. Yes. So say it's $100 million. That $100 million is going to be distributed among all the employees based on their point system in the profit sharing.

[B]

Got it.

[C]

So the employee who's been here the longest is going to get the biggest check when they sell.

[B]

Got it. Is that technically defined as an asset? Because they don't technically own it, I think in order for something.

[C]

No, they don't. So. So it. Yeah, they'll. They are.

[B]

It's a phenomenal incentive, so.

[C]

Well, they're beneficiaries of the trust.

[B]

Got it.

[C]

So they're not paying. Yes. So they only have to pay. They'll have to pay taxes on that money for sure when it's distributed to them and they have to pay taxes on their profit sharing. But I'm sure they won't complain about paying taxes, you know, on the big check.

[B]

Right.

[C]

Yeah.

[B]

So in many ways they're almost like your children as a benefit.

[C]

They are my children.

[B]

Yeah.

[C]

Yeah. I look at them as my children. You know, I, I tell people all the time, you know, we have to redefine. You know, I feel like I'm in a family business, but I have redefined my family to include all my employees, not just my kids. Right. And I have a social contract with them. I am their safety net. Right. And I think of the. When you think of Community, right. You know, you talked about earlier, and this is going to get a little philosophical, but I think you said the middle class is dying, right? Like we, what we have is a poverty issue in this country, right? And, and, and poverty creates barriers to everything, right? Barriers to health care, to education, to food, you know, to food, to, to shelter. But it also creates stressors which create, you know, abuse, you know, alcohol abuse, mental health issues, physical health issues, sexual assault, you know, like all the things that the social services of the community are supposed to help. Right? But if you, if you can eliminate poverty, you don't, you can eliminate all of the social services that are needed, right? But when I think about capitalism, you know, capitalism is a perfect tool to be used to eliminate poverty. But we, but, but now it's unchecked and it's, you know, it's not, I don't feel like it's being used in the best way possible. I feel like what we're trying to do is use it to eliminate poverty and eliminate the need of our employees relying on a broken system. Right. You know, when I think about like the Walmarts of the world, right, we have subsidized Walmart since its inception, or maybe not since inception, but since it started scaling, right? They are the biggest employer of employees on SNAP benefits, right? And, and yet they have what, three generations of billionaire heirs, right? So we have allowed them to accumulate wealth while we are subsidizing their employees.

[B]

I'm so happy you're saying this because I think one thing I like to say is we, we like to point the finger and say somebody has to do something about it, about this. Somebody like who's gonna do something about this? Who is it gonna be? And to your point is we are the ones that subsidized it. We're the ones that made it possible. Every time we try to save a dollar, you know, every time we make a, a act to survive today, to try to survive today, we are killing ourselves tomorrow. And we are like every. You vote with your dollar, right? And I, I think consumers are being marketed to and being told what you want is convenience and lower costs. Those are the things that you want, those are the things you need. But we, you and I both know that's not what we need. What we need, right, is security. What we need is, you know, your physiological needs. Security to feel like you're seen and valued, feel like you have the ability to grow, that you have autonomy and to self actualize. And I, I don't know, like I don't think. I guess what I'm trying to say is, like, what are we sacrificing for convenience and costs as a society?

[C]

A lot.

[B]

Right. So what's the.

[C]

I mean, we've never paid the fair cost of anything in our society.

[B]

Yeah. Is that what you meant by subsidizing? We're subsidizing this thing?

[C]

Well, yeah, because our taxpayer dollars are subsidizing. Right. Like, you know, when you think of social services, you know, the government has pulled money out of social services. So then you have philanthropy that has to take up the gap. But philanthropy doesn't. I mean, it's. It's an illusion.

[B]

Right.

[C]

Philanthropy is not going to solve the problem. Because if you look at the way philanthropy is structured, you know, private foundations, you know, they're only required to give 5% of their fund away. So the 95% of their fund gets reinvested in the stock market, in businesses like Walmart, in businesses that are creating the problem. So they're investing 95% of their money in businesses that are creating the problem, and only 5% in investing in solving the problem. So it's a closed loop. It's never going to work, ever. So that's where capitalism has to come in and fix it.

[B]

When you say capitalism, are you. I think of, like, social capitalism or conscious capitalism.

[C]

Yeah. Or compassionate capitalism.

