Transitioning a business is an intentional process. If done well, perpetuation will empower the next generation to carry on a legacy.
Only 30 percent of family businesses survive to the next generation—a stark statistic when you consider the lifetime that owners dedicate to nurturing their companies, providing employment, and giving back to their communities.
What does it take to perpetuate and thrive? Why do some family-owned businesses succeed while others stumble?
We spoke to three family operations that are in the midst of accomplishing what, based on that statistic, might seem like mission: impossible. But perpetuation is possible with intentional planning, open communication, and a desire to evolve and grow. Here are their stories.
Serving Up a Legacy
A month after Frank Hanna Sr. broke ground to build Harpoon Hanna’s on Delaware’s Fenwick Island, his son Wes was born. He has grown up in the business, as have his siblings Frank Hanna Jr. and Leigh Hanna Wheatley.
“Frank Jr. started washing dishes and putting garnish on plates by the time he was 10 or 12, and Wes worked the T-shirt stand,” Frank Sr. shares. “Leigh would serve muffins, carrying the breadbasket around the restaurant. That’s how we got them all into the business—they were exposed at a young age.”
Hospitality has always been a passion for Frank Sr., who attended Florida International University and graduated with a hotel and restaurant management degree. “I enjoy the restaurant business, the excitement of opening up a new facility—competing,” he says. “And the older I got, I found out how much I enjoy making deals.”
Over the years, Frank Sr. has done everything from mortgage lending for hotels, buying water and sewer bonds for developments, and operating apartment complexes. His first restaurant opened in 1974 in a leased facility, and his first rental began with a single house he built, that eventually grew into a large residential apartment portfolio. “Later, I got into single-tenant stores like Sheetz, 7-11, Royal Farms, Rite Aid, Walgreens, Dollar General, McDonalds,” he says of the properties he builds and leases.
Frank Sr. realized from the beginning—very early, when the children were young—that involving them in the business would help them learn, grow, and take responsibility in it.
Dividing the Responsibilities
Harpoon Hanna’s is on its 37th year in business, and Frank Sr.’s second flagship waterfront establishment, Brew River in Salisbury, MD, is in its 19th season. The operations are carrying on now that the second generation is at the helm. Each child has his or her own niche, and the “training” started young, working from the bottom to the top of the organization. Wes helps run the two restaurants, while Leigh oversees operations at Brew River and Frank Jr. operates Hanna Systems Wealth Management, which handles estate planning and money management.
Wes started as a young dishwasher, then food runner, worked in the kitchen, and served guests—he learned every part of the business. By 18, he was a manager. Because he knew he’d continue in the family business, he enrolled in a hotel and restaurant management program at the University of Delaware. “I saw the opportunity for this business, so after school, I came back full-time and helped the restaurants grow,” he says.
As for Frank Jr., he decided to pursue an MBA and move into the financial planning field. “When Frank Jr. left, it kind of rocked my world because he was the oldest and I thought he would be the one to take the restaurant, but it turned out Wes really wanted it and was passionate about it,” he relates. “But then, just as important, Frank ended up in estate planning and wealth management, and now he has that business that also plays into our business.”
Frank Sr. shares that a great deal of estate planning has gone into the process. He created a family partnership for some of his real estate holdings, along with a dynasty trust. Each child holds 33 percent of the family partnership, with Frank Sr. maintaining one percent.
“The idea is to get it out of my hands, and that started about 25 years ago,” he says of the planning. “I think a lot of businesses don’t last for more than one generation because they don’t plan properly, and then estate taxes can put so much pressure on them, they’re forced to sell. We feel like we’ve got a good situation. We didn’t want to sell the business—we wanted to hold on to it for our children, and hopefully for our grandchildren. We want to pass it down, which I’ve already done for my children.”
Frank Sr. advises bringing in professionals who can help design a transition strategy. It takes a team. Deeley Insurance Group writes insurance for all of Hanna’s properties, including business interruption, liability insurance, and health care. “They have a lot of expertise and can help guide a business,” he says.
Changing with the Times
Business is not necessarily “as usual” for the Hannas, and they like it that way. Wes is putting his own stamp on the business, and with Frank Sr. involved in real estate transactions and overseeing properties, everyone in the family has a role in growing wealth and success—in their own way.
