Beyond business-related decisions, such as managing organizational change, there are human factors at play in the transfer of ownership to an adult heir or family member. This research finds that the family business, in many cases, takes on its own personality, and can be seen almost to be a member of the family.

Ten active family business owners were asked to share their life stories in an effort to explore what constrains successful succession. The interviews were used to allow participants to tell the story of their business, thinking about pivotal chapters in its evolution. Researcher Dr. Alexandra Solomon, co-investigator with an eight member team, “Narratives are critical to understanding the ‘letting go’ process because they reveal the owners’ dreams, challenges, and how they handle both such that they ultimately can or cannot let go. As difficult as it may be to invite especially male family business owners to talk about ‘tender stuff,’ family therapists and family business consultants need to be willing to explore how and where the business ‘lives’ within the owner in order to free him up to pass the business along to the next generation.”

Family dynamics and unresolved emotional concerns can impact family business succession. Internal influences, such as trust and worldview, and interpersonal influences, such as co-worker relationships, gender roles, and marital quality, are powerful factors that can facilitate or constrain family business succession. When family therapists are working with an individual, couple, or family, and there is a family business at stake, family therapists are advised to explore the possible influence of the family business regardless of the nature of the presenting problem.

Solomon, “We want family business consultants to be aware of these findings because they speak to the importance of looking at succession problems through a systemic lens so that they can hypothesize about the facilitating or constraining impact of these key internal and interpersonal influences.”

Family Process is an international, multidisciplinary, peer-reviewed journal committed to publishing original articles, including theory and practice, philosophical underpinnings, qualitative and quantitative clinical research, and training in couple and family therapy, family interaction, and family relationships with networks and larger systems.

About Wiley-Blackwell
Wiley-Blackwell is the international scientific, technical, medical, and scholarly publishing business of John Wiley & Sons, with strengths in every major academic and professional field and partnerships with many of the world’s leading societies. Wiley-Blackwell publishes nearly 1,500 peer-reviewed journals and 1,500+ new books annually in print and online, as well as databases, major reference works and laboratory protocols.

For more information, please visit www.wileyblackwell.com

Attorney Seth Ellis

It’s estimated that 70% of family businesses in the U.S. fail after ownership is transferred from one generation to the next. Historically, Dunkin’ Donuts has attracted operators whose aim is always to pass the business down to their children—and beyond. The challenge of completing that transfer successfully and protecting the family’s assets is complicated by the language written into the Dunkin’ Donuts Franchise Agreement.

 “Dunkin’ owners face a tremendous hurdle,” says Seth Ellis, managing partner of Ellis & Goldberg, P.L. trusts and estate planning firm and a featured speaker at the recent DDIFO members’ meeting in Newark, NJ. “Understanding the intricacies of the Franchise Agreement is the linchpin to ensuring a successful transfer.”

Ellis, along with business colleague Gary Joyal, managing partner of Joyal Capital Management, L.L.C., offered a snapshot of the challenges Dunkin’ franchise owners face protecting their assets particularly in the face of a life event like death, marriage or divorce.

“The majority of Dunkin’ franchise owners have a substantial portion of their wealth tied up in their stores and corresponding real estate, so we have to be sure those assets are protected in a way that won’t trigger a default in the Franchise Agreement” says Joyal who has been working with Dunkin’ Donuts franchise owners for 20 years.”

According to Joyal and Ellis, one of the most common challenges a franchise owner and his family face when establishing an estate plan is ensuring their team of lawyers, bankers, accountants and insurance brokers are in synch and recognize how their plans will integrate with the Franchise Agreement.

During their 45 minute presentation at the Newark Sheraton, titled, “Pieces of the Puzzle: Plan Integration”, Ellis and Joyal offered the example of two brothers who partnered to buy and run three Dunkin’ shops. Each has children; one of the brothers is in his second marriage. The situation becomes acrimonious when one brother dies and a squabble over ownership ensues among the surviving family members. It’s then further complicated by the terms set forth in the Franchise Agreement.