[B]

Yeah. I mean. I mean, I'll use interchangeably, and that's kind of where I'm at. Like, I look at, and I think this is a good kind of pivot to, you know, looking to the future of the restaurant industry.

[A]

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[B]

Guessing if Friday is going to be

[A]

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[B]

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[B]

You know my mission statement is to inspire. We do that through sharing stories and showing people like, you know, you can do it too. Empower by sharing knowledge and how you did it. Specifically like who'd you go to? What did you use, what processes did you use, what models did you use? What are your business models? What are your ownership models? And then the the transformation is something I've been kind of wrestling with lately. Like what is the transformation I want to see? Like what is the future future? Like I don't think the future is predicted. I think the future is made and we're being told by certain people what the future is going to be. But the people telling us that this is the future are also the people making the future. You know what I'm saying? And it's a very self serving future for the people that are spinning the narrative. So what future do we want to for like what the middle class, the majority? What is that future and how can we make it? What is the transformation we can go through together? That's what really has me kind of interested in. It's like what is that future? Like how, how do we inspire more Peterry's of the world? Like how do like what, what needs to change today?

[A]

Like what are the other things that

[B]

like really grind your gears in terms of like what you see happening where we're like what trajection we're on and how can we stop that momentum and move in a different direction.

[C]

Right. Well, I think we have to redefine what success is. Right. Like, I think that that has to be the first thing. And also, you know, reimagine power. And I think for. For us at P. Terry's, you know, we just reimagined what. What success was for us. You know, we have. We have all that we need. And so what is success for you? I think it goes back to living in a world where everyone is seen and valued and has access to all that they need.

[B]

Yeah.

[C]

And I think, I think we're aligned on that. I think that is, you know, I think, you know, for the longest time, I used to think success was being. Having access to the elite rooms. Right. Like, I was, you know, I was on that treadmill. I just thought that that's what it was and that's what a lot of people are. But now I've learned that it's not getting access to the elite rooms. It's, you know, it's realizing how many people you've impacted because you were in the room.

[B]

It's social capital, not financial capital. It's. It's like. It's the ability to affect social change.

[C]

Right. And. And because it goes back to the whole feeling significant and relevant, you know, I. I get to be. I get to participate in all of these people's lives. You know, I. I'm part of their story, and they're part of my story.

[B]

Yeah. I like to say success isn't lateral growth. It's depth, its impact. I think that we look at others and we think, well, look how big they've gotten. Look how, like, they're so big, they're so successful, they have so much. But if you redefine success as, like, look at, like, Zingerman's out of Ann Arbor, Michigan. Right. Have you. Are you familiar with their. That business, Zingerman's?

[C]

No.

[B]

Ari Weinswag and Paul Sagamore, I think Saginaw, they had the opportunity to scale across the country with their delicatessen, and they said no. Instead, we want to create this community of business where we take our values, our ethos of how to do good business, and we inject it deeper into our community and help other people who have come up and worked for us to, like, you know, to do their own thing, and we scale the values, the brand deeper into our community. We make an impact, and I think this is another way to do that. Diet.

[C]

Yeah.

[B]

So it's, it's. It's choosing to make an impact on others versus to scale what you have.

[C]

Definitely. Yeah, definitely.

[B]

What do you mean by reimagine power? You said redefine success and reimagine power.

[C]

Well, because power is so concentrated, and right now it's concentrated in a few. And. And it's, you know, it's back to that same. Was it Brene Brown? You know, power over and set, you know, reimagining. Because right now it's power over and not power with. And I'm thinking, you know, reimagining is power with power with my community, power with my employees. It's not centralized to one person.

[B]

Right.

[C]

It's.

[B]

Yeah, I hear. When I hear you say that, I think of, you know, this battle between autonomy and community, this constant struggle between having autonomy and being the individual and being. But also being a part of something greater community. And I think we need both. You know, Ken Wilbur, I think, is the name. Yeah, Ken. Ken Wilbur wrote this book, A Brief History of Everything. And I really. Rudy Mick recommended this book to me, and I've really been quoting it a lot. But in that book, he introduced this idea of a Holland. H O L O N Holon. And everything in the known universe is a holon. And the definition of a holon is something that is complete on its own, but also a part of something else. So, like, you are a holon. You're complete on your own. You're a Kathy Terry, but you're also a part of Peterry's, and Peter's is complete on its own, but it's also a part of Austin, Texas, you know, so we can't exist without autonomy, being whole on our own and having a sense of freedom, of agency, of making choice. But we can't have that without trying to figure out how that freedom, how that choice gives back to the whole. So it's like, in other words, it's about finding balance. And I think that's what you figure it out.

