Foodservice IP blogs a lot about labor shortages in foodservice. The causes are multifaceted: more than one million Americans died from COVID-19, many more struggled to work with long COVID, and parents (especially women) had to leave the workforce during school closures to focus on childcare. These exits led to huge shifts in the labor market that are still being felt today.
As the Great Resignation, Quiet Quitting, and other popular “exit” terms are exhausted by the media, a more predictable trend is playing out. According to the AARP, 10,000 people turn 65 every day, meaning they are retiring (or will soon). Retirees are not average workers—they are leaving the workforce at their highest level of seniority, many as business owners. While Baby Boomers are holding onto their small businesses longer than expected, these owners will inevitably retire. According to PwC’s 2021 Family Business Survey, “only one-third [of family-owned small businesses] have a robust, documented and communicated succession plan in place.”
As Baby Boomers retire, succession planning (or a lack thereof), will have a profound impact across the foodservice sector: from romanticized family farms or restaurants, to less sexy ventures like manufacturing, distribution, and franchisees. With the right plan in place, both buyers and sellers stand to benefit from this trend.
Here are a few options aspiring retirees should keep in mind as they aim to pass on their business:
- Bring in Your Children (If It’s a Good Fit)
While many small business owners may aspire to pass the firm on to their children, that is not a guarantee. Japan (which has an economy built on family firms and a population graying faster than the United States) is currently contending with 40,000 firms per year that cannot find successors. Coverage in the New York Times and Financial Times illustrate the complex dynamic of parents who want to retire and children who have no interest in taking over the business.
If you are committed to passing your business to your children, you need a plan. Even if your child already works with you full time, it may take years of planning before you are ready to turn the keys over. A neutral third-party company can help you facilitate the process and ensure that you do not let family dynamics affect the business (or vice versa).
- Pursue a Worker Cooperative Conversion
You invested years in finding and training the right team. No one knows your business like your workers—why not leave it in their hands when it is time to move on? A worker cooperative is a for-profit business that is owned and managed by its workers. While they are relatively rare, their profile is rising as business owners retire and younger workers seek to build equity. As a bonus, worker cooperatives are more resilient than conventional businesses and have a higher survival rate once they are established, so your legacy will be safe.
An owner buyout can be an ideal scenario for converting a conventional business to a worker cooperative. The process can seem daunting, but organizations like the US Federation of Worker Cooperatives can help you find an advisor to walk you through the process.
- Sell to a Partner or Competitor
Another option is to sell your business to another firm. Potential buyers could include customer firms who are pursuing vertical integration (e.g., a frozen food company acquiring a cold logistics firm) or a competitor seeking to consolidate the market (e.g., one brewery buying another). Like the other two options in this article, owners seeking to sell should engage outside advice to help them find the right buyer, think through all aspects of the transaction, and compensate themselves appropriately for their work.
The Bottom Line
Like any other worker, business owners deserve a happy, healthy retirement on their terms. Unlike other workers, a business owners’ retirement may take decades of planning to train their replacement, complex financial transactions, and emotional negotiations. Whether you are an aspiring retiree seeking to sell or a future foodservice business owner looking to buy, start planning now to ensure you find the deal that works for you.