The moral of the story, according to Ellis and Joyal is that without proper planning from a team that is intimately familiar with Dunkin’ Donuts franchising, families face the possibility of lost assets, damaged family relationships and exorbitant legal bills—as well as potentially losing the right to continue operating any Dunkin’ Donuts shop.

“The typical response we get when we first meet with a Dunkin’ family is that they are all set—they have their documents ready and their team in place. But, after closer examination, we often see that their team is fragmented and the family has tremendous exposure to risk,” says Joyal.

Ellis says families should have their estate documents reviewed often because small changes can impact how the plans will operate in the event of a life change.

“I haven’t met a franchise owner whose shops and holdings remain stagnant. As a result they all need constant review and analysis.”

Over the last 15 years Ellis and Joyal have worked with close to 500 Dunkin’ families to create individually crafted plans. Often times, they work closely with the law firm of Lisa and Sousa, which has represented a majority of New England-based franchise owners. Many of these clients are Dunkin’ pioneers, who have been in the system for 40 years and have successfully engineered succession plans that not only protect assets, but also protect family relationships.

“We got great feedback on our Newark presentation,” Joyal says. “I think it was eye opening for those owners who haven’t thought about how to integrate the team that’s working on their behalf.”

Acquirers accustomed to providing only 30 percent equity and funding 70 percent of a deal through bank loans are now lucky to get a commitment for even 50 percent of the purchase price. Increasingly, they are looking to the seller to supply a separate loan (often called a note), to cover the remaining 20 percent. The seller is becoming the lender of last resort.

Seller participation in deal financing is not new. Most prerecession deals included some kind of earnout provision that delayed payment of a portion of the purchase price—up to 20 percent for one to three years. Despite cutting down the immediate tab for the seller, earnouts continue to be used primarily as insurance against seller misrepresentations post-closing.

In most instances, a seller note is still issued on top of bank debt and earnouts. When any portion of a purchase is financed by a conventional lender, seller paper is almost always subordinate in terms of when the note is paid and the ability to exercise remedies in the event of a default. Transactions are highly negotiated, with terms varying widely from deal to deal. Seller paper is usually held longer than a bank loan and can have limited transferability. Commensurate with the additional risk, interest rates for seller paper are almost always higher than those for traditional loans.

Read more at: BloombergBusinessWeek

Want your business to make bigger bucks? Treat the grunts right.

A new McGill Institute for Health and Social Policy study published by the Harvard Business Review rolls up conclusive findings that, no matter the size of your business, the way you treat employees at the bottom rung of the company ladder has an impact on your bottom line.

That’s a direct contradiction to the pattern at most companies, where, for instance, high-skilled tech workers or executives get the big bucks and bigger incentives, and Wall Street rewards companies for squeezing the lower rungs of the ladder.

“These companies have been profitable for their owners and shareholders not only while being profitable for their employees, but because they have been profitable for their employees” Jody Heymann, the study’s author, said in a release. “These firms have been able to do this for a simple reason. How work is structured, how it is rewarded, and how workplaces encourage employee engagement are all central to the profitability of firms and to the quality of the daily lives of working men and women. Employees determine 90 percent of most businesses’ profitability.”

The researchers looked at companies all around the world, ranging in size from 27 to 126,000 employees. They examined a dozen companies from 2005 until now.

“The findings were striking,“ Heymann said in a press conference Wednesday. “Workers at the bottom profited, but companies profited as well.”

Companies cut turnover, found cost-savings, increased productivity, and decreased absenteeism and turnover, all by following the Golden Rule when it came to the least of their employees.

“This research confirms what we have known for some time, that these things are good for the economy and good for the bottom line,” said Heather Boushey, of the Center for American Progress. “These kinds of policies are good for workers and good for companies.

