All in the Family
By Tracy Jones
It’s a tough world for lots of small businesses these days, and especially for those that are family owned.
Only around one in five businesses in the U.S. still survive after 60 years in the same family, so it’s something of an anomaly to find a family business in its third generation, or later, still going. Conflicts develop, inheritors lose interest or companies simply find they can no longer keep up with the times; whatever the struggle, keeping a business in the family is more likely than not to pose a significant challenge.
Raleigh has a deep history with family businesses, dating back to 1865 when Thomas H. Briggs opened his hardware store on Fayetteville Street. Although the store closed in July of 2015, due to debt from an economic downturn, Evelyn Murray, Briggs’ sixth generation descendant, reopened the store a month later, on East Hargett Street.
“To pay off our debt to our vendors, we had to sell everything,” Murray says. “I bought the name for $1, took my own money and reopened the store. I love being back downtown. The only thing that’s missing is being back on Fayetteville Street, where it all began.”
Briggs Hardware is proof that, while challenging, businesses can succeed (or bounce back) with enough heart and hard work.
Shirtsleeves to Shirtsleeves
Businesses aren’t easy to start. John L. Ward, one of the world’s leading authorities on family business governance, uses the phrase “shirtsleeves to shirtsleeves in three generations” to describe the evolution of family businesses. As his thinking goes, the first generation of family members create a thriving enterprise, starting out with nothing but their shirtsleeves. The second generation lives off of what the first generation created, leaving the third generation with nothing but the shirtsleeves to show for the business, and having to start all over again.
But maintaining strong family bonds and a business that’s financially healthy can help buck the trend, keeping a family business thriving as it’s passed down.
“At the end of the day, my mother always said, ‘When you walk out the door and lock it to go home, you go out as siblings,’” says Boo Jefferson, who now runs Kannon’s, her grandfather’s men’s and women’s clothing stores, with siblings Joe Ann, George and Mary Kathryn. “The most important thing is the love you have for each other. This business is our heart and soul, but we love each other more.”
Another factor Ward counts for family business failure over time is a business’s inability to adapt to the changing times. The product becomes obsolete or the family simply refuses to change its ways.
“Family business is susceptible to that, because they might have a tendency to stay with the product they know and therefore, don’t adapt,” says Dr. Stephen P. Miller, a family business expert and co-founder of the Family Enterprise Center at UNC Kenan-Flagler Business School. “On the other hand, they are able to make decisions faster, have rapid speed to market, and can provide a unique product or service for a specific niche market.”
Kannon’s has faced the challenges of a changing marketplace. Most clothing is now available at the click of a mouse (or tap of a smartphone) and the concept of destination shopping—something that Kannon’s Women’s Store was originally famous for—doesn’t really appeal to many younger people. In its previous location, nearly 98 percent of Kannon’s Women’s business came from out of town or out of state. After nearly 100 years in Wendell, the Women’s Store relocated to a space near the Men’s Store in Cameron Village. Jefferson hopes the new space will be more competitive and potentially prepare the company for ownership and management by a fourth generation.
“You have to always recreate yourself and stay on top of things,” Jefferson says. “It’s harder running a business today. My mother always told us that when you think you know everything about a business, you need to lock the doors.”
It’s often not enough for a small business to simply hang an ‘open’ sign on the door and wait for the customers to come. The community needs to know a business is there.
“You have to make money to be in business,” says UNC’s Miller. “We find a lot of family business owners are trying to pursue a product important to their community or society. Sometimes they just love a particular product or service. There is a higher purpose in mind. It can be a wonderful vehicle for a family to express their values through their business. Raleigh is a dot on the map for Walmart, but if it’s a Raleigh-based family business, it’s their whole world, and there’s more of an inclination to be tied into the community.”
A great example of a Raleigh family business supporting its community is Ruggero Piano, established in 1958 by trained violinist and Italian immigrant Robert Ruggero. The winner of the 2014 Raleigh Arts Commission’s Medal of Arts Award for lifetime support of the arts in the Raleigh community, Ruggero Piano has allowed local musicians of all ages and abilities to gather to share their gifts with an appreciative audience.
