Three-generation family businesses share their secrets of success

 

Family businesses are everywhere in South Florida. But the ones that make it to the third generation have commonalities: the ability to stay relevant, think bigger and take a long-term view. Here is a look at some of those businesses.

Facts about family business

•  Family businesses comprise 90 percent of all business enterprises in North America, and 62% of total U.S. employment.

•  Only 30% of family businesses in America will be passing the reins to the next generation, even though close to 70% would like to keep their business in the family.

•  By the third generation, only 12% of family businesses in the U.S. are typically still viable. By the fourth generation and beyond, only 3% of family businesses continue to exist.

•  The environment for innovation in family businesses improves when more generations of the owning family are actively involved in the business.

•  The oldest family owned business operating in the United States is the Zildjian Cymbal Co. of Norwood, MA founded in 1623 in Constantinople and moved with the family to the United States in 1929.

•  Return on investment is greater in family businesses, averaging a 6.65% greater return than non-family firms.

•  The average life span of a family-owned business is 24 years.

•  More family owned businesses are finding leadership from outside the family. Between 10% and 15% of U.S. family firms are now managed by non-family executives.

•  Emergency planning is vital. In nearly half (47.7 %) of all family-owned business collapses, the failure of the business was precipitated by the founder’s death, or in 29.8% of the cases, the owner’s unexpected death. Only in relatively few instances (16.4 %), did the business failure follow an orderly transition, and in situations where the owner was forced to retire, the figure drops to 6.1%.

SOURCES: Small Business Administration, Peakfamilybusiness.com, Family Business Review, Family Business Magazine, ffi.org, familybusinesscenter.com, Barclays Wealth and The Economist Intelligence Unit, University of Connecticut Family Business Program


cindykgoodman@gmail.com

In 2009, when Larry Zinn took over as sales manager for the Infiniti dealership that his father owned, he had a great idea: retrain the sales staff in a team approach and offer customers complimentary add-on services for the first year.

Some salesmen who were used to selling the same way for decades up and quit. But that didn’t deter Larry from insisting a new sales culture and value proposition for new car buyers was necessary. “I was persistent with everything I’ve believed we needed to do going forward. People were going to embrace change or move on,” says Larry, 28.

The resistance quieted, however, after Larry recruited young salespeople and had them trained in the new advantage program. The new approach helped push sales volume up 72 percent. "We had a lot of success with it,” he says.

Larry Zinn’s experience is not unusual for family-owned businesses that survive into a third generation and employ new tactics to keep from becoming obsolete.

Nationally, family-run businesses account for nearly 35 percent of the largest companies including Ford, Koch Industries, Hilton, Wal-Mart, Loews and Ikea. In South Florida, family-run businesses are particularly prevalent and account for a majority of the largest Hispanic companies, including Goya, Bacardi, El Dorado and Sedano’s Supermarkets.

But while more than 30 percent of all U.S. family-owned businesses survive into the second generation, only about 12 percent are passed onto the third generation, according to Family Firm Institute, a Boston-based association for family enterprise professionals. Those that do survive have a few intriguing commonalities: an ability to stay relevant, think bigger and take a long term view.

“They try to figure out where they want to be in 10 years and take steps to make that target,” says Wayne Rivers, president of The Family Business Institute in Raleigh, N.C.

Most third-generation family businesses, particularly those in South Florida, were started by a scrappy entrepreneur who saw business ownership as a way to provide for the family. Those businesses include grocery chains such as Sedano’s, restaurant operators such as Las Vegas Cuban Cuisine and airport concessionaires such as NewsLink.

Typically, in those businesses, the founder brought his kids with him to work, put them in the kitchen, the stock room, the sales floor, and taught them on-the-spot business lessons. Those kids eventually came to work full time and helped the company evolve beyond a seat-of-the-pants start-up into a more sophisticated business with processes and systems.

Now comes the third generation, who are more likely to have received formal business education before they return to the company. Often, they are able to leverage that training and move the company forward dramatically. But the succession also comes with challenges. They must keep the respect of longtime employees and show the same dogged commitment to seeing their company succeed, even after having already grown up enjoying the fruits of its success.

In successful third-generation businesses, the senior generation often stays on to ensure that commitment, adopting a role as mentor or advisor while creating an environment where younger family members can take on real responsibility, says Rivers, who consults for family businesses. “They get out of the way, let the next generation make their own mistakes, and gracefully exit when it’s appropriate.”

At Warren Henry Automotive, Dave Zinn, 79, has assumed the role of advisor to both his son and grandson, spending four days a week at the corporate office. Dave established his family in the car business when he opened the first Toyota dealership in Florida. Years later, when his son, Warren Henry, 57, showed interest he bought him a Volvo dealership, which led to more. Today, Warren Henry Auto Group has seven dealerships — Infiniti, Jaguar, Land Rover, Volvo, Lamborghini and Fisker in the Miami area and Subaru/Volvo in Ocala. In an industry where long-time family dealerships have been folded into big operating companies, Larry’s arrival cemented Warren Henry Auto as one of the independents.