Among some of the other findings:

•By investing more in health care, employers managed to reduce the their workers’ absentee rates and kept turnover rates low. Plus, the tactic boosted productivity. For example, American Apparel provided not only low-cost health insurance to its employees, it offered on-site exercise classes, massage therapy, and a more nutritious company cafeteria menu. All this cut illness and injury rates, and the costs that went with them.
•If companies did more training and offered more advance opportunities for those on the lowest rungs of the ladder, they were rewarded with lower turnover, easier recruitment, and increased efficiency. In Boston, for example, the firm Dancing Deer offered English as a Second Language classes to its employees, which improved communications between employees who had immigrated from a number of different countries and had no common language.
•Promoting from within had a big impact on keeping workers happy. Big-box giant Costco took this approach to advancement 98 percent of the time, and after the first year of employment, turnover was less than 6 percent for line workers.
•Companies that offered stock-option programs also benefited. After Dancing Deer put in such a program for all its employees, sales shot up 74 percent in a year and the value of those options increased 40 percent.
•Giving line workers more say in the direction of their work motivated workers and led to cost savings and efficiency increases. Novo Nordisk actively engaged line workers in questions about the production process and increased efficiency by 50 percent.

Read more: Portfolio.com

Which of these three do you think would be the happiest and most productive? No doubt the third person, who understood his job was far greater than just crushing rocks. He understood he was contributing to a purpose greater than his own efforts.

All of us want a clear and driving purpose for our lives; we want to contribute to something bigger than ourselves. Without a purpose, your employees are just putting in time. Their minds might be engaged, but their hearts will not be. A team without a purpose is a team without passion. Your team may achieve short-term results, but it won’t have the heart to go the distance.

A purpose is your team’s bridge to a brighter tomorrow … and you have to build it. It is not a project goal, financial target or strategic plan. A compelling purpose is a reason to be excited about getting up and going to work every day.

Be bold. Step back and look at the big picture. Think of how your team improves conditions for others. Your purpose should answer the question, “What difference are we making?” It should stir the emotions.

For example, a customer call center may have a purpose to brighten the day of each caller. An information technology department’s cause could be to improve personal productivity. For a purchasing department, it might be to ensure that all company products are made with the best raw materials available.

Engage your employees by asking them how their jobs relate to the team’s purpose. Some questions you might pose:

• “How does our purpose make you feel?” (If you hear responses such as proud, important, connected, helpful or like a winner, then you’re on the right track.)

• “Does our purpose make you look at your job differently?”

• “What can you change or do differently to better support the purpose?”

Great leaders don’t depend on chance, they lead on purpose.

Read more: Great leaders inspire through strong purpose – bizjournals:

James Lea of Triangle Business Journal writes a colmn on the world of family business bizjournals.com here is a Q & A regarding your family business.

Q: Our family’s business is growing at a steady rate, and we’re trying to put operating procedures and systems in place to support it. Our lawyer is urging us to write a buy-sell agreement among the principal stockholders. The process sounds like a lot of hassle and expense. Is it worth it?

A: A buy-sell agreement sets up a requirement that in the event of the death or incapacitation of one of the owners of a company, that person’s relatives or heirs are obligated to sell his stock to the remaining owners. The intent is to keep ownership in the hands of those running the business and minimize conflict.

So while it’s not the perfect answer to all ownership-continuity challenges, a buy-sell agreement is usually a valuable building block in the foundation of a family-owned or other closely held business. Remember, though, that the agreement itself is only a nice idea unless the remaining owners have the capital to buy the departing owner’s stock. Most buy-sell agreements are pre-funded with key man life insurance or another reliable cash source.

And don’t forget to check with your tax advisor about the income and estate tax consequences of a buy-sell agreement. Exercising the provisions of a buy-sell agreement can be stressful enough without getting a surprise from the IRS.

Q: I’m in my mid-60s and chairman of a company that my grandfather founded many years ago. My daughter and son are officers of the business, and I’d like for them to take it over and keep it in the family. But the owners that preceded me have spread company stock throughout the family. If something happened to me tomorrow, I don’t know how my kids could maintain control of the business. Is there any way to straighten this situation out?

