Lunya is now an Employee Owned Trust

Lunya started in 2008 with a stall on a field at Claremont Farm for Wirral Food Festival. We (Peter and Elaine) were the tender age of 44, with an idea (or was it an aspiration?) to open a Catalan inspired deli and restaurant close to home. Fast forward 16 years, and they are both now 60 (shhh don’t tell anyone!) planning for an eventual retirement from a beautiful and successful business of deli, restaurant, bar, outside catering and online store, across two wonderful sites in Liverpool.

It is hard to retire when you own a business and having the right exit plan is so important. Lunya is more than a business to us. It has become an integral part of our lives, a true family-owned business. There aren’t too many people our age running restaurants (for good reason, we think!). We had thought of the traditional route of private sale, but after careful consideration, we wanted to try something different that would help preserve what we had created and which was clearly so popular and that would protect our staff very long-term. That alternative is something called an Employee Owned Trust, which Lunya has now become. In effect creating a John Lewis model of ownership where all our staff have an equal stake in the business. Thanks to one of our wonderful regulars, John Stopporth, a partner at Brabners Solicitors in Liverpool, who gave us this idea over eighteen months ago and introduced us to a colleague who has guided us to this point.

With this transition to an Employee Owned Trust, we are ensuring that Lunya’s core values, our mission to showcase the very best of food and drink from Spain and commitment to quality throughout remain intact. The move to employee ownership reflects our belief that the people who have been integral to Lunya’s success should have a stake in its future. This new structure not only rewards the hard work and dedication of the staff but also empowers them to play a direct role in the restaurant’s continued growth and innovation as we retire gradually.  Importantly, in the future, they will financially benefit from Lunya’s success.

As many people know, Elaine was diagnosed with Myeloma, an incurable blood cancer back in very early 2021, and has recently taken a back seat in the business. Myeloma never goes away, and in the last couple of months has become active again which will result in further treatment to get it back into remission. Peter will continue to actively lead Lunya for years to come, hoping to fully retire within an approximate 7 year timescale, but scaling back some of his involvement over that time.  His role will be that of Executive Chairman, or as Peter describes it  ‘the palate and principles of the business’, still working actively in the business, and mentoring the management team. For those of a certain age, the best analogy is from ‘Are You Being Served’; in terms of presence, he started off in a Captain Peacock role (here all the time), moved into a Mr Rumbould role (more office based but still very much leading the business) and is now aspiring to become Young Mr Grace! But I have many years of fully leading the business left, and will be around in to my late 60’s running events, occasional cooking, serving, deli stock refilling – getting in the way!

Tom Cavanagh, the Director of Operations who has been managing Lunya on a day to day basis for nearly two years said ‘the team is really excited by this opportunity that Peter and Elaine are giving us; we are very grateful for their generosity  – in effect, gifting us the business, and we plan to continue to run and develop Lunya so it continues to be recognised as one of the very best Spanish restaurants in the UK. Personally, I love leading the business and will be working very closely with Peter and Elaine over the coming years, so they get the retirement they deserve in the future’.

We are incredibly excited to make this announcement that Lunya is now an Employee Owned Trust. Elaine and I have always believed in the power of our team and their dedication to making Lunya the special place it is today. By transitioning to an employee-owned model, we are ensuring that Lunya’s unique character, passion for Catalan and culture, and commitment to excellence will be preserved for generations to come. Under the new Employee Ownership Trust, Lunya’s employees will increasingly have a greater say in the business’s strategic direction and a direct stake in its financial success. With an EOT, Elaine and Peter gift the business to current and future employees (it is not a buyout and no money changes hand – a proper gift); we hope it will encourage staff to stay for longer and really financially benefit long term from their involvement.

This transition is a testament to the incredible people who make up the Lunya family. Our team is at the heart of everything we do, and we are thrilled to see them take on an even greater role in shaping the future of Lunya. We believe this new chapter will bring fresh ideas, renewed energy, and continued success; and eventually significant financial rewards to our team. As Lunya embarks on this exciting new journey as an Employee Owned Trust, we remain committed to delivering the same high-quality, authentic Catalonian dishes and warm, welcoming atmosphere that have made us a favourite among hundreds of thousands of food enthusiasts.  

What is an Employee Owned Trust (EOT)?

An EOT is a Government backed scheme with the aim of increasing employee engagement to ensure the long term future and stability of a businesses, whilst allowing the previous owners to retire over a period of time. The business is valued by independent accountants, HMRC approve this valuation, and the founders (Peter and Elaine) shares are gifted to a specially created Employee Owned Trust.  Lunya Ltd remains as the trading company, but with all the shares owned by the Lunya EOT. The Trust ensures that the future profits of the business are paid to the donating owners, up to the agreed valuation (over the next 7 years or so).  After that point, the profits and inherent value within the business are overseen by the Trust for the benefit of all staff. Very similar to the John Lewis model.

