Employee Ownership Drives Success at Newport Restaurant Group

Employee Ownership Deepens Engagement, Builds Community

by Karen Kahn

Dining at The Smoke House, one Newport Restaurant Group’s 13 employee-owned restaurants.

The Newport Restaurant Group (NRG) has its origins in a family company that was founded in Newport, RI, almost a century ago. By 1980 that business had evolved into a hospitality company, which over the last three decades has grown into a $82 million operation with 13 restaurants in Rhode Island and Massachusetts, a boutique hotel, and an event space. Today, the business is no longer family run — it is 100 percent employee owned.

NRG’s journey to employee ownership began in the mid-1990s, when then-CEO Tim O’Reilly decided to establish an Employee Stock Ownership Plan (ESOP) as a means of buying out “legacy shareholders” — family members who had inherited stock in the business over generations. Originally, a purely transactional decision that was seen as beneficial to owners who wanted to sell and employees who would gain a stake in the business, employee ownership turned out to be transformative. According to Kristin Allain, director of human resources and marketing, O’Reilly “couldn’t have possibly foreseen the impact, how employee ownership would motivate employees to work toward a collective goal — benefiting both the individual and the group. Our success as a business is because employees view the company as their own.”

Our success as a business is because employees view the company as their own, says Director of Human Resources and Marketing Kristin Allain.

Shares have accrued to employees slowly over time. For many years, employees owned 30 to 35 percent of the company; then 48 percent; then 68 percent. The company recently made the decision to transfer all remaining shares to the ESOP. Says Allain, “The decision was greeted with a collective ‘this is what it’s all about.’ ” That is, company executives felt that the employees should own all the shares because share ownership has spurred the culture of employee engagement, loyalty, and hard work that has been vital to the company’s growth and overall success.

Employee ownership, today, is deeply valued as fundamental to the excellent service and experience provided to NRG guests when they walk in the door.

A video on the website explains:

“What translates into a great experience for our guests is that everyone who is having an impact on their evening are owners. Walk inside our restaurant, and you’re being greeted by a hostess, she’s an owner of our company. Chat with the bartender or servers, they’re owners. From the dishwashers to the general managers to the chefs, it’s an integral part to who we are. It’s everybody, it’s all in.”

NRG is true to its word. The company employs about 1,200 people across its multiple businesses, about half of whom work 30 hours or more per week. But any employee, from waitstaff to executive, who works 800 hours per year is eligible to participate in the ESOP. Many seasonal employees are able to get their 800 hours during the summer season, so they return year after year.

Allain has been with NRG for 22 years, and she says, “When I hear family members, friends, and neighbors talk about their jobs, it just isn’t anything like NRG. Everyone at NRG is valued. Employees don’t necessarily make the big financial decisions, but managers ask for their opinions, and everyone is encouraged to share their ideas.”

While many restaurants have 100 percent-plus turnover, NRG’s turnover hovers around 13 or 14 percent. “People are treated fairly, they have a voice, they are engaged, and it makes a difference,” says Allain.

The company also practices open-book management, using a phone app to post sales numbers each week. During the yearly annual meeting/party at Castle Hill (one of Newport’s ocean-front historic inns and an NRG property), the CEO and CFO review the prior year’s financials, discuss strategic choices, and announce the share price for ESOP accounts. Employees are encouraged to ask any questions, no matter how challenging.

Ownership — which provides employees with a substantial boost at retirement — combined with an exceptional (for the industry) wage-and-benefit package that includes paid time off, health coverage, and opportunities for advancement, motivates NRG employees to stick around. While many restaurants have 100 percent-plus turnover, NRG’s turnover hovers around 13 or 14 percent. “People are treated fairly, they have a voice, they are engaged, and it makes a difference,” says Allain.

NRG is so enthusiastic about employee ownership that in 2017 the business was one of the 29 “founding members” of Certified EO, a national accreditation program for employee-owned businesses. That decision, along with becoming 100 percent employee owned, has jump-started an effort to fully integrate employee ownership into the company’s brand identity. Later this year, the company will be rolling out a new outward-facing marketing campaign that highlights the company’s commitment to employee ownership and locally sourced food. A little of that messaging is already appearing on the website:

“Food is about more than a meal — it’s at the core of our communities. So know that when you dine with us, in addition to enjoying a great experience, you’re also supporting our employee-owners and the farmers, fisherman, and artisans that live and work close by.”

NRG is more than a multi-million-dollar company — it’s a force for good throughout the communities it serves. It is investing locally, and building community wealth, rather than sending those dollars to absentee shareholders. Employee owners pay it forward by participating in community fundraising and charity efforts, making their communities better places to live. As CEO Paul O’Reilly says, “Employee ownership not only strengthens our business, but it ties us directly to the Rhode Island and Massachusetts communities that our employees and patrons care deeply about.”

Karen Kahn provides communications consulting and editorial support for Fifty by Fifty.

Fifty by Fifty, an initiative of @Democracy Collab, is working to transform the U.S. economy by growing employee ownership. Join our campaign, and we’ll send our monthly newsletter, filled with great company stories, right to your inbox.

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