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

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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

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