From a young age, Larry set a goal of learning the business from the ground up, trying to earn respect, and to be mindful of the traditions and legacy of his father and grandfather. But, he understands that for the business to endure, it must stay ahead of competitors by embracing new strategies. Larry has created a social media presence for the company, building an online community for its customers to share information and write online reviews. Warren Henry says Larry arrived at the right time in the company’s evolution: “I don’t know how to sell to generations that are much younger than I am. I don’t know what turns them on. He brings young ideas. He understands technology and the manner in which people in his age group communicate and buy cars.”

Larry says he walks the line, trying to assert authority in some areas while backing down in others. “If I feel something is affecting the business, I jump in. But if it is a little thing, I just think, ‘I’ll have my time.’ In the end, I still work with family and some things I’ve just got to let be.”

Warren Henry says he has taken the same approach with Larry that his dad adopted with him: “My dad has always been a sounding board to go to for advice. I have learned so much from him and now I am able to take what I’ve learned from him and work with my son. I know what it was like to be the boss’s son.”

Like most longtime auto moguls, Warren Henry Auto has endured several business cycles, expanding and pulling back, opening dealerships and selling them off. Larry joined during the thick of the recession and watched how his dad made tough decisions to keep afloat. Dave Zinn says he enjoys seeing his grandson applying lessons and asserting his authority. Larry’s mandate will be different from prior generations. He’s charged with growing an existing business, rather than starting new dealerships. “I get opinions from the different generations, I respect those opinions, and pick my own version of what to do.”

Respect has been the key ingredient in successful third-generation businesses, particularly when differences arise. “You can’t take away emotions or sibling rivalry so you have to acknowledge and work through those issues and that takes a level of respect,” says Martin Luytjes, a professor of management and international business at Florida International University. Hispanic-owned family businesses have seen particular endurance. “In the Latin culture, family comes first and the family bond is valued, which is why those family businesses tend to be successful,” Luytjes says.

Las Vegas restaurants

There’s no doubt that respect exists in the Vilariño family, a family-owned restaurant chain. Founder Antonio Vilariño, 75, bought Las Vegas Cuban Cuisine restaurants in 1984 when he couldn’t persuade the owner to sell him the adjacent grocery store. Having fled Cuba, Antonio was determined to make his Hollywood restaurant a hot spot for Cuban cuisine and immediately made it a family affair with his wife and five daughters, waiting tables and greeting customers.

As the girls grew, so did the business, with dad taking on the role of team manager, putting the right players in the right positions and letting them show their talent. Today, Antonio, his wife and four of the daughters divide the tasks of supervising 17 stores, ordering supplies, paying vendors and marketing to customers. “We’re in constant contact with each other,” explains daughter Miriam Vilariño, who manages the catering operations and the restaurants in Western Dade and Broward counties. “We decide together what takes priority.”

Today, the Vilariño daughters have their own daughters who they are training in the family business. Already, the girls, ages 17 through 2, spend time at the restaurants after school, making coffee, taking orders or greeting customers. Miriam, who has 17-year old twin daughters, says the entire family tries to mold them: “We want to instill our family values, which are entrepreneurship and perseverance.”

One of the biggest challenges of a family business can be the issue of entitlement. The two older generations of the Vilariños nip that attitude in the bud: “The granddaughters still do the same thing as bus boys. They have to work hard, chip in and they must set examples just like we do,” Miriam says. “Employees love them because they are part of the team. They are taught that things are not given, they are earned.”

Still in high school, Natalie Vilariño Borowski shadows her grandfather whenever possible, watching how he uses the skills that have made the business successful. “He shows me how to treat people when they come in and how to give them good customer service.” From watching her mother, she has learned dedication, something she knows a textbook would never be able to teach: “My mom and her sisters are always at the restaurants. I wake up and she’s there. On the weekends she’s there. But I also learn that dedication and that hard work pays off. “

Already, Natalie and her sister, Valerie, are contributing, appealing to a reluctant grandfather to embrace social media. They’ve created a Facebook page, reworked the marketing and advertising materials, and convinced grandpa to allow them to respond to online reviews.

With multiple family members involved, disagreement is inevitable. When an issue arises, Antonio calls a meeting at his home and serves as the diplomat, calmly making a determination that the others agree to follow. “We disagree every day like any family,” Miriam says. “However there is a passion for what we do, respect for my dad and the family name. At end of day, we may disagree on a business level, but we are united as a family.”

Antonio says he is proud of his accomplishments, but he is still not satisfied. He wants to take Las Vegas restaurants national, to the biggest cities in the United States.”I talk a lot with my granddaughters about what I envision for the business and for them,” he says.

