Family Matters | Food Newsfeed
Shula’s Steak Houses

Dave Shula, president of Shula’s Steak Houses and son of Don Shula.

Family Matters

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Keeping a restaurant business in the family for several generations may be every owner’s dream, but it’s not the quick and easy process some envision.
By Mary Avant Executive Insights

Building a career and legacy in the restaurant industry for nearly 40 years—27 of those with family-dining concept Golden Corral—Mickey Chance would love nothing more than to keep his company, Chance Hospitality, going for years, decades, and even generations to come. And it looks like he’s doing just that, as he recruits, preps, and grooms his son, David Chance, to one day take over the family business and carry it confidently into the future.

While David Chance is now the vice president of Chance Hospitality—a company that owns two Golden Corral units in North Carolina—his father already has plans in place for David to succeed him once he’s ready to step down. “It’s all set up. It’s in his corner,” Mickey Chance says. “He can carry this business as far as he wants to.”

The Chances’ story is inspiring for many family-owned businesses in the restaurant industry and beyond, but it’s more the exception than the rule. “One generation is the norm,” says Rick Bisio, franchise consultant and author of The Educated Franchisee, a book detailing family business ownership strategies. “Most businesses do not get passed down to children, although most business owners hope one day that their children will take over the business.”

In fact, of those businesses that classify themselves as family-owned and -run, only about 30 percent successfully transition to the next generation. Of that 30 percent, just 15 percent make a successful transition to the third generation, and of that small pool of candidates, only 12 percent go on to transfer the business to the fourth generation. Beyond that, just 3 percent manage to keep the business in the family any further than the fourth generation, according to statistics from PricewaterhouseCoopers (PWC).

Bisio says there are several contributing factors to these low-succession rates, one of which is the fact that the next generation may not want to be involved in the industry or doesn’t have a passion for the business in the first place.

“You can have a lawyer involved and you can put all kinds of instructions in place, but the reality at the end of the day is, if you don’t have a person who wants to run the business and is willing to put the time and effort into doing that effectively, it can be very hard to successfully transition,” he says.

In some cases, the next generation simply doesn’t possess the abilities to run the business. In fact, according to PWC’s 2010–2011 Family Business Ownership Survey, owners who would like to pass on the business but choose not to cite the succeeding generation’s lack of skills as a primary reason.

“You have to have a child that doesn’t just want to, but is able to, and has the capabilities to run the business,” Bisio says.

Passing Along Financial Prosperity and Pride

Before deciding to pass on a business or taking the steps to actually do so, it’s helpful to examine some of the reasons why owners choose to keep a business in the family.

From a tax perspective, passing a family business to the subsequent generation can be advantageous, says Stephen Sheinbaum, CEO of Merchant Cash and Capital. “You can pass [businesses] down from generation to generation, up to certain amounts, without being taxed on it,” he says. “There are real tax-deferral advantages.”

The ability to pass a certain level of wealth and financial stability to the next generation is an appealing proposition to many parents and business owners, Bisio adds.

“All parents want something for their children that’s better than what they had,” he says. “If a parent has built a business that’s creating income, there’s a certain amount of financial security that goes along with that, as well as the potential to grow it.”

There’s also a sense of pride involved when one generation is able to successfully pass along its creation to the next. “That really starts with the parents and with a sense of legacy that you’ve built a business and it has survived generations and is going to continue on,” Bisio says.

That satisfaction doesn’t belong just to the founding generation, David Chance says. “There’s a lot of pride in knowing the groundwork that my dad’s done over 40 years in the restaurant business,” he says. “I’ve seen him put a lot of hours and a lot of dedication into building the brand and the company, and I’ll take pride in advancing that and continuing that tradition.”

Though it has yet to transition or create a succession plan that’s set in stone, Shula’s Steak Houses—founded by legendary NFL coach Don Shula—plans to keep the company within the family after the elder Shula decides to step down, says Dave Shula, president of Shula’s Steak Houses and son of Don Shula. “We recognize the value of having family members involved,” he says, “and it’s been helpful in how we’ve grown our business to this point.”

Thanks to the natural bond between families and the members within it, allowing a business to remain family-owned can be extremely rewarding and fulfilling, says Marcy Syms, president of TDP Group, a multi-generational succession planning company. “There are just so many advantages that are emotional, practical, economical,” she adds. “Your sense of continuity and purpose are so profound in transferring from one generation to another.”