[C]

Well, and I think for me, you know, I think a lot about the difference between belonging and connection, because I think as a society, we're so focused on belonging. You know, we belong to. I mean, we belong to our race, we belong to our religion, we belong to our political affiliation, but we also belong to our neighborhoods. We belong to our city, state, country. Yeah, right. But it's all about, you know, it's based on our identity, and it's based on our shared identity. But what belonging does is it creates exclusion at every level because someone is always left out. Right, right. But belonging creates what you're saying, you know, that security. Because now I. I belong to someone. But. But just because you belong to a certain group doesn't mean you're still feeling seen. Right. That's the difference. Because connection is based on our shared humanity, not our shared identity. So when I say I'm in the human connection business because I'm connecting to people who I have no shared identity with. With. Right. But I have a shared humanity with them. I have shared experiences with them. And I think we have to have both. We are so focused on identity. But, you know, it's like going to the football stadium and have your face painted and screaming, you know, yes, you're part of that. You're a fan and you're part of that club, but you still don't feel seen. Right. And that's why the connection piece is so important that I don't think. I think we're missing out on connecting with each other outside of our identity.

[B]

Yeah. There's a great book out there by Johan, I think. Is it. Oh, my God, what's his last name? Johan Harris. Hari. Called Lost Connection. That really gets.

[C]

Oh, wow.

[B]

Yeah. I have to look up the name of the book now because I want to make sure I get his name right. Lost Connection by Johann Hari. Yeah. H A R I guy. And the whole philosophy on this book is basically. Or the. The idea, like he started writing this book because he was on all these depression medications and he was advocating for these depression medications. And his. His research actually ended up com. Telling a completely different story, that a lot of these medications are placebo and they wear off pretty fast. And really what makes people happy is connection. And the reason why there's so many depressed people is because there's so much lack of connection. Connection in the world.

[C]

Oh, yeah. And we're desperate for connection.

[B]

Yeah. And he lists all the different things that kind of contribute to this lost connection and what we need. And it's a fast. It's a fascinating book. I want to get him on the show. One last thing I'm kind of curious about along this idea of, like, how do we move into the future? And you pointed to this point of, like, this. The rich getting richer, the poor getting poorer. Are there any other systems that you think are broken in the restaurant industry that I should be aware of, that I should explore, to expose, to discuss, to find ulterior solutions or alternative, rather, solutions?

[C]

Oh, that's a really interesting question. Well, I mean, I think it's whatever is happening in the restaurant business, it's happening in probably every industry. Well, I Think it's just the race to the top. And that's really the problem with so many of the industries. You know, it reminds me of, did you ever see that YouTube video, the $100 bill game, or the hundred dollar bill race? Have you ever seen that? Oh, my gosh. It came out. My kids were young. I remember when it came out, and I was really impressed with it. But it's all about privilege. And so basically, really quickly, it's. I think it's like a coach and he brings out a whole class of kids and he puts them on a field, and he basically says, okay, guys, we're going to race for $100bill. And of course, you know, all these teenagers are hooping and hollering. And he says, but before we do that, I'm going to line you up and I'm going to ask you a series of questions, and based on your answer, you can move up along the field. So he lines them up and he starts asking him, who here has both parents at home, who was raised with a father at home, and they get to take two steps forward. Who had access to private school, who had access to a tutor, who doesn't have to worry about their cell phone being turned off, who never had to worry about having a meal. And so all of a sudden, the field is divided, right? And it's based on your privilege. And I had my kids watch it when they were young. And then a couple years ago, I had them watch it again because I had this revelation that he'd missed the mark. So anyway, the video goes on and he has everyone standing, he goes, okay, now everyone to turn around and look where you are. And it was so hard to watch, right, because the kids on the front line just full of shame and embarrassment. And he basically says, you know, you are where you are based on nothing you have done.

[A]

Done.

