nextcity.org/features/view/can-employee-ownership-preserve-legacy-businesses-in-communities-of-color
Can Employee Ownership Preserve Legacy Businesses in Communities of Color? Next City looks at year one of the SEED Fellowship, which educates small-business owners on how to craft succession plans and convert to employee ownership.
Hakim’s Bookstore, at 210 S. 52nd St. in West Philadelphia, is one of the oldest black-owned bookstores in the U.S. When founder Dawud Hakim passed away in 1997, the landmark establishment formed in 1959 might have closed if not for the efforts of Hakim’s daughter, Yvonne Blake, who kept the store afloat while juggling her own career and family responsibilities.
A half-block away, African Cultural Art Forum (ACAF), founded in 1969, sells art and jewelry by artists of African heritage and manufactures its own incense and body products in a building once occupied by the Aqua Lounge jazz club in the street’s entertainment center heyday in the 1960s and 70s. For more than 50 years, owners Sharif Abdur-Rahim and his brother Rashie Abdul Samad have provided summer jobs to generations of young locals.
Among the 264 businesses that line this stretch of 52nd Street between Arch and Pine streets, these stores exemplify the “legacy businesses” that 52nd Street Commercial Corridor Manager Tempest Carter sees as integral to the social and cultural fabric of the predominantly African-American neighborhood.
These business owners have weathered decades of economic and neighborhood ups and downs. But it’s an open question if and how such local mainstays will live on — or what might take their place — when aging founders retire, fall ill or pass away.
ACAF has a succession plan; a new generation of family members in their 20s and 30s is situated to take ownership. Indeed, this group has already guided the business into modern times, adding online sales capability and building an Instagram following.
But, Carter says, “That’s the minority. Most of my business [owners] do not know what they’re going to do. They’re just planning on working until they’re carried out.”
The percentage of black-owned businesses in Philadelphia is already small. Although 41 percent of city residents are black, only 2.5 percent of businesses are black-owned, according to the latest Pew Charitable Trusts State of the City report. If current owners lack succession plans, odds are good that many of these operations will shut down, or be acquired by investors. This kind of turnover is sure to alter the types of businesses in these primarily African-American commercial corridors, which in turn would change the face of the districts.
“We are definitely in a space of massive transition right now,” Carter says. She notes that the 52nd Street area has become more “porous” demographically, with a shift toward more white and wealthy residents, adding, “What we’re going to get is a transference of wealth and assets from a historically marginalized community to a community that by and large is already well-equipped.”
A Solution for the Looming Retirement Crisis
Philadelphia and other cities across the U.S. face an impending wave of small business upheaval as Baby Boomer-era owners reach and pass retirement age. The majority of those owners have no clear succession plan, nor do they have a new generation ready and willing to assume ownership.
52nd Street Commercial Corridor Manager Tempest Carter, standing in West Philadelphia’s Malcolm X Park.
As this “silver tsunami” approaches, one emerging strategy to prevent an exodus of community-anchored businesses and wealth is to transfer ownership to employees. The idea gained some momentum with the 2018 passage of the federal bipartisan Main Street Employee Ownership Act, which promises employee-owned businesses easier access to Small Business Administration assistance and loans.
Employee ownership can take various forms: It could mean a simple sale to a group of employees who know the business well. For larger firms, adopting a more complex Employee Stock Ownership Plan (ESOP) allows employees to reap some equity upon leaving the company. But the best way to broaden ownership, in the long run, could come from the worker cooperative model, which provides workers with both ownership and democratic control of the business.
Unfortunately, few business owners are familiar with the co-op model. Similarly, city economic development teams, small business advisers and capital providers often lack expertise in co-op conversion nuts and bolts. And yet no city leader would stand idly by and watch small-business revenue and jobs take a hit when these community mainstays disappear.
Enter the multi-city Shared Equity in Economic Development (SEED) Fellowship, introduced in 2018 to help city governments promote and support employee ownership. Organized by the National League of Cities and the Democracy at Work Institute (DAWI), a national organization dedicated to worker cooperative development, the SEED fellowship program offers technical advising, peer information exchanges and visits by advisers and peer fellows to each of the four cities in the year-long program.
A recent report by the ICA Group and Capital Impact Partners examines the potential for scaling up co-op conversions. Among its broad recommendations: increase education and outreach to business owners; increase access to capital and technical assistance for co-op conversions; and support targeted geography-specific and/or industry-specific initiatives.
The SEED fellowship promises to bolster these types of assistance. The first year is intended as a time to build infrastructure, examine current policies, research local businesses and plan policy changes. In a second phase, after the formal fellowship ends, cities are expected to actually deploy policy changes and start to approach and assist businesses, with ongoing support from DAWI and NLC such as quarterly check-ins and pro bono trainings.
Through this outreach, education, and assistance to cities, the SEED program’s long-term goal is to build assets and wealth for people in communities of color, immigrant communities and low-wage sectors. The four cities in the inaugural cohort (Philadelphia, Atlanta, Durham and Miami) all chose to focus energies on preserving legacy businesses in communities of color.