Failure to Plan is Planning to Fail

It may seem obvious, but businesses—especially family-run companies that want to pass the business along to subsequent generations—must have a clearly defined succession plan in place well before a transition takes place. “If you don’t plan for it and you don’t work for it for a long period of time, it’s probably not going to happen,” Bisio says. “And even if you do work on it, it doesn’t mean it will happen.”

According to PWC’s Family Business Ownership Survey, 52 percent of family business owners surveyed said they would like to pass the business to the next generation to both own and run, while 24 percent plan to pass the business on to own, but not to run. Despite this desire, 40 percent of family businesses surveyed don’t have a succession plan in place.

Granted, family-business succession plans can be overwhelming to create and put into action. Once an owner has decided to keep the business in the family—both from a financial and an organizational standpoint—pinpointing which child or family member will take over is imperative. In the simplest cases, one individual will stand out among the rest, but in situations where multiple siblings are vying for the top spot, the competition can get ugly.

“You have to leave the business to one child, and how do you take care of the other children and how do you balance that out?” Bisio says. “Do you give one operational control, but you give them 20 percent ownership each? How do you avoid [creating] family squabbles?”

While determining which family member will be both capable to run and passionate about the business is a challenge in itself, it’s the grooming of this individual that requires the most time and effort. In order to increase the chances of a successful transition, Bisio says a successor must be brought into the fold at the ground level as early as possible and taught every aspect of the business, allowing that person to mature not only as a business leader, but also as an individual.

Though he took a break from the restaurant industry to spend 15 years in real estate, David Chance got his start fresh out of college with Golden Corral’s corporate office—an experience that taught him a great deal about the restaurant industry and prepared him for his future role at Chance Hospitality. Similarly, after leaving a career in professional football in 1997, Dave Shula spent several years undergoing a total immersion in various departments of the business to prepare for his current—and possibly future—role in the company.

At a minimum, Sheinbaum says owners need to give themselves and their future leaders three to five years to develop and carry out a viable succession plan. Syms suggests leaders should begin planning as soon as they have any insight or gut feeling that they may want to pass the family business on to the next generation. “And if for some reason they don’t get that feeling at 40, 50, or 60—or if they haven’t done it by 65—their children or their relatives should assume it’s not going to happen.”

Though Bisio says the necessary lead time depends on the size of the business, larger companies should be thinking about succession plans several decades in advance. And when it comes time for the actual transition to take place, Bisio says it should be a non-event if executed properly. “If you’ve done everything right, you’re still there and your child’s basically running the business,” he says. “Your child has grown into the position; they’re recognized as the leader of the business, and when you actually transition the business to them in a legal way, nobody notices.”

Multiple Generations Create More Challenges

When it comes to transitioning a family business beyond the second generation, that’s when a challenging situation gets even trickier, thanks largely to the fact that the original nuclear family involved in the business has multiplied and expanded. When in-laws, grandchildren, and more are introduced into the situation, Syms says it’s crucial to develop rules about who, beyond the core family, is able to participate in the business. “A lot of family businesses deal with that by saying an in-law is in essence an outlaw,” she says. “An in-law does not have a seat at the table, even if the in-law actually works at the company and gets a paycheck from the company.”

These difficulties only become more problematic when other complications arise, such as determining whether a business is still relevant or even has reason to exist in the business world of the third, fourth, and subsequent generations. Often technology and processes will also need to be addressed and upgraded when the company continues in the hands of subsequent generations—an update that may be met with resistance from the original founders or employees who have been with the company for many years and are used to the old way of doing business.

Passing on the values of the founding generation can also be difficult when businesses come under control of the third or fourth generation, simply because the values of the world may have evolved greatly from the values established at the time of the business’s conception. In order to guarantee that the initial principles live on, Bisio says it’s important for the founder to share these values with everyone—both inside the company and out—before retiring and leaving the business. “If you’re able to share those ideas and values with the whole community, then there’s an expectation that your corporation will act that way,” he says. “It puts societal pressure on the corporate mission.”

Staying true to its values no matter which generation is in charge is vital to the team at Shula’s. “What has made us successful to this point will continue to make us successful over the years as times change,” Shula says. “We may feature different items on the menu, styles may change in uniforms, and the design of restaurants may change and evolve, but the virtues do not change and will always apply.”