“I like to be creative,” Wes says. “I like to see my ideas come to life and present a youthful transition where we are evolving into this next generation of restaurant and bar—and I love to see the success.”
Wes admits he is competitive like his dad, and shares his father’s eye for detail. “I don’t know if it’s in our blood or if I got it from watching my father,” he says.
Their working relationship has always been positive, and that has helped the transition over the years. “Growing up, business was the main focus for us,” Wes says. “And I’ve grown a healthy bond with my father doing it.”
Now, with a shared vision, planning in place, and each child working toward individual goals, the Hannas’ businesses are perpetuating into the next generation—and hopefully, beyond.
When Joe Pino Sr. and his wife, Patricia, started United Restoration Inc. in 1981, they took on a range of construction jobs—whatever the market demanded. “For a while, my dad ran it as a paint company with dozens of painters,” says Joe Pino Jr., who started learning the business in a hands-on way when he was a teenager.
“Whatever opportunity there was, my dad took it and ran with it,” Pino says. His father loves working with customers and guiding them through the restoration process, which can be emotional after tragedies like fires or flooding.
In the summers growing up, Pino worked with crews doing carpentry, drywall, and demolition. “I wasn’t the best,” he laughs, “and my dad told me a decade later, ‘We threw you in there—you didn’t do a great job. We had to come back and fix some of your stuff, but we wanted you to understand the business.’”
Joe Sr. didn’t want his son to walk into management without learning the trades. This is how Pino developed a deep understanding of the business. During college, he was preparing estimates and selling work. And after graduating in 2007, he joined the family operation full-time in management.
They began to fine-tune the operation, focusing more on water mitigation and commercial projects. Today, 80 percent of their work is commercial, and they have 20 employees on staff.
“I feel like some parents who own family businesses immediately put their kids into management positions, but that’s not how we did it,” Pino says. “My dad didn’t want me to start doing management work until I really understood and experienced the field work.”
An Organic Transition
Business perpetuation has been gradual and intentional. “My dad and I have always had a great relationship, and he’s been very patient with me, teaching me how to run the business,” Pino says.
He feels the process has evolved naturally as his skill sets have developed. He and his father diversified the business and developed areas of concentration that each enjoys. For example, Pino prefers the commercial accounts while his father enjoys residential work—such as restoration after a large house fire. “If we have a problem on a job site or with a customer, we talk to each other about it,” Pino says.
“We haven’t had a formal [succession] plan, but it’s more of an organic thing,” Pino says. One part of their strategy involves moving Pino’s mother out of her role of managing the financials. “We’ve hired people to help take some of that workload off of my mom, and she has started to take a step back,” Pino says.
Joe Sr. is still very involved and generally oversees the residential projects. “He has let go of a lot of responsibilities, but at the same time, he likes to be very hands-on with his projects,” Pino says.
“Dad is more of a Type-A personality. I’m definitely a Type B,” Pino says. Because of this, he finds it easier to delegate tasks. “That’s something you really need to do in order to grow.”
But growing also requires attention to detail so quality doesn’t falter, and that’s where the Type A comes in. “He has taught me to be more hands-on and focused on quality control,” Pino says.
“We still work together and bounce ideas off of each other,” Pino adds.
Respecting the Legacy
Pino feels there’s a mutual respect that’s important when transitioning a family business. “The person coming into the business needs to value the person who built the business and the work they put into it—it’s their baby,” he says.
While Joe Sr. is at “retirement age,” he still enjoys his time working closely with customers, so the transition is happening naturally.
“I know my dad will always want to be involved to an extent,” Pino says. “And I am looking forward to getting the business to a point where it’s a well-oiled machine and I can be there to oversee quality and focus on big-picture planning.”
Divide and Perpetuate
Bill Gibbs grew up in Ocean City, working as a beach boy for Breakers Hotel on the boardwalk. Every day, visitors asked him where they could grab lunch—there really wasn’t a casual spot for families near the hotel. “I always loved the pizza business,” Gibbs says. So, after coming home from college, a 22-year old Gibbs opened a boardwalk pizza shack.