A: If you’re in your 60s, then it’s kind of late in the day to start thinking about this problem. But if your company’s stock is still in the hands of only the family, then you should be able to formulate a plan for clarifying and continuing ownership. First, get your objectives clear and in order: protecting and preserving the business, retaining management authority for those with management responsibility, distributing benefits of ownership fairly among those entitled to them, and others.

Then bring in some expert help – an attorney experienced in corporate ownership issues, your financial advisor, etc. … – to facilitate the necessary agreements among family members.

Q: I’ve thought about succession planning for the business I founded, but I’ve decided just to include it in my will. My wife and kids can do whatever they want with it after I’m gone, and I’ll save myself a lot of money and worry. Don’t you think that makes sense?

A: I’ve said it before, but only about a thousand times, so I’ll say it again. No company worth more than $10 in U.S. currency should be conveyed by will. The risk of value loss through estate taxes and the management burdens dumped on surviving family members should be reasons enough to keep even the biggest blockheads from willing their businesses. But apparently they aren’t.

So consider this. Your company is your life’s work. You’ve put a lot of yourself into creating, nurturing and growing it. Why throw all that investment to the wind by letting the courts and the tax collectors have the major voice in what happens to your business after your death? Take a little well deserved pride in the business you’ve built, and put some effort into preserving it and protecting your family’s longer term interests.

Go to work with your family on a succession plan, and get your attorney and tax advisor to link it to a good personal estate plan for you and your spouse. That’s the real way to save everyone concerned a lot of money and worry.

Lea is a professor at the University of North Carolina at Chapel Hill and a family business speaker, author and adviser.

Read more: Be prepared with good plans, be they buy-sell agreements or succession – bizjournals:

Under the HIRE Act employers are exempted from paying the employer 6.2% share of Social Security employment taxes on wages paid in 2010 to newly hired qualified individuals. These are workers who: (1) begin employment with the employer after Feb. 3, 2010 and before Jan. 1, 2011, (2) were previously unemployed, (3) do not replace other employees of the employer (unless those employees left voluntarily or for cause), and (4) aren’t related to the employer under special definitions. The payroll tax relief applies only for wages paid with respect to employment beginning on Mar. 19, 2010 (the day after the HIRE Act was signed into law by the President) and ending on Dec. 31, 2010.

The payroll tax holiday doesn’t apply for wages paid during the first calendar quarter of 2010. Instead, the amount by which the qualified employer’s OASDI tax for wages paid during the first calendar quarter of 2010 would have been reduced if the payroll tax holiday had been in effect for the first quarter is treated as a payment against the employer’s OASDI tax for the second calendar quarter of 2010.

HIRE Act Sec. 103 provides employers with an up-to-$1,000 tax credit for retaining qualified individuals. The workers must be employed by the employer for a period of not less than 52 consecutive weeks, and their wages for such employment during the last 26 weeks of the period must equal at least 80% of the wages for the first 26 weeks of the period.

For a worker to be treated as previously unemployed, he must certify by signed affidavit, under penalties of perjury, that he hasn’t been employed for more than 40 hours during the 60-day period ending on the date the individual begins employment with the qualified employer. New Form W-11. The new form, consisting of only a few lines, is a statement by the new employee certifying that he meets the statutory unemployment requirement. The employee fills out his name, social security number, first date of employment with the new employer, and the latter’s name, and signs it under penalties of perjury. The employer is cautioned not to submit the form to IRS but, rather, to keep it with other payroll and income tax records.

Download Form 11 Here

Submitted by Jim Ventriglia of James P. Ventriglia, CPA, Inc. or Cranston, RI.  James P Ventriglia, MST, CPA, is DDIFO’s CPA and has been servicing the accounting needs of  Dunkin’ Donuts franchisees for decades. For more information contact him at  jimv@jpvcpa.com or at 401-942-0008.