Why have we done this?

It’s not always about the money! A private sale would have brought us plenty of money, but we believe may have placed at risk the core of what we have created and ultimately not been in our staff’s best interests. We know that it is possible to make more money out of Lunya which would make it a very popular acquisition in a private sale. Making our deli area a coffee shop area, buying cheaper and inferior ingredients, doing away with our online business and reducing the number of staff we employ would all bring in a lot of profit. We have purposefully chosen not to do this. Not that we are rubbish business people but we have a clear idea of what we want the business to be and the values we hold. The very best ingredients from Spain are what we are about. This process gives us enough funds over the next 7 years or so to be able to have a comfortable retirement, probably not what we thought when we set up the business all those years ago, but we are happy with it.

With an EOT, as we gradually withdraw over the next seven years or so, our staff will have an increasing say in the business and continue to shape a business that works for our lovely customers and staff, alike. I (Peter) will be here initially leading the business and ultimately becoming more of a mentor to Tom, Dave and the team. With a bit of luck, I will be on a for a full retirement in 7 years time. But in terms of the day to day operations, it is very much business as usual and Elaine and I hope to continue to see all our regular customers as much as possible. We know with their support, the future of the business is very secure.

We are particularly grateful to Stephen Hadlow and Nathan Samuel at Brabners Solicitors and Tim Adcock at Mitchell Charlesworth Accountants for the legal and accountancy support in the process of setting up this EOT. It is pretty unique in the hospitality industry.

Peter & Elaine Kinsella

ADDENDUM – Notes for our staff which explain a little more for anyone else interested.

LUNYA IS BECOMING AN EMPLOYEE OWNED TRUST – WHAT DOES THIS MEAN FOR OUR STAFF?

What is happening?

Peter and Elaine have been thinking about an exit plan (ie. how do they retire?) for the last few years and after lots of careful consideration have decided to turn Lunya into an employee owned business and as staff you will become beneficiaries of an Employee Ownership Trust (the “EOT”) that is being created to ‘own’ Lunya. The EOT will own shares in Lunya Limited on behalf of all employees of Lunya now, and in the future.  This is something similar, but not identical to, John Lewis. We’ll be explaining in detail what employee ownership is and how it works over the course of the next couple of months and beyond. EOTs and the legislation was created about 10 years ago to help founders and owners have a smooth exit plan from their business and to encourage wider employee participation in the businesses they work in.

But in effect, we are gifting Lunya to our staff, via this Trust.  It is a fantastic present, and it is for free!

What you need to know now is this (initially, not an awful lot changes!) – Lunya will remain as an independent business and Lunya Limited will operate for the benefit of employees of Lunya. Your jobs, your salary and your terms and conditions of employment will not change as a result of Lunya becoming employee owned. Lunya Limited is the existing trading company – that doesn’t change.  There is one company (always has been) that operates from two sites in Hanover Street and Albert Dock. We will carry on doing what we always have – providing superb Catalan and Spanish food and drink with fabulous friendly service.

The management of the business and the direction of the business will also not change right away, at this time, but eventually, we will fully retire in about 7 years and it will be up to our team to get on with it, and we hope that as employee owners you will each think about what you can do to improve the business as time goes on.

Why are we doing this?

For a while now we have been considering how we exit Lunya and retire and what will happen to the company when we eventually do.  At some point in the coming years, we will want to hang up our aprons and have more time to do other things and enjoy ourselves in our retirement – we are both now 60 and ‘getting on a bit!’ Elaine’s cancer diagnosis left us reeling and reassessing everything in our lives. It really got us focusing on having more of a life and much less time in work.  For 14 years (and nearly 20 previously with our other work), we have lived and breathed our business.  It took every penny, amount of energy and time that we had.  That’s not sustainable forever, and probably wasn’t such a good idea in retrospect for work and business to become so dominant in our lives.  But retiring when you own a business is very different to a job and difficult!

We have been looking at options regarding how we can realise the value that has been built up in Lunya over the past 14 years.  Typically, the method of exiting a business for owners would be for us to sell to another person or business (in effect, the highest bidder) or occasionally sell to the management team (given the nature of the hospitality sector, our senior managers do not have the resources to buy the business),  with us receiving the money for the company, departing and then leaving it to them to manage and run .

Selling to a third party does not sit comfortably with us, even though we could be financially better off doing this.  Too often we have seen small businesses like ours being bought up by larger companies or competitors to find they move operations away from the area they were established with the result of lost jobs, the culture of the company being radically changed, the type of business it is changing a lot and loyal employees not looked after. This is not something that we want to allow to happen at Lunya.

