Natural Foods Merchandiser

Tending the Family Tree

Marc Friedland always expected to enter his family's grocery business, just as his father had followed in his own father's footsteps.

But in the 1970s, Friedland turned his back on Food Fair, a $2.5 billion chain of supermarkets and discount stores, and became a yoga teacher instead.

"I didn't want to participate in any business that sold cigarettes," he says of the Philadelphia-based chain started by his grandfather in 1918 on a $119 loan from his great-grandfather.

"Passing the baton can be really difficult," says Carl Spina, a Fort Collins, Colo., small-business adviser who specializes in helping families plot business success and succession strategies without chopping down the family tree.

Business Espalier
By most estimates, there are about 24 million businesses in the United States. About 90 percent of businesses are family owned, but only about 30 percent will survive into the next generation under the control of the same family, says Joe Astrachan, director of the Cox Family Enterprise Center at Kennesaw State University in Kennesaw, Ga.

The businesses that do survive and thrive under family control typically operate within a formal framework that deals with succession planning, conflict resolution and entrance and exit strategies, and have established a formal family council and often a panel of advisers or board of directors.

The formality helps reduce conflict and anxiety by setting rules that everyone in the business knows they must follow. Rules translate to fairness, Astrachan explains. "Fairness is when you know what to expect and even if you don't like it, you get it."

Closely held businesses with the greatest longevity also often have a mission statement that expresses family traditions, values and beliefs and how they apply to the business.

"Some really clear ground rules make a big difference in success," Spina says.

Sophia and Forest Wakefield and their partners, Glenjamin Wood and Angele Ferre, needed to take out a loan in order to purchase Harvest Organic Foods, Bakery and Café nine years ago. From the outset the two couples agreed that any one of them could leave the Jackson, Wyo., business at any time. "But we had a legal document that said as long as we had debt, a person could leave, but they could not take a thing with them," Sophia says.

The debt was paid off in three-and-a-half years and the agreement set the foundation for a particularly open and trusting business partnership that lasted until Jan. 1, when the Wakefields bought out Wood and Ferre.

The openness helped smooth the types of transitions that are often the most sticky in closely held businesses. Though he was a full partner in Harvest, Forest Wakefield was for several years an apprentice baker to Wood. For Forest, now in his mid 30s, to come into his leadership role at the store and the bakery, Wood, who is in his late 60s, needed to prepare to step aside.

Over several years, Wood and Ferre gradually removed themselves from day-to-day operations. "We were constantly in touch," Sophia says. "The daily business stuff, we didn't feel like having to share every day. But the major changes, successes and excitements, we always shared with them."

Harvest's management succession has been comparatively easy; Harvest's partners do business following a paradigm that allowed them to see the end of the cycle in the beginning, Sophia explains. "That means you have to be able to see how the finished product looks—people going in and out of the business, shelves all full, bills all paid and all the employees you need."

When Wood and Ferre began to travel more than they were in the store, "it was the right time," Sophia says. "It took a couple of years to really do it, but we could see that there would be a time when Glenjamin and Angele did not need to be in the store 12 to 14 hours a day."

10 Years To Switch
Usually, it takes about a decade to groom a successor and plan an exit strategy, assuming the entrepreneur has made peace with the idea of stepping aside and can see it as an opportunity for regeneration for himself and added vitality for the business, says Denver-based family-business consultant Jeff Rothstein.

But the process can be thorny if the older generation lacks clarity about the transition and worse if the next-generation managers are still playing their roles as children.

"The junior generation could be saying in a lovely way, 'You've worked hard all your life, let me take care of you,'" Rothstein says. "But if you're the parent, you're hearing your 6-year-old saying they're in charge of your future."

Rothstein helps his older clients figure out how they will know when their successors are ready to take the wheel and the junior generation to understand when they are ready to ask for control. "If it's their choice and they can plan for when it happens, it's a much easier transition," he says. "They are not being shoved, kicked or bought out in some way."

In cases where there are several siblings interested in joining the business, Rothstein helps them to carve out their own niches. "Not everyone is going to be a leader," he says. "Not everyone wants to be a leader."

By finding their own expertise, the next generation can invite the owner/founder to be part of their circle, Rothstein says.

Though Friedland never joined his father in the family business, he did eventually enter the grocery world with his father's help. Friedland spent 20 years developing expertise in vegetarian foods and natural living and honing his food politics, and worked for a few years at Orchard Hill Market in Branford, Conn., before inviting his father into his business circle. In 1991, Friedland's father financed Talley's Green Grocery, a 14,000-square-foot natural foods store in Charlotte, N.C. Friedland's wife, Jyoti, is the foodservice manager and his brother Rodger programs computers for the store.

