Sexy Pizza Celebrates Increasing Employee Retention Rates with Employee Ownership

The Sexy Pizza team opened their first location in Capitol Hill in 2008 with a company culture rooted in activism and community engagement. 13 years later, Sexy Pizza has expanded to four locations across Denver and a growing list of employee benefits, making them a highly competitive employer.

From its inception, the Sexy Pizza team knew that employees are the heart of a business, especially in the restaurant industry. As the business grew, leadership was able to offer fully-compensated health, dental and vision, a 401k retirement plan match, free mental health care, paid time off, down payment assistance on a home and other benefits. These benefits have helped Sexy Pizza keep their retention rate in the low 20% range. 

After seeing how successful employee benefits are in facilitating positive company culture, low turnover and increased revenues, Sexy Pizza explored the concept of employee ownership as an addition to the already robust benefit plan.

After exploring various models and visiting cooperatives in the pizza industry in California and stock ownership plans, Sexy Pizza turned to a phantom stock model. It was the best fit for them based on their entity type and allowed them to gradually step into employee ownership, prove the structure a success and be more flexible than an employee stock ownership plan. 

A phantom stock plan is a deferred compensation plan that provides the employee an award measured by the value of the employer's common stock. However, unlike actual stock, the award does not confer equity ownership in the company. In other words, there is no actual stock given to the employee.

Although Sexy Pizza is dipping their toes into employee ownership, leadership agreed that it was just the beginning to prove the model and they intend to transition to a more formal employee stock ownership plan in the coming years. 

In considering how to instill an ownership mindset among the employees, Kayvan Khalatbari, co-founder of Sexy Pizza, shared that it requires communication and encouragement for the employees to take advantage of the incredible benefits. 

The Sexy Pizza team is learning that employee ownership and their other benefits create a career opportunity in an industry that typically has very high turnover. Sexy Pizza has brought their turnover down to the low 20% range and is finding employee ownership another tool to impact hiring and retention. 

“I’m also excited to see how this affects employees’ ideas about entrepreneurial aspirations,” said Khalatbari. “Being able to lend a little more intimacy to the details of our business, increase the financial literacy amongst our employees, open the books to them and help them be a part of decision making, we’re able to show them more about how to run a business.” 

One challenge Khalatbari finds in the employee ownership transition is talking people into the idea. Employees, especially in the restaurant industry, are not used to getting these benefits, pay and ownership that Sexy Pizza is a leader in. Overcoming the disbelief that a restaurant would prioritize the well-being of employees has proven a unique challenge in the process. 

“Other than that, there haven’t been hurdles. It’s been on us to be as communicative and transparent as possible,” said Khalatbari. “Everything worthwhile is challenging and we are ready to take this on. It has far exceeded our expectations for what it’s meant for our business.”

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