Taking a Longer View: Business Succession Planning Basics for Independent Operators

At some point restaurateurs must ask themselves: If something happened to me tomorrow, how would my business survive and thrive? Stakeholders -- primarily family members, but also employees, suppliers and financers -- both need and deserve to know the answer, which is why succession planning is such a vital, if underappreciated, part of the business.

A well-thought-out, seamlessly crafted succession plan will protect an owner in the event of a longor short-term disability and will provide financing sources. It will also prevent costly and painful squabbles and empower the management team. Transferring ownership involves changing leadership, which can be disruptive.

Traditions, culture and management styles can upset both staff and customers' habits "and transform a winning formula into a money-losing operation," says Dave Matthews, general counsel for the National Restaurant Association in Washington, D.C. He advises restaurant operators to prepare their staffs for any proposed changes, and to communicate with the customer base as well.

"The first and probably the most important issue is for owners to consider their personal financial security -- how well will they be protected as they plan and execute their exit strategy," says Don Schwerzler, family business expert and the founder of the Family Business Institute in Atlanta. Another key question is whether they should sell the business to an outsider and pass the proceeds of the sale to their children as part of their estate planning.