“I was very aggressive,” he says, sharing his love for meeting and talking with people while rolling dough, serving up pizzas, sodas, and beer. He worked this way for eight years, until 1979 when he had an opportunity to buy the Breakers Hotel.
“I knew it would be a perfect place for a family-friendly restaurant,” he says, hatching plans to open up a pizza and pancakes spot for guests. To help bring this vision to life, his wife, Julie, gave up a nursing career to run the Breakers Hotel.
The Dough Roller opened in the spring of 1980, and it has consistently grown since then. Today, there are two Coastal Highway locations, a second boardwalk location at South Division Street that also serves Dayton’s Boardwalk Famous Fried Chicken, a West Ocean City store, and the original spot at Third Street.
Gibbs was careful when opening stores, waiting until he had a reliable manager who could “own it” and grow it. And the same care applies to the way he is transitioning the business to his children.
“I deal with people I know,” he says. “That’s my business plan.”
Basic Training from Dad
Gibbs’ three sons grew up working in the business—he involved them from a young age because that’s what the family did. The oldest son, Gary, loved cooking on the line and was running it himself by age 15. The middle son, Jeff, had a thing for making pizzas. “One was cooking and the other was making pizza, so they were working together but one didn’t have to yell at the other to get the food out, which you have to do in a kitchen,” Gibbs points out.
Gibbs intentionally shifted his children into various roles as they were growing up so they’d gain experience, get in a good day’s (or night’s) work, and maintain healthy boundaries.
Gibbs didn’t begin working on a transition plan until his children graduated from college and began returning to the business.
“If my children hadn’t come back and gotten into the business, I would have sold out,” Gibbs says. There was never any pressure on them to join the company.
In fact, Gibbs wasn’t sure he wanted his children to have the nonstop restaurant life. “When I look back, it has all been a blur,” he says. “It was 20 years of working from 7 a.m. to 1 a.m. from April through October, every day. I didn’t really want my children to do that.”
But Jeff always felt differently. He naturally moved into running the busiest location after college. “He is married with two kids,” says Gibbs, “and has been running that original location for almost 20 years.”
Kevin trickled back into the business. After he graduated from the University of Kentucky, he came home to Ocean City to manage the South Division Street location, which had been rebuilt after a fire. Kevin is also savvy with marketing. “He does all the social media and advertising,” Gibbs says.
Gary returned home and started helping in the family business. “He comes down and works the whole summer and sometimes year-round,” notes Gibbs. “He still lives in Washington, D.C., in the winter.” Because of Gary’s engineering background, he handles the technology aspect of the business, including implementing the menu changes. “He’s the numbers guy,” Gibbs says. “He’s the mathematician around here.”
Gibbs adds, “The diversity of having different stores allows my children to work for the same business we built, and that is the reason this particular family business is surviving.”
The Next Chapter
About five years ago, when the inheritance tax laws were due to change, Gibbs worked with advisors to create family trusts. Assets have been filtered into those trusts. “That was pretty much the planning we did,” he says, noting that giving his kids key business responsibilities and stepping away from daily operations has been gradual. The trusts were formed when he realized those years of teaching and growing could result in a sale of the business due to tax burdens if he didn’t protect the assets and start passing them down. How would his kids afford to keep the operation otherwise?
Meanwhile, Gibbs ensures that his properties are protected from liabilities that could prevent perpetuation by consulting regularly with his insurance advisors. “At one point, there were 20-some properties in this business, so there is a lot to make sure you have covered,” he says. “Deeley has covered my entire pace of life in growing the business and diversifying.”
Today, Gibbs isn’t necessarily slowing down—he’s out at all the stores daily and overseeing office administrative duties. His wife Julie still plays a supporting role, and is very involved with renovations and remodeling. But Gibbs isn’t working the line or quite as involved in the everyday details of food service. He trusts his sons and other managers to do their part.
They all grew a love for it, and with the multiple locations, they can run a business independently while working together in the family operation. As for letting go, Gibbs says, “Well, they can have it! I’m glad they’re here. I’m glad they’re happy, and I’ve always preached that’s the most important thing in life.”