Multi-Unit Franchisee Magazine Issue IV, 2016 - Page 56

SUCCESSION Wanda and Bill Sieber between people you care about, so business can be business and family can be family, is difficult,” Rawls acknowledges. In many cases, she says, “It is a tightrope walk.” No matter what your strategy, it is vital not to overlook the human element, advises Philip J. Toffel, Jr., CEO and managing partner at Sage Hill Advisory & Management in Saratoga Springs, N.Y. For Toffel, a successful plan to transfer ownership requires involving all the potential players. In the case of family-owned structures, the process typically involves the owner patriarch and/or matriarch, family members inside and outside of the business, estate and financial considerations, and the franchisor, who must approve the transfer. “The current franchisee has to recognize who will have a voice in the succession plan and who can dismantle it very readily if it is not vetted with them,” he says. And when it comes to planning the future of a family-owned business, it is never too early to start talking. Openness and transparency are critical to address the human, legal, and financial issues that accompany family legacy decisions. Toffel, who has seen families torn apart by a founder’s lack of planning, encourages owners to take the lead with “robust” family meetings aimed at putting everyone on the same page. “One of the first things we do when we get involved is to make sure we have a good blueprint of the family situation early in the planning process, to make sure 54 that the parents are communicating well with each other and with their children as to what the plan needs to be,” says Toffel. Getting an early start in transition planning enables a founder to identify who will manage and own the business (often not the same person), and to ensure that potential successors meet the franchisor’s requirements—which can be especially tricky when multiple brands and approvals are involved. To avoid a franchisor vetoing a succession plan, Rawls encourages owners to take advantage of every opportunity for incoming leadership to interact with and build their own relationships with the franchisor. “If the active generation holds all the relationships and something happens to them, they may have always planned for the next generation to take over, but if the franchisor has no idea who they are, do they trust them?” she says. The same holds true for financial institutions. Allow the successor to build “credit continuity” to ensure the first or active generation isn’t holding all the personal guarantees and relationships with the banks, she adds. In trusts they trust Toffel says trusts can be used to separate family interests and protect the assets of the business. “Another fly in the ointment, if they don’t do it well, is distributing shares without developing trusts for the process,” he says. “What if the marriage of one of the children doesn’t go well and the divorced family member has shares in the business and the business is in the middle of the divorce action?” Every franchisee organization has a different knowledge level and different attitude toward trust ownership, says Toffel. However, he says, used properly this succession tool can be a win-win strategy to provide continuity for everyone involved. “If a business continues and you know it is being run by the next generation, and if the franchisor approves this form of planning, it forces the franchisee to tend to proper mentoring of the next generation to take the lead in the business,” says Toffel. No matter the route, establishing a succession plan early and visiting it often ensures that business owners, family members, and key company leaders are not blindsided with problems, says Rawls. Succession, she says, is a process, not a project. CULTURAL CONTINUITY Strategic succession planning is the topic of almost daily conversation between industry veterans Michael Simon, managing partner of Titan Restaurant Group, and his 67-year-old partner Jack Whiting, who holds a 20 percent stake in the company. Simon, 55, owns 80 percent of the company, which operates 42 Donatos Pizza stores, purchased in 2010 from the family-owned brand. His responsibility for the future of his 1,000 employees is always on his mind. Simon’s background includes more than 30 years in corporate operations for companies such as Tim Hortons and Pizza Hut. In his experience assisting franchises with succession planning, he has found the key to success is in maintaining a continuity of culture and performance. “You need to find an individual with the same kind of integrity, vision, and performance management. The big question is whether to go internal or external for the successor. The tricky part is to determine which will add more value, which is a risk for an external person you have not worked with before,” says Simon. “For me, the safe play is to bring someone in who protects everybody that has made this thing work.” MULTI-UNIT FRANCHISEE IS S UE IV, 2016 muf4_succession(50,52,54).indd 54 10/6/16 5:13 PM