WELCOME TO THE WEEK
We are looking at how Jack Stack and his fellow managers bought a struggling International Harvester plant with $100,000 and an $8.9 million loan, then taught employees to understand the company's finances. We also explore a franchised burger restaurant near Orlando listed for $620,000 at an estimated 4.0x EBITDA and the October jobs report due Friday, November 6.
— THE LEAD
Why did Jack Stack open SRC's books to every employee?
In the early 1980s, International Harvester was facing serious financial difficulties. The company planned to close its engine remanufacturing plant in Springfield, Missouri, putting more than 100 jobs at risk. Jack Stack, the plant manager, and a group of fellow managers decided to buy it. "I fell in love with the people," Stack told Missouri Business Alert in 2023.
The plant had opened in 1974 as International Harvester's remanufacturing division, where employees rebuilt used engines. Stack and his colleagues wanted to preserve the jobs. Together, they assembled $100,000 in equity to finance the purchase.
More than 50 banks rejected their financing requests before a Chicago bank agreed. The final deal involved an $8.9 million loan at an initial interest rate of 18%. That meant $89 of debt for every $1 of equity. At that rate, annual interest on the full loan would have been approximately $1.6 million. Springfield Remanufacturing Corp. began operations in February 1983.
Facing substantial debt, Stack began teaching employees how the company's finances worked. The approach eventually became known as The Great Game of Business, the title of his first book. Its central principle is that employees can make better business decisions when they understand the financial consequences of their work.
The method has three parts. Employees learn how the business makes money and generates cash. They follow financial measures and track performance against company goals. They also share in the results through incentives such as performance-based bonuses.
At SRC, employees learned to read income statements, balance sheets, and cash flow reports. Regular meetings allowed teams to review financial results, identify problems, and discuss improvements. The company also introduced employee ownership, giving workers a direct financial interest in its performance.
The approach helped SRC develop employees capable of managing additional businesses. Since 1983, the company has launched more than 60 businesses. SRC Holdings is now 100% employee-owned through an employee stock ownership plan. Its website lists approximately 2,000 associates and 4.4 million square feet of manufacturing and warehouse space. Stack's biography describes a group of ten businesses with annual sales approaching $1 billion.
Employee ownership has also created substantial retirement wealth. SRC has reported that its largest shareholders include hourly employees, several of whom have accumulated seven-figure retirement stakes. The company's stock, valued at 10 cents per share in 1983, has appreciated significantly.
Stack remains chairman and CEO. His books include The Great Game of Business, A Stake in the Outcome, and Change the Game.
With $8.9 million in debt and an initial interest rate of 18%, SRC needed employees to understand how everyday decisions affected cash flow and profitability. Stack's approach combined financial education, regular performance reviews, and shared financial rewards. Employees could see the company's results and understand how their work contributed to them.
— CHANGING HANDS
Ocoee, Florida, burger franchise asks $620K on $156K of estimated EBITDA
Asking price: | $620,000, including $120,000 of FF&E, plus $25,000 of inventory |
EBITDA: | $156,000, estimated |
Gross Revenue: | $1,200,000 |
Asking multiple: | 4.0x EBITDA |
Rent: | $9,800 a month |
Number of Employees: | 8 (4 full-time, 4 part-time) |
The Brave Burger in Ocoee, near Orlando, is a franchisor-owned restaurant serving Certified Angus Beef burgers, sandwiches, and other casual dining options. The location opened on March 9, 2024, as the brand's second restaurant after Clermont. It offers dine-in, takeaway, delivery, and catering services. The restaurant occupies about 2,500 square feet and includes an equipped commercial kitchen.
Translation, if you own one: The $156,000 is a 13% margin on annualized revenue. As the franchisor's own store, it may not pay the royalty a franchisee would owe, so a buyer’s margin could be lower. Rent takes 9.8% of revenue. An established location, equipped kitchen, and existing customer base give a buyer an operating business to build on. Catering, delivery, and stronger local marketing could create additional revenue opportunities, although franchise royalties and management costs will determine actual returns.
— THE WEEK AHEAD
The Bureau of Labor Statistics releases the October jobs report on Friday, November 6. In September, employers added 29,000 jobs, and the unemployment rate edged up to 4.2% from 4.1%. Revisions cut July to a loss of 10,000 jobs and August to a gain of 133,000. Health care added 17,000 jobs, construction 11,000, and manufacturing 9,000.
Average hourly pay rose 5 cents to $37.81, up 3.0% from a year earlier. At that rate, a worker paid for 40 hours a week earns about $78,600 a year. A 3% raise adds about $2,400 per worker, or about $23,600 across 10 workers. The October report will show whether wage growth continued.
On Tuesday, November 3, the BLS also releases its September job-openings count. In August, openings were little changed at 7.1 million, and hires held at 5.2 million. Quits were unchanged at 3.1 million, with the quits rate holding at 1.9%.
COMING ON WEDNESDAY
Jay Boren bought LockNLube for less than $1 million in 2017, with the seller financing about 75% of the purchase. He expanded the business from a single grease coupler to more than 250 products before selling it in 2024. This Wednesday, The Spotlight examines how he financed the acquisition, grew sales through digital marketing, and expanded the product catalog.
