An ESOP option can tangibly impact culture, recruitment and teamwork at businesses that offer this to employees. 

By Tom Gresham

Employee stock ownership plans, which are frequently known as ESOPs, represent a compelling, sometimes overlooked option for companies exploring ways to provide attractive benefits to their workers.

In an ESOP, employees own shares of stock in the company as an employee benefit. Through this arrangement, team members own part or all of the company. According to the National Center for Employee Ownership, “ESOPs are most commonly used to provide a market for the shares of departing owners of successful closely held companies, to motivate and reward employees, or to take advantage of incentives to borrow money for acquiring new assets in pretax dollars.” According to the organization, more than 6,400 plans exist in the United States, covering more than 14.2 million people.

Demetrios Karoutsos, senior director of marketing and communications for the ESOP Association, said an ESOP is a qualified retirement plan but also “much more than that.” Employees do not invest their own money in the plan, but accumulate shares based on length of service, their performance and the success of the company. The longer that they remain in an ESOP, the more that the shares — and their wealth — grow.  

Karoutsos said that the average employee owner has more than $150,0000 in their ESOP account, and their ESOP often is their most valuable retirement asset. He noted that 75% of ESOP companies also offer employees a 401(k), so that team members are not relying solely on their shares for retirement savings through their employer.

Karoutsos said the ESOP approach is a notable option for the Baby Boomer business owners set to retire during the next 10 years — part of the “Silver Tsunami” in the United States. Many of those owners do not have an exit strategy, he said, and “an ESOP is a terrific option for owners to exit without having to close the business or sell to a competitor or private equity.”

Some companies in the car wash field are among those who have turned to the ESOP option. Victoria Perez, director of marketing for Texas-based Bubble Bath Car Wash, said when Bubble Bath became part of QuikTrip, a chain of convenience stores that had an existing ESOP, “our shared values made transitioning into an ESOP a natural fit.”

“Both organizations prioritize employee investment and long-term growth, so adopting an ESOP aligned perfectly with our vision,” Perez said.  

In October 2024 after partnering with KKR, Quick Quack Car Wash unveiled that it was incorporating an ownership program for its 4,200 team members. It took them a couple of decades to achieve this goal. “My founding partners and I have dreamed of this day from the beginning of our car wash journey nearly 20 years ago,” said Jason Johnson, CEO of Quick Quack.  

The goal is to align all team members around a common purpose, values and goals and bolster team members’ financial capability, according to the press release. The program is free for every team member and offered in addition to their regular salary and benefits.

Sheetz, a privately held company, also has an ESOP option for employees after their one-year anniversary. “We're all about sharing our success with the people who make it happen! We started our employee stock ownership plan in 2001 to reward our employees for their high-energy hustle and dedication,” said a company representative.

Mister Car Wash has something similar to an ESOP with its employee stock purchase plan and incentive award plan. Companies involved in building car washes have found ESOPs valuable, as well, such as Rycon Construction and Hilbers Construction.  

Financially, ESOPs can be ‘transformative’

ESOPs provide many advantages for both business owners as well as employee owners.  

“In addition to receiving fair market value for the business, selling to employees in the form of an ESOP also provides significant tax advantages in the form of deferred capital gains,” he said. “The ESOP transition also allows companies, and their jobs, to remain in their local communities. That’s a big advantage for owners who want to preserve their company’s values and the continuity of the business.”

For example, Kraig Snyder, national sales and marketing manager for J.E. Adams Industries, an Iowa-based manufacturer of self-serve car wash equipment, pressure washing products and mist cooling situation, said the company turned to the ESOP option to protect its employees and their jobs “by keeping the operations the same and all of the jobs here.”

For employees, meanwhile, “ESOPs offer the opportunity to build real, long-term wealth and get more out of their jobs than just a paycheck,” Karoutsos said.

Perez said QuikTrip has seen “countless examples of tenured employees achieving financial success directly tied to their ESOP investments.”

“The ESOP offers transformative financial advantages for employees, including increased retirement savings and long-term wealth accumulation,” Perez said.  

A cultural boost

An ESOP’s draw comes in part from its power to create a culture of ownership within an organization, Perez said.

