President of 107-year-old family business explains decision to make employees the owners of Dennis Paper and Food Service

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HAMPDEN — Hampden-based Dennis Paper & Food Service’s website and business cards already boast that the company is “100% Employee Owned.” The trucks are next to advertise the shift set to become official in 2015.

Ron Dennis, the company’s president and grandson to its founder, announced the switch on Nov. 24, just two days after he gathered his 125 employees into a room to tell them they soon would own the company. His decision was five years in the making, Dennis said during a recent interview in his Mecaw Road office.

The company distributes food and disposable paper products — plates, cups, paper towels, etc. — across the state.

Dennis, now 60, was 55 when he started thinking about a retirement “exit strategy.”

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He saw a few options: “I could work here until I die. I could work here and hope that my children at some point in time want to get involved. I could sell to a competitor. I could get equity partners involved.” He didn’t like any of those choices.

He wants to enjoy retirement at some point.

He has two daughters. One is 26, happily working and living in Boston and “probably has no interest in coming back,” Dennis said. The other is 16 and focused on determining what college she wants to attend, not whether she wants to someday take the reigns of dad’s business.

Selling to a competitor or third party could mean major changes to the company — layoffs, department relocations to out-of-state parent company headquarters, the loss of the company name.

So, he started researching another option — employee stock ownership plan (ESOP). This week, Dennis expects to sign paperwork to make the deal official.

Dennis will divest himself of his 100 percent stock ownership effective Jan. 1, 2015. Instead, those holdings go to a trust fund, which will hold all of the company’s profits to be distributed among employees over time. The employees don’t buy the company out of pocket. Dennis essentially acts as the bank, holding the note until he gets paid back for the value of the sale. He declined to say what that price was.

In a news release announcing the sale, Dennis said there are more than 11,000 ESOP companies in the U.S.

“The sustainability of ESOP companies has proven to be a strategically sound business decision that empowers people to become business owners,” he wrote.

Dennis sees that empowerment as one of the biggest benefits of the ESOP arrangement. Employees who know that the better the company performs, the better off their families are, are more likely to take care to ensure the company is efficient and successful.

That could mean driving the truck more carefully to avoid wear and tear, or handling a pallet of goods more carefully, or bringing a potential cost-cutting idea to a boss.

“This secures people’s future,” Dennis said. “It’s a culture that you’re creating when you’ve got all business partners and all business owners. If you’ve got skin in the game, you react differently.”

The ESOP shift doesn’t change anything about the company’s governance. It will still be run by the same board of directors and the same in-house leadership, with Dennis staying on as president.

The business, which celebrates its 107th anniversary in January, was started by Dennis’ grandfather and his four brothers. The Russian immigrants started a small soft drink bottling and distribution company in Cherryfield using horse-drawn carriages.

In the early 1920s, the company relocated to Ellsworth and Ron’s grandfather bought out his four brothers to take sole leadership of the company.

Ron Dennis’ father took over the company in the late 1940s after the death of Ron’s grandfather and got into beer and wine distribution. He added disposable paper products in the 1970s to ensure that distribution trucks were full when making deliveries. The company relocated to Veazie in 1968, and grew slowly in the 1970s-1990s, competing with several other independent distributors in the area. Over the years, however, those other distributors were either bought out by larger enterprises or closed.

That set the stage for the early 2000s, when Dennis Paper expanded into food distribution, moving to another larger location on Thatcher Street in Bangor. At the time, the company had just 23 employees.

As it grew through its new food distribution business, the company moved to a larger warehouse on Mecaw Road in 2008, hiring 100 more employees during the past 12 years.

Dennis’ mother, Lena, is still with the company, working a couple hours each day in the office. She’s 95 years old, lives on her own, and “begrudgingly” gave up driving just a few months ago, according to her son.

Dennis said the change in ownership will retain the feel and focus of his company, while setting a benchmark for his own future and the future of his employees.

“I wanted to remain independent,” he said. “I wanted to remain a Maine-owned business, and I wanted to take care of the people that helped me build this business — my employees.”

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