We have spent 14 years building Lunya, putting everything that we have financially, practically and emotionally into it, supported by you and those that have come before you.  We are really proud of the very successful business that Lunya has become. It’s position in the market and the community, our reputation with customers is all down to the people that work here, the products we have and the ethos we have as a business. We don’t want our personal future plans to negatively impact what we’ve all built or change the way the business operates and our way of doing things (i.e. our culture).

We were introduced to the idea of employee ownership around a year ago and we have been researching it ever since and decided that this was the best option for Lunya last year. To us, it seems the best option – we ‘gift’ the business to an employee owned trust that we create, receive a fair value for the business (in effect we have an IOU of future profits up to the value of the independent valuation), stay involved in the business for as long as we are wanted and/or needed and as employees and beneficiaries, you do not need to contribute financially at all – this is not an employee buy out, it is a gift from us to you. Crucially for us, it will ensure that Lunya will continue to grow and prosper long into the future as an independent company.

We have taken plenty of professional advice and looked at how other business owners who have chosen to transfer their business to employee ownership and spoken to a number of professional advisors and we know that employee ownership is the right move for us and, more importantly, for Lunya and all of you.  It is very rare in the hospitality sector, but think it will become much more common as time goes on.

In simple terms, Lunya Limited will establish an “Employee Ownership Trust” (the “EOT”) and we (Elaine and I) will sell 100% of the shares to the EOT. The EOT (which has no money of its own) will pay for these shares over a period of time, likely to be up to 7-8 years out of the profits that Lunya hopefully makes over that time. Technically, the EOT will receive ‘gifts’ of money from Lunya Limited from their profits over this time and will use this money to pay off the valuation sum owed to us. None of you will be liable for any debts owed to us, nor will you be liable for any other debts of Lunya Limited. At the end of this time (having paid Elaine and Peter the valuation sum), all of the ongoing profits that the business makes will be up to the EOT to decide what to do with to benefit the staff.  This could be increased pay, bonuses, reducing working hours  – there will be all sorts of options for you to consider in the future when the time comes. You will be able to consider expansion – ie. do you want to grow the company into other areas.  But all of that is for the future!

We are genuinely excited that we can find a way of exiting the business without needing to sell Lunya  to another company and risk destroying what has been built up over the years. We believe that employee ownership will herald the start of a new vibrant chapter in the Lunya story and is a lovely legacy to leave for our team.

There is a lot of research that shows that a combination of shared ownership and employee participation results in a business that is more engaged, innovative, productive and sustainable. A “win, win” for everyone!

We want to create a gift and legacy for our staff and one which results in their ownership (through this Trust) of Lunya.

What does this mean for you?

In terms of the day-to-day running of the business, it is important to stress that nothing will really change. Peter will still remain as (in effect) the Chief Executive/Executive Chairman of the company; Tom will be the Director of Operations; the Company Directors of Lunya Ltd will be Peter & Elaine.  Over time, this will change and we will increase the board of Lunya Ltd.  As things settle down and we are confident that Tom, the senior team and all of you are working well and running the business well and profitably, we will reduce practical involvement – realistically from 3 years or so.

You will become “employee owners” and over time, when trading allows, the management team will be exploring how we can reward you all for your contribution to Lunya’s success, find ways of keeping you better informed and encouraging ways for you to improve our business – building on the foundations already in place.  We will all grow into this model and make these adaptations gradually over time.

When will this happen?

The advisors we have appointed have just completed all of the legal processes (early October 2024) and everything is now set up and registered, but now the real work begins – developing how employee ownership will work for Lunya. We’d like to think that by this time in 2025 we’ll all be clear about what employee ownership means for all of us.  Elaine and I, for now, are remaining as company directors of Lunya Ltd (but not shareholders); as mentioned previously, as time goes on, we will have less and less operational involvement and if all goes well, we will have minimal day to day involvement in a 3-7 year timescale.  If the business is going well and the economy is strong (and so the Trust is receiving moneys to pay us the acquisition value) and this looks like it will continue, we will leave things for Tom and the senior management team to run, just being available for mentorship and general guidance.  When the final amount is paid (we think in a 7- 8 year timescale), that is when we plan to cut our ties completely, unless the team want us to stay involved in a very light way – and I have the energy, time and desire to!  But at that time, things can really change financially for all of our team.  All of our team will benefit from the ongoing success (and financial success) of the business. It is quite conceivable in a 7-10 year timescale with a strong economy and a continued well run company, that you will, through the EOT, ‘own’ a business that could be worth £3M (I wish that was the case now for us! But there is a lot of hard work to achieve that, too).

We have a super team, and as we always have done, together we will make this work successfully, be an innovator in our sector and have something of phenomenal value for our staff to enjoy and have great, long term sustainable jobs. We hope you enjoy the gift in years to come.

Peter and Elaine Kinsella