Family Business Individual Case

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FAMILY BUSINESS MODULE: EMG 464

TUTOR: ED GONSALVES

STUDENT: ELENA SANDU S00703041

PROJECT: INDIVIDUAL CASE STUDY

DATE: 16/03/2014

TAVERNA ALPINA DALLA SPAGNOLA


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FAMILY BUSINESS INDIVIDUAL CASE STUDY

SANDU ELENA EMG464 2

TABLE OF CONTENTS

1. TAVERNA ALPINA SALLA SPAGNOLA HISTORY...pag.3

1.1. NOWADAYS.pag.3

1.2. HISTORY ...pag.3

1.3. FROM TAVERNA ALPINA DALLA SPAGNOLA TO

SIVIGLIASpag.4

1.4. SUCCESSION PLAN...............pag.4

1.5. THE FAMILY BUSINESS AND THE GLOBAL CRISISpag.5

1.5.1.APPENDIX...........................................................pag.6

2. THE BORSOI FAMILY.pag.6

2.1. KEY ACTORSpag.6

2.2. QUESTIONSpag.7

2.3. GENOGRAM ..pag.8

2.4. ORGANOGRAM .pag.9

3. GENERATED ISSUES....pag.9

4. THEORIES AND FRAMWORKSpag.11

4.1. EXITING FROM A FAMILY BUSINESS.....pag.11

4.2. INTERNAL VERSUS EXTERNAL OWNERSHIP

TRANSITION..pag.11

4.3. INITIAL AND RETROSPECTIVE SATISFACTION AFTER

SALE...pag.12

4.4. TIMING...pag.13

5. REFERENCES....pag.13


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1. TAVERNA ALPINA DALLA SPAGNOLA HISTORY

1.1. NOWADAYS

At the next family meeting, all the members will discuss about the possibilityof selling the family business, a Spanish restaurant that has been the sourceof the familys wealth and the dream of a woman. All the family membershave their personal opinion about the Chinese purchase of the business.Unfortunately, they seem to be far from a solution, because their feelings,their concerns and their animosities are taking over.

1.2. HISTORY

The Taverna Alpina Dalla Spagnolas story began in 1965, when SergioBorsoi, helped by his mother, opened his first restaurant in Conegliano. In afirst moment, the place was called Da Gennaro , in memory of Sergiosfather, who died in 1964. The restaurant was specialized in Venetian cuisine.At the beginning, the restaurant achieved a lot of returns, because it was thefirst one of that small town.

Few years later, Sergio went to Spain for a trip with his friends. In Siviglia, he

met Reyes Medina, who accepted immediately to marry him.

After their arrival in Italy, Sergio decided to run the business together whit hiswife, even if his mother was not agreed with him.The problem was that Reyes didnt know absolutely nothing about Italianfood, such as pizza, spaghetti, risotto. She was a chef in Spain, thus shestarted to cook Spanish dishes like paella, Catalan cream and tortilla.That was a new beginning for the restaurant and for the Borsois family. Therestaurant became famous in Veneto for its amazing paella. In 1970 Sergio

decided to change the name of the restaurant into Taverna Alpina DallaSpagnola.

Sergio and Reyes had two children: Gianluca Borsoi (1970) and AgneseBorsoi (1971) that one day would have run the business instead of theirparents.

The restaurant had a huge success in the 80s, because of Sergio and Reyesability to grow their family business, without problems between them and the

other family members involved in the business. They worked day and night toimprove their business.


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1.3. FROM TAVERNA ALPINA DALLA SPAGNOLATO SIVIGLIAS

After that great success and those returns, Reyes decided, without Sergiosapproval, to open a new Spanish restaurant in Conegliano by her own. Sergio

and his wife quarrelled a lot about her new project: Sergio didnt think that anew restaurant could bring other income to the family; it would have beenonly a reason to invest money without the security that the new businesswould have been successful and economically convenient. He was also surethat two Spanish restaurants were too much for such a small town likeConegliano.

Sergio was right: Reyes new restaurantwas a big mistake. It drainedReyess money and energies and it brought a lot of disagreements in thefamily. Thus she decided to close down her activity in 1989.

After that bad experience, Sergio and Reyes continued to work together withhigh results. Their younger child, Agnese, started a degree in economics andat the same time she studied to become a good chef in order to keep thefamily business.

In 1990, during the family meetings, Sergio and Reyes started to complainabout their impossibility to run the business any longer: they had been in thebusiness almost for 40 years. The only available and possible successor was

Agnese, who was ready to run the family business with passion and devotionas her parents did.

Unfortunately, Agnese died in a car accident in 1991, after having started hernew work at the Taverna Alpina Dalla Spagnola. The family was reallydevastated by that tragedy. At that moment, they had to figure out whoshould have continued the business. Gianluca, the older child, wasntinterested in the family activity; in fact he never tried to help his parents overthe years.

1.4. SUCESSION PLAN

Sergio and Reyes decided to keep the family business, without selling it tothe best buyer. Gianlucas parents were sure that he would have becomemore interested in the family affairs.

