When White Electric Coffee in Providence changed hands in 2021, it didn’t go to a corporate buyer or a retiring owner’s handpicked successor. It went to the people working behind the counter.
But the process was grueling, said employee-owner Chloe Chassaing. Over a stressful seven-month period, workers scrambled to line up financing, track competing offers and hold together a deal that was never guaranteed to land in their hands.
“Every step of the way, it could have fallen apart,” she said.
Now, Rhode Island lawmakers have introduced legislation aimed at streamlining that process with the creation of a new state entity – the Rhode Island Center for Employee Ownership.
The proposal comes as the state is entering a wave of small-business retirements, often referred to as the “silver tsunami,” said Robert Piechota, district director of the U.S. Small Business Administration’s Rhode Island District Office.
Nearly 99% of all firms in Rhode Island are small businesses, he said, and more than half are owned by people 55 or older.
Yet many owners still fail to plan for ownership transitions until it’s too late, Piechota said, making businesses more vulnerable as owners look to exit.
“The largest nation in the world is procrastination,” he said. “People put things off.”
The proposed legislation, if approved, would bring Rhode Island into step with a growing national movement.
More than 20 states – including Massachusetts and Colorado – have already created similar centers to help guide business transitions and expand employee ownership models, according to findings cited in the legislation.
Lt. Gov. Sabina Matos had pushed for the measure’s passage this General Assembly session. She said she first learned about employee ownership centers through a national lieutenant governors conference a few years ago, where states shared models for supporting business transitions.
Rhode Island’s proposal is modeled largely on a program in Colorado, with additional elements drawn from other states that have established similar centers, she said.
Under the proposal, the center would be housed within the Small Business Development Center at the University of Rhode Island, using existing resources rather than creating a new standalone agency.
Matos said the center would also serve as a confidential point of contact for owners exploring a sale, helping connect them with lenders, legal experts and national employee-ownership networks.
A related proposal would offer tax credits to business owners who sell to employees, a measure Matos said is intended to work alongside the center.
For White Electric Coffee, Chassaing said the gap between having a plan and executing one was exactly where the pressure built.
“We really weren’t certain whether the sale would go through,” she said. “We didn’t have anything locked in. It was seven months of trying to pull all the pieces together while still not knowing if we’d actually end up owning the place.”
Even once the co-op model was on the table, she said, the process required stitching together advice from multiple places – lenders, small-business advisers and co-op support groups – without a single centralized source guiding the transition.
“We were fortunate to find some great resources, even locally,” Chassaing said. “But it was still kind of piecing it all together on our own and trying to figure it out as we went.”
That fragmentation, she added, is part of why proposals for a centralized employee ownership hub have resonated with workers who’ve lived through the process.
A dedicated center, she said, could have helped smooth out the uncertainty by connecting sellers and employees to financing pathways, valuation expertise and technical support earlier in the process – before deals become fragile or time-sensitive.
“It would just take so much of that anxiety out of it,” she said. “Because otherwise, you’re trying to build the plane while you’re flying it.”
And while White Electric ultimately succeeded in becoming employee-owned, Chassaing said that outcome isn’t guaranteed, especially for workers trying to navigate similar transitions without experience, capital, or institutional support behind them.
Jegoo Lee, assistant professor of management at the University of Rhode Island and a member of the Rhode Island Business Enterprise Succession and Transition Task Force advising the lieutenant governor’s office, said the biggest challenge is not enthusiasm for employee ownership, but rather execution.
Rhode Island, he said, still lacks a deep “ecosystem” of attorneys, accountants and advisers familiar with structuring employee ownership deals, especially around valuation, financing and legal transition.
But interest in the model, he said, is not the problem.
“They love the idea when I talk to them,” Lee said of small-business owners. “But the following question is: What should I do? How can I do it?”
Lee said that gap in expertise is one reason that many owners default to more familiar exit paths such as selling to private equity firms, outside buyers, or simply liquidating the business.
“This is perfect timing,” he said, pointing to the broader wave of retiring small-business owners across the state.
The legislation, backed by Lt. Gov. Sabina Matos, would create a centralized resource to guide owners through alternatives to traditional sales, including employee stock ownership plans, worker cooperatives and employee ownership trusts.
Supporters say the center is designed to remove friction from a process that too often determines whether small businesses stay locally owned or are sold out of state.
If approved, the center would also track employee-owned businesses in the state and measure whether the model improves long-term stability and growth.
Companion bills have been introduced in the House and Senate. While on the House side the legislation was held for further study, the R.I. Senate was scheduled to vote on the bill on May 7.
For Chassaing, the legislation reflects not only what she and her co-workers lived through firsthand, but also the challenges that the proposed center aims to ease.
“It’s not just about selling a business,” she said. “It’s about making sure it doesn’t fall apart in the process.”
