Build a Family Business You Can Pass Down to Future Generations
In the U.S., 90% of businesses are family-owned with two-thirds of the Gross Domestic Product (GDP) attributed to these businesses. However, when they are passed to the second generation, 70% of these businesses fail, and only 12% are successful in getting to the third generation. So, how do you build a family business that is successful for you and future generations?
The answer perhaps lies in the fact that nearly one million of the family-owned businesses in America are franchise businesses. Franchising can provide a number of solutions to the problems that arise in business successions, and we have outlined some of these below:
Franchising Provides a Successful Succession Plan
A well thought out succession plan is crucial when businesses change hands through generations. For example, no one knows when they might get ill or die, and there are a variety of financial and legal issues that franchise owners must address while they are able.
However, franchising is renowned for its beneficial business models, which help franchisees to hit the ground running. This is also the case when future generations take over. Unlike family-owned businesses which have been developed by Mom and Dad, a franchise has a specific system to follow. Therefore, the handover between generations may be a much smoother process, as training and support are available to a new franchisee. Family members taking over the business aren’t thrown in the deep end, and don’t have to try and learn the ropes on their own.
The Kids Don’t Have to Be Directly Involved in the Company
Another primary reason why family-owned businesses fail is because future generations have no interest in the business. Mom and Dad may have been skilled decorators but little Harry may have absolutely no interest in this at all. In a family-owned business, this is a problem, because they have to take over the same roles that Mom and Dad had. However, with a franchise, the younger franchisee can take a back seat, managing the franchise from behind the scenes. This allows them to continue their family’s successful business but without having to have a direct interest in what the franchise does. They see the franchise business as a business.
The Younger Generation is More Open to Change
Whether it’s the changes in the marketplace, changes in how business is being done, or technological changes, the younger generations are likely to be much more open to these adjustments. In some cases, the kids can see greater potential, whereas parents have been more focused on the here and now.
Have you successfully created a franchise family business that you have passed on to future generations? How did you make it work? We would love to hear your comments below!