Passing the Torch: Succession Planning Strategies for Family-Owned Restaurants

• The main takeaway: Family-owned restaurants should begin the succession planning process well in advance of the owner’s retirement to focus on training, communication, and alignment across generations.
• Impact on your business: It’s critical to balance your family dynamics with your business’s needs. By establishing clear roles and documented processes, you can better navigate emotional complexities and facilitate a smooth leadership transition.
• Next steps: With the right advisors, strategy, and support, your family-owned restaurant can thrive across generations. Schedule a consultation with Aprio to find out how we can help you.

The full story:

Succession planning is a critical component to long-term business success — but for family-owned restaurants, the process can be particularly complex. Beyond the standard challenge of identifying and preparing a capable successor, family-owned restaurants must also navigate intricate family dynamics, emotional investments, and the expectations of loyal patrons, who may feel wary about welcoming changes — such as a new owner and a new menu — into the fold.

Whether you own a single-location eatery or a multi-unit operation, here are some key tips and best practices to keep in mind as you start succession planning for your family-owned restaurant.

Distinct succession planning challenges

Without a clear succession plan, your family-owned restaurant risks operational disruption, financial instability, and reputational damage. To keep your customers’ trust and support, it’s important to maintain continuity as ownership changes hands — and a well-structured succession plan can be your guidepost for accomplishing that goal. The right plan will preserve your vision, support both the business and your family’s financial future, and help you overcome challenges like:

• Family Dynamics: Between your successors and family members, you may struggle with making decisions, influenced by their emotional ties and different visions for the future. The right succession plan will establish clear roles, responsibilities, and expectations among you and your family members early in the process.
• Customer Perception: Even if your successors keep your restaurant at the status quo and make very few changes, your long-time patrons may still associate the restaurant — and their loyalty to it — with you. As part of your succession plan, it’s important to communicate ownership changes thoughtfully to help maintain trust and loyalty in your customer base.
• Regulatory and Financial Considerations: To meet regulatory compliance standards, enlist the help of a qualified advisory team to facilitate estate, trust, and gift planning. Aprio has seen a wide range of situations and can more easily spot red flags and help you refrain from costly surprises. We are here to address financial planning, such as managing taxes, securing funding for the transition, and assuring financial stability of the business during the succession period.

Best practices for a smooth transition

You may not be ready to leave the helm of your restaurant just yet, but it’s still important to plan proactively so you aren’t left scrambling when you’re finally ready to exit. At Aprio, we advise our clients to follow these five succession planning best practices:

1. Start Early: Ideally, you should start succession planning for your family-owned restaurant years before your anticipated transition. It is best to assess current leadership/structure to identify any gaps or needs for improvements, which will ultimately impact the potential successor and/or transition plan. This will give you time to properly train and prepare the next generation of ownership and address any gaps in experience or readiness.
2. Formalize the Process: Start documenting essential roles in your business, timelines, and contingency plans. Your advisory team can also take the lead on helping you facilitate potentially difficult conversations with family members, such as your family’s values, mission, and legacy, and provide objective guidance on the succession planning process.
3. Train and Empower Your Successors: Whether you are planning to leave the restaurant to a child, spouse, or long-time employee, it’s critical for you to give your successors the tools, authority, and agency they need to lead effectively. You may also consider asking your advisory team to provide leadership development and operational readiness resources to your successors.
4. Communicate Transparently: Keep your staff members and customers informed throughout the transition process. The messages and communications you send them should reinforce continuity, stability, and the values that define your restaurant brand.
5. Leverage Professional Support: As I mentioned above, a third-party advisor like Aprio can offer you independent, unbiased advice and tailored succession planning services — from business valuation and tax strategy to estate planning and operational consulting. We are here to help execute the transition plan, monitor, and track progress, and potentially adjust to various circumstances, if necessary.

The bottom line

Succession planning isn’t just about preparing for the future; it’s about honoring the past and the impact you have made on your customers and community. With the right strategy in place, family-owned restaurants like yours can preserve their legacy, empower the next generation, and continue serving their community for years to come.

Ready to start your succession planning journey? Aprio’s Restaurant, Franchise & Hospitality team is here to help you build a plan that protects your legacy and sets your business up for long-term success. Schedule a consultation with our advisory team today.

Related Resources

• About Aprio’s Restaurant, Franchise & Hospitality Practice
• Income Tax & Estate Planning Solutions
• A Phased Approach to Family Estate Planning