The Philadelphia Inquirer ran a story Monday about the legal troubles unfolding around a famed restaurant, illustrating the troubles that can ensue when the next generation disagrees about how to handle a family business. The saga of the Victor Café, founded in 1920 as a phonograph store that eventually became an opera-themed restaurant boasting classically trained singing servers since the 1970s, could provide fodder for an opera all of its own.
The Inquirer story details the battle for control that began after owner Lola DiStefano, whose parents opened the place, began growing forgetful and wasn’t able to run the restaurant on her own anymore. The change brought up long-simmering sibling rivalries that ended in court.
The industry abounds with stories of family restaurant companies that have successfully navigated the tricky waters of succession. Texas-based Whataburger has thrived and grown under family ownership, from the first eatery Harmon Dobson opened in Corpus Christi in 1950 to the more than 700 units under the stewardship of his son Tom, who runs the company today.
Lawyers and experts quoted in the Victor Café story say there’s little that could have been done to prevent the owner’s grown children from taking their long-held grudges to court, but better planning early on might have helped head off the worst of it.
The U.S. Small Business Administration offers tips for managing a successful family business, advice designed to head off the kind of workplace problems that can crop up when family members work for you and issues that come when it’s time for the company to change hands.
The SBA advises family business owners to:
- Remember that at work, the business comes first. It’s important to keep decisions objective and not personal as you’re building the company, with clearly defined roles for each family member who works there.
- Consider hiring a manager from outside the family, to ensure objectivity when it comes to making the tough decisions.
- Avoid taking sides when disagreements crop up among family members who work for you.
- Plan for succession far in advance of the day you’ll be ready to pass the business along, either to the next generation or to new owners from outside the family. Consider: Your family goals for the future, which family members are best-qualified and most-interested in taking over the company, and what you’ll do if there’s not a family member to run the company after you retire.
Are you running a family-owned restaurant? Share the challenges you’ve faced in the comments.
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This is good advice, as far as it goes, but as a counsellor to several family owned businesses, we actually did a course in understanding the whole family business concept and its dynamics, called Family Business.
John Heinrich, Chief Mentor
American School of Entrepreneurship
asechmentor@gmail.com
Sad news about the Victor Cafe. While a student at Penn in the 1960's, I ate there frequently, as much for the singing waiters – opera – as for the food. what next? The bar tucked in behind Wanamakers?
Perhaps the most important advice that the SBA doesn't list is that family business owners must not think that their company is any different than a non-family business.
The work to be done to make a company saleable so that it is actually transferrable to the next owner is the same regardless of family or non-family ownership.
The big elephant that business owners every where are ignoring or unaware of is that they have to invest 2-4 years before they want to sell in making their companies saleable.
This work is far more in depth than succession planning. It is making the company worth what the owner wants for it and making it a perfect fit for the next owner.
That's the way an owner will be able to claim their wealth. Because the biggest payday doesn't come from owning a business, it comes after the business is sold. Businesses have a shelf life. Make it saleable and then sell it before the expiry date arrives "one day", and then makes selling impossible.