"He really has taken a hands-off attitude from the beginning," Friedland says about his father. "I do send regular reports to him. He's a real numbers guy and he does give me some pointers. But the person who gives me the most advice is someone who has 35 years in the supermarket industry and worked for my family the whole time. He has a lot more experience than I do; I found him through my father."

Rothstein says Stew Leonard's, the Norwalk, Conn.-based chain of dairy superstores, is a particularly good example of an entrepreneur allowing his children to carve out their own business niches.

In the late 1960s, Stew Leonard attempted to follow his milkman father into business, but soon decided a dairy store on the commuter route between New York City and the Connecticut suburbs would be more profitable. Today Leonard's four children control the company. Stew Leonard Jr. is president and chief executive. Beth Leonard Hollis, founder of Bethy's Bakery, serves as executive vice president and manages the company's Gifts By Mail Center. Jill Leonard Tavello is an executive vice president responsible for customer service. Their brother, Tom Leonard, opened the second Stew Leonard's store in 1992 and was its president until 1996. He is preparing to open a Tom Leonard's Farmers Market near Richmond, Va.

Stew Leonard did a good job allowing his children to find their place in the business and was also able to pass on a sense of stewardship. "When I met Stew Jr., a lot of people were asking him questions around money and he gave one of the most intelligent, astute answers on the issue. He said he saw the wealth transferred to him as a Faberge egg that needed to be taken care of—that he needed to make sure it doesn't break," Rothstein says.

Those are tough values to convey, Spina says. "The owner/founder needs to consider that they are truly stewards of the business and take the opportunity to educate their offspring and grandchildren around being creators of wealth rather than recipients of wealth."

Financial and estate planning helps guarantee that the next generation will at least have a chance to prove their mettle. "Often, the founder's retirement is tied up in the business," Spina says.

"To effectively and fairly distribute the assets from the older generation to the younger, there must be enough money for the owner/founder to retire on and still provide enough cash flow in the business for the next generation to take it on," he adds. Without this kind of planning, chances are good that the business will fall out of family hands.

Once the senior generation steps out of the leadership role, it's important for them to stay out, so long as the business is not on the verge of collapse. "If they jump back in, it undermines the authority of the new leader," Cox Family Enterprise Center's Astrachan says. "It is one of the most dangerous issues with succession."

Often, though, if owners don't leave to explore their passions, they can find a new role in the business, Rothstein says. "I've seen some cases where the entrepreneur hands the operation over to their kid and then goes into a domain where they can go back on the road, or back in as a salesperson, where they can be active and lively and remain in the business in a vital way."

Carl Spina of Family Business Consultants in Fort Collins, Colo., will discuss managing the family business using well-designed family mission statements, family councils and family legacy plans March 7 at 4 p.m. at Natural Products Expo West. For details, visit

Natural Foods Merchandiser volume XXIV/number 2/p. 26, 28, 30

Family Business Planning

  • 36.7% have written strategic plans

  • 85% that plan to keep the business in the family have selected a family member from the next generation to lead the company

  • 71% of companies have no qualifications for family employment

  • 54% have shareholder agreements that allow members to buy in or sell out of the business

  • 38% have a liquidity plan

  • >50% have regular, formal valuations of the business

  • <50% hold board meetings more than once or twice a year

    Source: MassMutual/Raymond American Family Business Survey 2002

The Raymond American Family Business researchers asked family businesses if they expect:



Leadership change within five years



CEO will retire within five years



CEO will semi-retire within five years



Among businesses with $1 million or more in revenues:

CEO will retire within 10 years



CEO will never retire



Have two CEOs



Natural Foods Merchandiser volume XXIV/number 2/p. 28

How Kids Join the Biz

For his dissertation research, Denver small business consultant Jeff Rothstein interviewed "family-business kids" and determined there are six entryways to the family business. "Each of those on-ramps have different pathways and struggles," he says.

  • You were predestined. From day one, you knew you'd go into the business and valued experience in the business over formal education. You probably entered the business right out of high school or college.
  • You took a more formal path. You value education and earned an advanced degree, such as a master's of business administration, before entering the family business.
  • It was your second choice. You wanted to be a cellist or an artist, but didn't get into those programs.
  • You're in the "sheltered workshop." You had difficulty finding another vocation and were taken under the wing of the family business, regardless of your skills.
  • You flowered in the sheltered workshop and found a niche that helps the business and helped you develop your professional identity.
  • You didn't want to wait to make partner. You earned a professional degree, but reasoned it would take seven years to make partner in a law or accounting firm, you might as well be working toward an ownership stake in the family business.

Natural Foods Merchandiser volume XXIV/number 2/p. 30

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