“Community involvement and support has always been one of our top priorities,” says Chris Ruggero, the general manager and third generation descendent involved with running Ruggero Piano. “Our passion for pianos, music, and the arts has allowed us to take an active role in the community in many different ways. We’ve offered free concerts, fundraisers, educational seminars, and other types of events at our Bosendorfer Hall since 2002.”
Love of the Business (And Each Other)
While most businesses are simply passed down through the generations, Bailey’s Fine Jewelry falls into a unique family business category. According to the Wall Street Journal, nearly a third of family businesses are operated by husband-and-wife teams. Bailey’s opened in 1948, with both Clyde Bailey Sr. and “Mama” Ann Bailey running the business in Rocky Mount. Clyde Bailey Jr. then helped grow the business, opening a location in Cameron Village, with his high school sweetheart, Jane. And now, grandson Trey Bailey has taken over third-generation ownership with his wife, Marci, and brother-in-law, Doug Morgan.
Our business is not just generational,” says Trey Bailey. “It has always been husbands and wives working in the business.”
Working together in the store and at home, Bailey says, it is his family’s love for one another coupled with its love of the business that has made the store successful. While Bailey’s has had its challenges over the years, the Baileys’ passion has always brought them through.
“Family business has pros and cons,” says Bailey. “It’s not always easy. It can be great in many ways, and there’s a lot of good to that. You can get too close for comfort and too many cooks in the kitchen sometimes, but we all have different strengths and weaknesses. We all seem to have a strength where the other has a weakness, and vice versa. We’ve grown so much. We now have more family members pulling the rope in the same direction, more people on the team who really care.”
Another reason Ward cites for the failure of family businesses is when the founder’s successors are unmotivated, or less interested in the business, and therefore, less hungry to work to keep it going. It can be difficult to keep love for a business alive through generations, or at least to keep that love as strong as it was when the business started. It’s up to each emerging generation to re-ignite the flame, so to speak.
“I was really interested in the jewelry industry,” Bailey says. “My grandfather and dad were jewelers and watchmakers, and I am neither. I am not a born jeweler, but I love people, I love customer service, and I love the jewelry industry. It piqued my interest to give the family business a try, and I’m glad I did. It’s a love-filled, joy-filled business.”
While poor succession planning is another reason family businesses fail, not all family businesses were set up for succession in the first place.
“Many start family businesses with no intent of going from one generation to the next,” Miller says. “It doesn’t have to go from one generation to the next to be successful. Some are just serial entrepreneurs.”
In the case of Raleigh’s Flythe Cyclery on Peace Street, succession began when Wade C. Lewis gave his son the business after he returned to Raleigh from serving in World War II. Lewis’s grandson, Edwin “Skip” Flythe Jr. had intended to pass the business on to his son for fourth generation ownership, but his son’s early death in 2013 changed everything. Flythe Jr. lost interest and closed the bike shop in 2016, nearly 70 years after it originally opened.
But the story does not end there.
“Skip was getting into his 70s, and he was ready to be done,” says Derek Frank, co-owner of Trails End Bikes. “He took us under his wing and helped us get started. We took the remaining inventory and took his advice and we created our own thing out of it.” Frank and his business partner, Tim Karcher, both worked at Flythe Cyclery and decided to carry on the bike shop in their own style, opening in Raleigh’s Oak Park Shopping Center in December of 2016.
“As a third generation business at Flythe, we got to carry a lot of pervious clientele who were loyal to the shop,” Frank says. “But we have also brought on new clients as well. We’re open to everybody and anybody.”
According to Miller, next generation development begins around the age of 10. Children often learn a lot of things just by being around the family business and absorbing the environment.
“We view succession not as an event that occurs when the owner becomes 65 or 70 years old, or is ready to let go of the business,” Miller says. “It can take decades. The children may not be old enough to understand strategy, but they’re watching every day.”
Most family businesses owners agree that they don’t want to push the third, fourth or fifth generations into the business if they lack the desire to be involved, for fear that the business will then fail. Many also require that any children who want to come into the family business work somewhere else first, to gain discipline, responsibility, and perspective in their field.
“My mother never asked us to come into this business, but we all had to get business degrees,” says Jefferson of the Kannon’s clothing stores. “Each one of us came back. We want to see the legacy continue.