Crab cake institution Pappas sells to financial technology firm

One of the biggest names in Baltimore crab cakes has a new owner.

Pappas Seafood Co. has sold for an undisclosed price to a financial technology firm and holding company called Teamshares. The publicly traded firm with a headquarters in New York City acquires small businesses, aiming to transition their ownership to workers.

The change comes nearly a year after the death of the Baltimore company’s founder Mark Pappas, who opened the first Pappas Restaurant & Sports Bar in a former Parkville stag bar in 1972.

After more than 50 years in operation, the restaurant group has grown to include five different locations, including a distribution facility in Perry Hall that ships crab cakes to the individual restaurants as well as to customers. Its most famous client is media mogul Oprah Winfrey, who became a fan while living in Baltimore and working at WJZ and has posted about them on Instagram.

Despite its success, the company had become unwieldy to manage, said former owner Steve Pappas, Mark’s son. “We were five different corporations working in five different directions, and you know it became very overwhelming to me at points,” he said.

Pappas also needs to find someone else to run the chain when he eventually retires. His children weren’t interested, he said, and “I didn’t want them to be in the restaurant business anyway,” given the industry’s rising challenges. “You need a strong financial backing to survive the ups and downs.”

Pappas said he learned about Teamshares through a broker and was intrigued by its unique model. After purchasing a business, Teamshares grants its employees a 10% stake. Its goal is to eventually transition the majority of shares in any company it buys to its employees.

“The profits of the business basically buy down the Teamshares stock and increase the employee stock,” said Madhuri Kommareddi, its chief operating officer. Teamshares aims for each business to be 80% employee-owned within 20 years, she said, “but it really does vary depending on the company and its profitability.”

The company was founded just seven years ago, so none of its acquisitions have yet met the 80% threshold, Kommareddi said, though she wrote in an email that “Many companies have made strong progress toward that goal.”

While Kommareddi said Teamshares is “constantly acquiring” new businesses and now owns more than 90, Pappas is its first in the Baltimore area. But Teamshares isn’t new to the restaurant industry; the company also purchased the Don & Millie’s fast food chain, which was founded in Omaha, Nebraska.

As it does elsewhere, Teamshares says it will install a new president at Pappas and look for ways to boost profits. The firm will also look to improve consistency across each of Pappas’ five locations, said Eric Braunstein, industry lead for food and beverage. “They have different French fries in each restaurant,” Braunstein said.

Pappas suggested that Teamshares could also help the restaurants expand business on third-party ordering platforms like Uber Eats. “They would get a better rate because they have a national presence,” Pappas said.

But Pappas also stressed that, post-sale, customers to the restaurant will be unlikely to notice a difference when they walk in the door. “People need to know that nothing is changing at all,” Pappas said. “It’s still going to be the Pappas that they’ve always known, if not better.”

Pappas will still be involved in the restaurants’ day-to-day operations and advise the new president until he retires, perhaps two years from now. His brother-in-law, Justin Windle, will stay on at the Cranbrook location, while his sister-in-law, Karen Zimmerer, will remain general manager of the Perry Hall location. Pappas will also continue to own the buildings at the Perry Hall and Parkville locations. “Of course, my name’s on it, and I care about what happens,” he said.

Many companies sell to Teamshares without notifying the public. Pappas said he wanted to dispel rumors in the community and to reassure customers. “Not one place is changing at all,” Pappas said. “We have an investment group behind us now. That’s how I look at it.”

One thing that is always subject to change: the price of crab cakes, which Pappas warns could go up before they go down.