Sedano’s Supermarkets

Sedano’s Supermarkets has seen dynamic growth fueled by its transition from generation to generation. The chain was founded by Armando Guerra Sr., a Cuban banker and grocer, who came to the United States in 1961 and bought and managed a small grocery store called Sedano’s with Manuel Herran. Agustin Herran, Manuel’s son, is the current president and CEO, and Manuel is now chairman of the board of the chain that has 37 store locations in South and Central Florida.

Today, the founding generation has been succeeded by sons and nephews (seven) who are just beginning to greet the third generation, the grandsons and maybe one day the granddaughters. “We tell our kids the same thing we were told. Go get a good education and the business is there if you choose to go into it,” says Javier Herran, chief marketing officer and nephew of founder Manuel Herran.

Javier says all three generations operate with the same vision — growth and efficiency. What differs is their adaptation to the culture and modern technology. “The first generation were immigrants. They had no hobbies, and their mindset was all work. They wanted to build the business for the future for betterment of their kids.” The next generation took a different approach: “We brought more psychology into the business. We follow the same principles that the first generation did with the benefit of added technology to help us with daily work.” Now, although the third generation is mostly in grade school, two already are on the scene, pushing for change that the senior generation initially resisted: “They launched us into Facebook, got us hundreds of friends. They have a different idea of how we should market ourselves. We had always done lots of community service but had never publicized that — the younger generation has pushed on that front, too.”

Even as the company grows larger, the management style remains somewhat informal. Decisions are made by a quick phone call to get buy in, explains Jorge Guerra Jr., associate buyer and store supervisor and nephew of founder Armando Guerra . “We each have our areas of expertise and the others rely on the fact that we know what we are talking about.”

The business has grown large enough that at least a dozen family members of the original founding families have a role, and Sedano’s has a major a stake in Associated Grocers, a food supplier. “We definitely have a vision of growing [Sedano’s] more,” Jorge Guerra Jr. says. “We want slow growth the way the older generation showed us works.”

The older generation also impressed family unity on its successors. “Things may happen, and they do, but once we leave the office, it’s done,” Javier Herran says. “That might seem difficult if you haven’t grown up that way, but if you did, it’s second nature.”

NewsLink

Family business owner Raymond Kayal Jr. doesn’t have to worry about sibling rivalry or disagreements but he does have to concern himself with operating a much bigger company than his father or grandfather had built.

After working for a management consulting group and a law firm, Raymond returned to his family’s Miami airport retail business in 1998, becoming the third generation of his family to lead the company. Raymond actually formed a new entity called NewsLink, which acquired the older company’s infrastructure and hired most of the employees. He says his success has come from combining his grandfather and father’s strengths and building on them.

Raymond says his grandfather was charismatic and entrepreneurial and was an early concessionaire in the 1950s. His father, an ex-marine, came along and brought processes and discipline. Together they grew the company into six shops at the Miami airport. Under Raymond, NewsLink now has more than 30 locations at Miami and Orlando airports including restaurants, gift shops, sports stores, book stores and newsstands. In 2011, NewsLink opened The Shoppes of Ocean Drive, the first department store in an airport at the Miami International Airport.

“I’ve been able to combine that great foundation from previous generations with the latest and newest in branding and logistics — all the things the marketplace now demands,” he says. Raymond says he wouldn’t have been as successful had he not watched his grandfather and father in action. “I learned the power of ideas… to have a gut feeling about something and push it through to fruition, to just go for it. But I also learned how to combine that with discipline and systems. One without the other will not work. You don’t go three generations unless you have both of those things working equally well.”

La Revoltosa

Like Raymond, David Pardo is a third-generation family business owner who combines old-fashioned sales techniques and processes with a sophisticated inventory and an online presence. Having watched his grandfather in action, and then his mother, David feels he knows what gives his business, La Revoltosa, its edge over Walmart and other low-cost giants. “We give extra customer service. That’s what the old man did in the day and we continue with that tradition.”

David says in the third generation, owners must rely more on outside employees. “My grandpa was the man behind the register every day. He never took a day off and he was totally fine with that. I enjoy being in the stores, but I still want time to myself.” His grandfather, a Cuban immigrant, opened the first La Revoltosa on Flagler Street. Raymond’s mother, Milagros, still manages one of the two retail stores, but he has hired new talent. “I do that very cautiously.”

Just as other third-generation family business owners are doing, David Pardo says he must take risks to keep his business relevant. Beyond clothing, his stores now sell medical and school uniforms and ladies comfort shoes. He also has brought in some higher priced goods. Despite his mother’s initial reluctance, he says, “I’ve seen it work.”

Rivers of The Family Business Institute says third-generation family businesses walk a fine line: The bigger they get, the more that’s at stake: “There’s one commonality among family businesses that feud, they have something to fight over. The businesses are worth millions.”

Yet, when there is harmony, when the prior generations get past the “this is the way it’s always been done mentality,” the third generation has great opportunity, Rivers says. “They can make it a better, stronger business.”

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