“It empowers our team to take an active role in their future and the company's success, fostering a sense of pride and purpose,” Perez said. “This, in turn, enhances employee engagement, strengthens commitment and drives business growth and performance.”  

Snyder said J.E. Adams has seen evidence of an ESOP’s impact on employees from a cultural standpoint.

“We have found that everyone wants to maintain excellent craftsmanship, hit our ship dates and provide quality customer service as this benefits each and every one of our employees,” Snyder said.

Karoutsos said a unique culture evolves at successful ESOPs. Employee owners develop an ownership mentality and can see how their actions drive company performance, he said. As a result, they often become outspoken advocates for the company  — not just internally but externally, helping draw others into the fold.

“Put simply, employees are invested in their ESOP’s success,” he said. “This shared responsibility means there is greater alignment between employees and their employer, which leads to greater engagement and motivation. Employee satisfaction is higher at ESOP companies, and employees are more likely to be involved in company decisions. ESOPs also improve job security and are less likely to lay off employees. For example, during the COVID-19 pandemic, ESOPs were nearly four times more likely to retain jobs, and during the Great Recession employment grew among ESOPs while declining by nearly 3% overall.”

Perez said that an ESOP can be a “game-changer” for both retention and morale.  

“Employees knowing they have a literal stake in the company inspires them to innovate and continuously improve,” she said. “In a competitive labor market, it’s a powerful tool for attracting and retaining top-tier talent. The ESOP not only aligns employee goals with the company’s success but also reinforces our core values, creating a more engaged and motivated workforce.”

From a company standpoint, an ESOP strengthens its brand’s community commitment, Perez said.

“Alongside providing employment opportunities and supporting nonprofit work, we now offer our team a tangible path to build long-term financial success,” Perez said. “This unique offering has enhanced our appeal to local partnerships while deepening customer loyalty and community support.”  

Getting everyone on board

Karoutsos said getting buy-in from employees is critical to the success of an ESOP at a company.

“Ensuring they understand how an ESOP works, how their account will build value over time, and how their performance impacts the company’s future are extremely important to building an ownership culture at their ESOP,” Karoutsos said. “There is an openness that organically happens at many ESOPs, where the employees know that management truly cares and everyone in the company is invested in shared success.”

Snyder noted that an ESOP is “not a quick solution.” In addition, it requires buy-in from all levels within an organization and relies on employees who are committed to the long-term success of the company.

Karoutsos said the initial ESOP transaction can be complicated for business owners.  

“And because ESOPs are a qualified retirement plan under the Employee Retirement Income Security Act (ERISA), there are responsibilities and requirements that must be met each year to ensure employees’ interests are protected,” Karoutsos said. “However, there are many expert advisors in the ESOP field that can help navigate these issues from financing, to accounting and plan administration.”

For an ESOP to succeed, Perez said it is vital that employees fully understand the plan, its value and how it works.

“This starts with the onboarding process and requires ongoing education and communication,” Perez said. “A well-implemented ESOP is one that continues to be transparent and accessible to all employees, allowing them to feel confident and informed about their role.”

Finding out if it’s a fit

Companies considering an ESOP should start by evaluating whether their culture aligns with the principles of employee ownership.

“Transparency and clear communication are essential throughout the transition process,” Perez said. “In our case, Bubble Bath leadership collaborated closely with QuikTrip’s HR team to integrate existing and new employees into the ESOP program. For companies starting from scratch, partnering with experienced ESOP advisors can help navigate the legal, financial and operational complexities of the process.”

Perez said ESOPs offer clear value to not only car wash operators but the industry as a whole.

“From an industry perspective, ESOPs have the power to help position car washing as a profession that offers lasting opportunities and growth for everyone in the business,” Perez said.

Perez said ESOPs are a good fit for companies that have a strong employee-centered culture and an emphasis on long-term growth. “In industries like car washing, where teamwork, innovation and expansion are integral, an ESOP can be especially effective,” she said.

“ESOPs show a deep commitment to employees and the community,” Perez said. “By handing each employee a piece of the company, you create an environment where business growth and employee satisfaction go hand in hand. This isn’t just about financial rewards — it’s about building a culture where everyone shares in success, driving loyalty and dedication that fuel the company’s longevity.”