[C]

No decision you have made is, Is. Has. Has impacted where you are. But you, you know, the people in the middle of the field are going to have a big, a bigger advantage to this race. And so he said, you know, I just want you to acknowledge, you know, to be aware of this. And so he has them race and even said, you know, if this was fair, these guys on the. These black guys on the front line would just, you know, smoke you. Anyway, he runs the race and he has them all huddled and he says, you know, hopefully, you know, you will have learned something from this. And I realized that he lost an opportunity. And so I had my kids watch it again. And I said, what he should have said is who's willing to give two steps up for someone else who's willing to give four steps up. In fact, why are we even running this race? I mean, wouldn't it, you know, if you're going to run it, wouldn't it be more fun to cross the finish line with someone else on your back? But my, the whole reason I made my girls run it is I said at the end, I said, you know what? We're not running this race. I'm not running it. There's no reason to. What's the benefit? Because you're going to get to the end of the, you know, you're going to get to the end and do your little victory dance by yourself, and no one's going to look at you because everyone else has their head down running the race. And so, you know, that's kind of feel like. I feel like we're all running this race and. And we all have our elbows out or head down and we get to the finish line and we realize we're still alone. So it goes back to the whole connection conversation. Right?

[B]

Yeah. I couldn't help but think of Angela Duckworth in her book Gray. Are you familiar with that book? I wouldn't be surprised if you.

[C]

Oh, yeah, yeah.

[B]

Do you remember that book when she's talking about the origin of the word compete?

[C]

Oh, yes.

[B]

And basically that nowhere in the word of the origin, the Latin origin of the word compete is is there a winner.

[C]

Right.

[B]

And the word means together to, to serve, to strive in, aim at. So it literally means to seek together, to strive together.

[C]

Exactly.

[B]

And I think that that's just so powerful, this idea of, like, we compete by make, by. By elevating ourselves, we elevate those around us. So at the end of the competition, there might be somebody who came out, but the goal isn't to, like, always when it's to, like, it's like a friendly, like, competition. And that's what I think we need to look at our competitors in the industry as the people down the street. It's not us versus them. It's us versus, you know, an ulterior or an alternative future that's not good for any of us. How do we all strive together for a better future?

[C]

Right, Right.

[B]

So that's really been, you know, speaking to me lately. So I think this is a great way to wrap up the conversation. And thank you for sharing that story. I want to learn more about this. So, you know, one person you went to to learn more about employee ownership trusts was common Trust. Do you think that they would be willing to, to talk to us and to teach us more? Who's the person behind Common Trust that you went to to learn more about this?

[C]

Oh, yeah, Zoe slogan. She runs Common Trust. She'd be great. She, her team was so great about helping us maneuver this. I mean, it took a couple years because, you know, just, you know, having to model it out in so many different ways. So they were very patient.

[B]

And that was Zoe.

[C]

Zoe.

[B]

Last name again?

[C]

Slog S C8L80 I'm not sure if I'm pronouncing it right, but their team is great and they are working with people in all kinds of industries that are trans, that are transferring over to employee ownership trust models.

[B]

I think it'd be cool to get her in the network and to learn more. I cannot do what I do, Kathy, without people like you making time to share their story, to show perspective, to elevate standards. You know, if, if anybody wants to reach out. Is there social media a way you prefer to have to connect with people?

[C]

I'm, I'm really not big on social media. I have a LinkedIn account.

[B]

Okay.

[C]

They can reach out to me that

[B]

way and it's easy. I googled you earlier and you're linked and pops up very easily. So it's just Kathy K K A T H Y T E R R Y Kathy Terry on LinkedIn and we'll link to it it in the show notes. Kathy, there is no questioning my lady. You are unstoppable. Thank you so much.

[C]

Thank you. It's been wonderful to be with you. This is fun.

[B]

Cheers. There's another episode wrapped up here at Restaurant Unstoppable. Special thanks to our guest today, Kathy Terry. And if you enjoyed today's chat, be sure to join us on August 24th at 11am Eastern. Kathy's gonna be joining us live for coffee with Eric. And you can get the zoom link by heading over to restaurantunstoppable.com See we. That will get you the zoom link. And Remember, it is August 24th at 11am we'll be there. We hope you are too. And this is the, this is the, the perfect time to, to join a conversation if you're interested in creating a more equitable business model. If you don't have a succession plan, if you're planning for the future, if

[A]

you want to start planning for the

[B]

future today, way far out. I think we get in so much trouble putting this off to the last minute. So now's the time to plan for the future. And now's the time to make the industry more equitable. I think this is a really awesome path to doing that. So excited for this conversation and we would love to have you join our community. Head over to restaurantstoppable.com live to get access to this and all future live conversations. We'll see you there.