Related reading at ddifo.org: HIRE Act Aims to Encourage Immediate Hiring with Tax Credits

As the song by Joni Mitchell goes; ” I’ve looked life from both sides now,” and, I have. (The song was part of the opening ceremonies at the 2010 Canadian Winter Olympics, and keyed my imagination.) After spending more than three decades within the business of franchising, I’ve expanded my insight to see more clearly both sides now in the franchise relationship. Moreover, I realize there truly is an art to franchise negotiations for both parties to succeed. And both sides had better be ready for the other in this transforming economy.

A fellow named Herb Cohen, put it this way, “If you want to persuade people, show the immediate relevance and value of what you’re saying in terms of their needs and desires… Successful collaborative negotiation lies in finding out what the other side really wants and showing them a way to get it, while you get what you want.” Indeed, and so relative to franchising.

In franchising we must play by the rules. From the original franchise contract to renewals, the rules are specified within the agreement between the franchisor and the franchisee. However, there are times these topics could be negotiable, considering the new normal economy.

I learned from some of the best hagglers in the world after working for 10 years on Capitol Hill in Washington, D.C. We have all met rascals who, in a fifty-fifty proposition, insist on getting the hyphen, too. In franchising we strive for what is considered fair, just, and equitable for all parties involved in the legal concurrence.

Good franchisors are interested in franchisees’ ideas, and franchisees are interested in the range of experience franchisors bring to them. Neither side needs to cheat or bend their values, or regulations, to succeed in business through franchising. As with playing a game, it’s not really fun to win by breaking the rules. So, who of us dares to win?

In the business of franchising, one can still beat the competition, stick with what they believe in, follow the rules of the contract, and prevail without being deceitful. Each must know the rules, understand them, be willing to accept or question the rules, and challenge for change, while advancing the system.

Read More at: Franchise Chat

“Given the challenging conditions retailers will face in the near future, any technology enhancements must help to reduce labor costs while delivering better business intelligence”. Retailers are focused on getting the most value from their existing investments in both high and low-tech tools without having to add people to review detailed data, according to Paula Rosenblum, an analyst and Managing Partner for Retail Systems Research (RSR) and co-author of the report.

A free copy of the 24-page report can be obtained at:  Loss Prevention Shrink 2010

The on-line survey of 83 small to large multi-national retailers was conducted by RSR in the fall of 2009. Retailers identified their top three sources of shrink as employee theft of merchandise, shoplifting and employee theft of cash.

Over the past year, RSR reports that 44 percent of retailers have experienced a rise in theft, likely due to challenging economic conditions. Findings indicate that top retail performers – those whose sales growth outpaced the three percent industry average – place an even higher priority on Loss Prevention (LP): 78 percent report an increase in year-over-year LP’s priority, vs. 43 percent of underperformers.

“Given the challenging conditions retailers will face in the near future, any technology enhancements must help to reduce labor costs while delivering better business intelligence,” said Rosenblum. “Tools such as Video Surveillance, Returns and Void Management, Exception Analysis Reporting and Cash Management are crucial for retailers to be more profitable. Retailers are also paying more attention to managing their item level perpetual inventory systems to gain better insight into lost sales.”

Among the more detailed findings:

• Retailers report employee theft of cash has increased from 32 to 45 percent of total losses. This appears related to challenging economic conditions and has prompted retailers to recognize the need for better business intelligence to analyze results, rather than more staff to examine report details.
• When it comes to roadblocks impeding retailers from progressing in their loss prevention efforts, 86 percent say they are challenged for capital, 41 percent lack staff to review LP and audit data (compared to 29 percent in 2008) and 36 percent have extremely inaccurate inventory systems unable to quantify areas of loss.
• Retailers identified top technology solutions that help them overcome organizational inefficiencies including:
  - 63 percent cited better business intelligence to analyze all their data. – 40 percent cited more accurate inventory tracking to identify the items being stolen.- 39 percent cited more creative uses of existing technologies.

