Client Profile: Gems N’ Loans

Gems N’ Loans is a classic case study for why one can’t always judge a book (or, in this case, a business) by its cover. In 1993, Mack Hembree, a successful real estate businessman, was invited to invest in opening a business that he had some commonly held reservations about. The business was a pawn shop, and Mack made sure to do his homework on the industry before jumping into a 23-year journey building an excellent organization in the most unlikely of places. By fostering and aligning employee satisfaction, collaboration, and commitment at every level, Mack has developed an ownership culture that differentiates Gems N’ Loans from its peers and has been instrumental in the company’s success. The company’s growth from one location in Oceanside, Calif. to five shops and 46 employees is proof that this model has worked well.

The first thing one notices when visiting any one of the five Gems N’ Loans locations is how clean and welcoming the stores feel – closer to a jewelry store than a typical pawn shop. Gems N’ Loans prides itself in creating a professional and inviting environment, and also in being very selective about the items it carries. By policy, the stores will not buy or sell weapons or junk, and much of the higher-end jewelry that they sell is certified by the Gemological Institute of America. All locations stay open until 7 p.m., seven days a week, in order to offer their customers as much flexibility as they may need to access the products or services they require. Employees are exceptionally friendly, knowledgeable, and highly professional, which is all a reflection of the surprisingly rigorous process by which they are selected and trained. In a business that serves people who are often in less-than-ideal circumstances, having employees who can work well together and understand the customer’s needs is crucial.

The employees, now part owners of the business, thanks to the employee stock ownership plan (ESOP) that was implemented in 2014, form the foundation of the company’s operation. Mack recognized this early on, and made sure that the people who joined the Gems N’ Loans team were carefully selected, trained, and incentivized. Before being granted an interview, applicants are screened through two highly respected tests – one to evaluate personality traits, and the other to identify professional strengths and weaknesses. If there appears to be a good fit, the applicants are then interviewed by the GM and oftentimes Mack himself. Joining the team is no walk in the park, as there is a 10-day trial apprenticeship, followed by a series of required tests and certifications in order to staff the floor. Once a person is admitted, they feel like they’re part of a family, and also get to share in the company’s success. All of this time and effort in recruitment reinforces Mack’s belief that outstanding customer service can only be delivered by the most capable, committed, and happy employees.

Deciding to move forward with an ESOP transaction wasn’t immediately obvious to Mack, but it didn’t take long for him to understand that this was the best win-win situation for himself and the organization he cared so much about. The Beyster Institute helped guide him and his company through the ins and outs of the transaction and its impact on the long-term future of the business. While there were obvious tax advantages for him, he felt that giving his people on the front lines of the business another way to win when the business wins was a perfect way to ensure that the organization was taken care of by those who understood it best.
Irene Longoria, the Gems N’ Loans general manager, said that “now employees seem to have more conviction coming forward with their ideas for the company, often prefacing their opinions with ‘as an owner.’ People don’t always get to feel assured that their legacy will live on, but for Mack Hembree and the new owners of Gems N’ Loan, it’s likely that they will get to continue offering outstanding service to their customers for a long time to come.

Reprinted, in part, with permission from the Beyster Institute. To read the article in its entirety, go to