Business Succession Planning – Food for Thought

In my post two weeks ago, I promised more real-life business succession stories. Here are three shocking words for many business owners: You will die. Perhaps you read that and say: “Duh! That’s obvious!” But most business owners do no business succession planning, acting as if they’ll live forever.

As an estate planning lawyer, I have come to grips with the reality of death. That wasn’t the case when I was a young lawyer. Then I had a wake-up call. In a meeting with a client, I started a sentence like this: “IF you die,….” The client stopped me and said: “You mean WHEN you die,….” That’s when it hit me.

For this post, I’m doing a survey of real-life succession stories from the food industry. So today, it’s all about food. Let’s start with a favorite appetizer—cheese.

  • Jim Leprino’s Denver-based company Leprino Foods cornered 85% of the pizza cheese market for over 70 years. Leprino landed in court over a battle for succession between two nieces vs. Jim and his two daughters. The jury ruled for Jim after an agonizing trial to determine “the next, um, cheese heads, so to speak. Nieces need not apply.” (Amy C. Cosper, “When the Cheese Stakes Are High,” Family Business Magazine, Jan./Feb. 2023.)
  • The next cheese fight involves The Chicago Pizza and Oven Grinder Co., home of the pizza pot pie. Legal battles over control ensued among three factions: children of founder Albert Beaver, Jr., a longtime employee, and Beaver’s fourth ex-wife. Beaver gifted the business to a trust for his children. The employee later presented documents (which the children assert were forged) where the children relinquished their interests in the trust, followed by Beaver assigning the same business to the employee. Ironically, the restaurant business was a lookout spot for the 1929 St. Valentine’s Day Massacre. Now a business massacre is continuing to this day in the same location. (Joe Barrett, “Chicago Restaurant That Invented Pizza Pot Pie Embroiled in Legal Battle,” Wall Street Journal, Apr. 29, 2023.)
  • Shifting from pizza to another fast-food fiasco, the Fletcher corn dog. Each year at the Texas State Fair, the Fletcher family enjoys sales of more than 500,000 of these breaded hot dogs on a stick, raking in $4 to $5 million in three weeks. When grandfather Fletcher died, his fifth wife G.G. sued granddaughter Jace over the rights to use the Fletcher name for Jace’s competing corn dog business. Jace settled for the name CornDog With No Name.” Both corn dogs are sold at the State Fair. Too bad this wasn’t all resolved while grandfather was alive. “It’s a deep-fried mess.” (Brian Davis, “Corny Dog Crossroads: How a Fletcher’s Trademark Dispute Led to Family War with Deep-Fried Emotions,” Austin American Statesman, Sept. 30, 2020.)
  • Now a fast-food story with a happier outcome—Subway sandwiches. Following a recent trend of charitably inclined business owners, the late Peter Buck left his half of Subway to his family foundation. Following the donation, Subway embarked on negotiations to sell the business at more than $10 billion. Note the order of events—donate to charity first, then sell the business. By doing it in that order, the Buck family avoids tax on the half donated to the foundation. Upon a sale for $10 billion, the foundation receives $5 billion to create educational opportunities, undiluted by income tax. Way to go, Subway! (Simrin Singh, “Late Subway Co-Founder Leaves 50 Percent of Sandwich Chain to Charitable Foundation,” CBS News, Jan. 31, 2023.)
  • Tyson Foods sells one-fifth of the meat eaten in the U.S. Founded in 1931, the Tyson family still controls a majority of the stock. The efforts to keep governance in the family are now at risk, due to rising costs, layoffs, and plant closings. Even worse, CFO John R. Tyson, fourth generation and presumed next in line for Chairman, “pleaded guilty to charges of public intoxication and criminal trespassing, after he allegedly was found asleep in the bed of a woman who didn’t know him.” When selecting family members for key positions to run the businesses, be careful whom you get in bed with. (Dominick Reuter, “Meet the Billionaire Family Behind Tyson Foods, the Beef, Pork, and Chicken Juggernaut Whose Heir Apparent Has Battled Legal Troubles,” Business Insider, Jun. 10, 2023.)
  • Concluding this food survey, consider the saga of brothers Theo and Karl Albrecht, owners of grocery chains Aldi and Trader Joe’s. The Albrecht brothers grew their mother’s corner grocery store in Germany into a giant supermarket business. Theo was notoriously frugal. “He was known to use pencils down to their stubs, wore cheap suits, and never allowed the stores to [indulge] in fancy décor.” Similarly, Karl shunned publicity “and always turned down any honours, leading a secluded life.” However, Theo’s and Karl’s values weren’t successfully infused into the next generations. Theo’s daughter-in-law Babette went against family rules by spending millions on vintage cars and art. Babette challenged her husband’s Will which cut out Babette and her children from control of Aldi Nord, worth more than $22 billion. The family reached a settlement whereby Babette and her children have to make do with $36 million a year. The drama continued when Theo’s wife Cacilie died, leaving a Will where “she accused Babette and her children of ‘lavish spending’ and of siphoning $112 million from one of the company’s foundations to fund her lifestyle,” adding “they should have no role in the company’s future.” (Meira Gebel, “The Family Behind Grocery Giant Aldi Is Locked in a Feud After the Founder’s Wife Tried to Cut Her Grandkids Out of the Business in her Will—Meet the Albrechts,” Business Insider, Apr. 5, 2019.)

The lessons from these food industry stories abound. As Amy Cosper points out in her article, family business succession is fraught with challenges: “No matter the company size, revenue or sector, family business succession is never easy, and no two successions are the same…. ‘There are a lot of reasons succession is hard,’ explains Dennis Jaffe…. ‘Leaders want to hang on and sometimes think nobody else can possibly do a job better…. When emotions run high, things get messy. The best strategy is to have a plan.”

Furthermore, senior generations need to be intentional about imparting the family values to future generations, especially to younger ones who grow up in wealth! Your estate planner can help you design a strategy to address these challenges.

Marvin Blum draws lessons from the food industry to show the importance of business succession planning, including the story of the Albrecht family’s Trader Joe’s grocery.