The report further identified areas where retailers have seen a more direct effect from the economy, most importantly, a faster rise in external theft versus internal:

• Individual customer theft of merchandise (28% increase)
• Organized gangs stealing merchandise (25% increase)
• Employee theft of cash (19% increase)

Additional study findings reveal top retail performers use business intelligence tools more frequently such as exception analysis reporting at 68 percent and returns/void management at 65 percent. To enhance the value of existing investments without adding staff to review detailed data, 31 percent of respondents report using inventory tracking systems.

“The information revealed in the research indicates the methods of retail theft are shifting. As a result, loss prevention tools must adapt to those changes,” according to Kelvin Lam, Vice President of Retail and Security Products, ADT Security, Asia Pacific. “In a tough economy, resourceful retailers are looking beyond traditional tagging and stand-alone surveillance to include software based analytic tools, integration and better inventory management systems,” said Lam.

A free copy of the 24-page report can be obtained at:  Loss Prevention Shrink 2010

About ADT Security Services

ADT Security Services, a Tyco International company, is the world’s largest provider of electronic security services to more than seven million commercial, government and residential customers worldwide. ADT’s total security solutions include intrusion, fire protection, closed circuit television, access control, critical condition monitoring, electronic article surveillance, radio frequency identification (RFID) and integrated systems. ADT’s website address is http://www.adt.com/global

About the Sensormatic Retail Solutions Portfolio

The industry-leading Sensormatic Retail Solutions portfolio offers vital loss prevention and operational improvement technologies and solutions. Backed by more than 1,500 patents, the Sensormatic solutions portfolio is sold through ADT and authorized business partners around the world. From the front of the store through the entire retail supply chain, Sensormatic solutions help keep losses lower – and profits higher. Today, over 80 percent of world’s top 200 retailers that use EAS rely on Sensormatic solutions, which include EAS, source-tagging, data analytics and in-store, item-level intelligence applications. Sensormatic forward-thinking solutions also include dual EAS-RFID technology that provides item-level security and visibility in an ever changing retail environment. For more information, please visit http://www.sensormatic.com.

Business Wire

One year after the worst credit crisis in living memory, U.S. markets have come back to life. That’s especially true in the nether reaches of fixed income, where rates on high-yield debt have dropped from the high teens to the high single digits since a rally started last spring.

That’s welcome news for investors. It’s also good news for smaller and medium-size companies that might not have the best credit ratings but still want to raise funds. Their ability to tap the access capital will improve as the rates on high-yield debt continue to fall. More and more companies that have been shut out of the market will find a way back.

High-yield bonds—or junk bonds, if you prefer—generated a 55 percent return in 2009, more than twice the performance of Standard & Poor’s index of 500 big stocks, which rose 23.5 percent. And while no one expects them to match last year’s rally, many experts believe that their prices will continue to rise and that their rates, which move in the opposite direction, will keep falling.

A number of factors will support the junk-bond rally for another year. “There are many of the view that earnings growth won’t sustain much growth in stocks next year. That helps explain the flows into the high-yield market, where there is a decent coupon and the prospect of at least a moderate capital gain,” says Martin Fridson, CEO of New York-based Fridson Investment Advisors. He expects junk bonds to deliver single digit gains in 2010.

That outlook is much better than at this time last year, when the credit markets were essentially frozen and fund managers were selling bonds at fire-sale prices because they were meeting a wave of redemptions. But the market reached a low point in March and began to climb back by summer. The average spread on high-yield bonds of all ratings narrowed to 6.34 percentage points from 18.86 percentage points in March, according to Merrill Lynch & Co. index data. The spread is the difference between the rate that junk-bond issuers pay and the rate that the Treasury pays to issue its debt. Bank of America Merrill Lynch said in a note to investors that the spread tightening is going to offset an expected rise Treasury yields as the Fed raises interest rates to damp down inflation fears.

Read more at: Portfolio.com