“Employee ownership can be an anti-poverty, racial wealth gap-addressing tool,” says Zen Trenholm, SEED program manager with DAWI. While saving jobs is a success and employee ownership could take other forms, DAWI is devoted to the worker cooperative model, he says. “We don’t want to forget that it’s not just about saving jobs, it’s creating ownership. We are addressing a long history of people not having opportunities to build assets.”
Adapting SEED to Each City’s Needs
At the start of the program last summer, each city formed an initial SEED team of three city employees, who then recruited a community fellow — someone from a local nonprofit or philanthropic organization who would have on-the-ground connections with neighborhoods and small businesses.
The fellows converged at a June 2018 kick-off in Boston, a city notable for its recent equitable economic development work. Then, from September to December 2018, DAWI and NLC convened site visits in each city that brought together fellows from peer cities along with invited technical assistance experts such as business development specialists, capital providers and co-op conversion experts. A mid-year retreat brought fellows together in New York City.
Each city came to the inaugural SEED cohort with its own advantages, problems and potential solutions.
Atlanta set as its “North Star” the preservation of African-American owned businesses in Southwest Atlanta, particularly in Cascade Heights, the commercial hub of a middle-class African-American neighborhood, says Christina Cummings, SEED fellow and interim director of Atlanta’s Office of Housing and Community Development.
Seated at a large white work table with a few local community members at the Atlanta City Studio, a pop-up outpost of the city’s planning department in the heart of Cascade Heights, Cummings describes some of the anchor legacy businesses in the surrounding blocks.
The Beautiful Restaurant, in Atlanta’s Cascade Heights neighborhood (Photo courtesy The Beautiful)
Among them are Dr. Young’s Dental Clinic, owned by dentist and civil rights activist Dr. Walter Young, brother of former Ambassador and Mayor Andrew Young; Barlow’s Barbershop, whose founder once tended the hair of Atlanta luminaries such as Martin Luther King Jr., Mayor Maynard Jackson and Dr. Benjamin E. Mays; Ashmel’s Plumbing and Contracting, started in the 1970s by husband-and-wife owners Ashmel and Marie Williams, known as “Mr. Ashmel” and “Mrs. Ashmel”; and The Beautiful Restaurant, a church-owned Southern-food spot known for its macaroni & cheese and banana pudding as well as its mission to hire returning citizens and other people in transition.
“The Beautiful has had a vision for how to create jobs, create wealth, keep those dollars local, for 40 years,” Cummings says. With 50 employees and a growing catering business, the restaurant could be a good test case for the SEED team’s co-op conversion outreach.
The City Studio is where the SEED team convened 50 or 60 community stakeholders and business owners last fall during Atlanta’s technical assistance site visit. Cummings went door-to-door and invited business owners old and new to learn and share in the discussion with DAWI and NLC representatives and a panel of experts on small-business preservation and worker cooperatives.
By paying visits to local businesses and gathering that large and diverse group of stakeholders in the room during the site visit, her team has “built a bridge,” Cummings says, forming a base of trust for future discussions with local businesses — which she knows are not going to be simple.
“We’ll have to do a lot of education and community engagement as to what worker-owned businesses are and what that process looks like,” she says. “Not only do they need the knowledge and education, they need technical support and they need the money. Conversations could take two years, sometimes three years start-to-finish, to get someone ready for that model.”
In the other cities, too, local ecosystems helped define SEED project goals..
Durham has a history of strong black-founded enterprises that contributed to its “Black Wall Street” designation during the Jim Crow era. As Next City has reported, city officials want to build on that legacy while helping businesses climb back from the recession and respond to a new knowledge economy and gentrification pressures.
Philadelphia already had a robust infrastructure for co-op support, with its rich co-op history, dedicated city funding for co-op development and the presence of the Philadelphia Area Cooperative Alliance (PACA), which had already done extensive work supporting the formation of new worker co-ops. With the SEED Fellowship, the Philly team sought to build systems for identification, outreach, education and support of legacy business owners on 52nd Street and other business corridors, tapping into its system of city-funded corridor managers such as Carter, who connect with local businesses on a regular basis.
In Miami, small business districts in Little Haiti and Little Havana have for years been subject to gentrification pressures as development spills over from the Design District and Wynwood areas. Some other historically vibrant but recently troubled lower-income neighborhoods such as Overtown and Liberty City are seeing increased interest from developers and new residents, adding to pressures on longstanding business owners.
“People are trying to move toward the urban core, which have not been the best neighborhoods in the past,” says Santra Denis, Miami’s SEED community fellow and chief program officer at the anti-poverty organization Catalyst Miami. “And there’s a trend toward moving back into the city. So there’s a lot of pressure that those communities are experiencing.”
One Year In, the Preliminary Results
The inaugural SEED year concluded in June with a closing retreat in Washington, D.C. Now that the first year has wrapped up, how effective was the program at spreading the worker cooperative gospel? The purpose of the fellowship is subtle — more to lay the groundwork for action than to achieve concrete results. But it has spurred some changes already, and others are in the works.
DAWI’s Trenholm says that for SEED organizers, the baseline success metric was that each city leaves the fellowship with a clear plan for implementing their project and with some initial steps taken based on the expert advising and feedback they received during the year. In his view, all four SEED cities have devised “clear plans, clear roles and good foundations for future business conversions.”
Mary Bolton 202-390-1208