Simone Borsoi, Gianlucas cousin, was staffed as the restaurants manager,because he had a lot of experience in several Italian restaurants. Thanks toSimone, the business continued in the right way, with high returns and with


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Reyes, Manuels grandmother, hopes that he will continue the familybusiness because she is really attached to it.

This business has always distinguished the Borsoi family from its other

relatives. Owing the Spanish restaurant has really set them apart. Shedoesnt want to lose this distinction.

1.5.1. APPENDIX

SAVING RATE (% OF DISPOSABLE INCOME)

2. THE BORSOI FAMILY

2.1. KEY ACTORS:1. Sergio Bors oi: he was born in Conegliano in 1945. He has always

been interested in food and restaurants. When he was 20 years old, heopened a restaurant in his city with his mothers help. He worked there

almost for 40 years, running the business together with his wife ReyesMedina. They had both the ownership and the management of theirbusiness. Sergio decided to retire in 1999.


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2. Reyes Medina: she was born in Siviglia in 1946. She married Sergio in1968. After that, she moved to Italy with him and she started to work asa chef in his husbands restaurant. Her contribution was really importantto enhance the restaurants reputation and visibility: it became the first

Spanish restaurant of the area. She became co-owner in 1975. Shedecided to retire in 1999.3. Gianluca Borso i: he was born in Conegliano in 1970. He has never

been involved in the family business by his choice. He started to bemore interested in it, when his parents decided to leave the restaurantmanagement to his cousin Simone Borsoi. They never had a goodrelationship: in fact Gianluca always felt that he was in competition withhim. For that reason, he started to ask his parents about therestaurants ownership. He became the new owner after his parentsretirement in 1999. Unfortunately the disagreements between the twocousins are continuing: they have a very different working approach. Onthe one hand, Simone is really professional and he has a lot ofexperiences in several restaurants. On the other hand, Gianluca is quiteinexperienced and bossy.

4. Simone Borsoi: he was born in Conegliano in 1969. He has alwaysbeen interested in working in restaurants: his child dream was tomanage one restaurant. He became a chef and he worked for some ofthe best Italian restaurants. He started to manage the Taverna AlpinaDalla Spagnolain 1996. He is really passionate in what he is doing for

the restaurant and he has also a great knowledge of restaurants ingeneral.

5. Manuel Foss a: he was born in Padova in 1991. He is studyinginformatics at the college and he doesnt want to run the familybusiness in the future. He represents the third generation and he wouldbe the only successor, because both Simone and Gianluca dont havechildren.

2.2. QUESTIONS

The case leaves the reader with three key questions to reflect on:1. Is it possible for Simone and Gianluca to solve their personal

disagreements in order to fix the restaurants problems or the saleremains the only solution?

2. In this last scenario, what would be the best option for the restaurant?To sell the business to a private investor or to try to open a franchisechain?

3. Is the decision to sell the business influenced especially by the negative

Italian situation and by the lack of a successor? Is it too hasty? If yes,why?


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2.3. BORSOI FAMILY: GEOGRAM

First generation

Second generation

Third generation

1945

Sergio

Borsoi

69

1946

Reyes

Medina

68

1971 - 1991

Agnese

Borsoi

20

1967

Mattia

Fossa

47

1991

Manuel

Fossa

23

1921 - 1964

Gennaro

Borsoi

43

1924

Simona

Camillo

90

1970

Gianluca

Borsoi

44

1947

Carlo

Borsoi

67

1947

Giulia

Bennacchio

67

1969

Simone

Borsoi

45


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2.4. TAVERNA ALPINA DALLA SPAGNOLA: ORGANOGRAM

Firstgeneration

Secondgeneration

3. GENERATED ISSUES:

The Taverna Alpina DallaSpagnola business is really facinga tough moment. The restaurant isoperating in an environment that ischanged deeply: the economiccrisishit the Italian economy morethan other countries. The negativeeconomic conjuncture has reducedthe average income of families,whose expenditure is decreased a

lot from the 80s or 90s. Thebusiness has also to consider new

OWNERSHIP

Sergio Borsoi

(1965/1999) andReyes Medina(1975/1999)

Gianluca Borsoi(1999/nowadays)

MANAGEMENT

Sergio Borsoi

(1965/1999) andReyes Medina(1969/1999)

Simone Borsoi(1996/nowadays)


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competitors who are really willing to fight for the customers preference. Forsure the new situation is different from the previous years, when therestaurant achieved a lot of economic profits and the family built their strongreputation in that small city.

The difficult moment is getting worse because ofGianluca and Simones

personal issues. They have always been in competition since they werechildren, and their problems continue also in adulthood. They have twodifferent methods at work: Simone is more professional and he has a lot ofexperiences in this industry, while Gianluca is really unaware of how to run arestaurant. He should be just the owner, leaving the managerial aspects tohis cousin Simone, but their rivalry is now pushing Gianluca toward baddecisions and inadequate behaviours. They have also a different vision of thebusiness future. Gianluca wants to keep the business within the family,because he is sure that the negative conjecture wont last forever.He is alsolooking for a possible franchise contractthat maybe could help the familyand his future career. This option will be very expensive. Instead Simonewants to sell the restaurant now that a buyer is available: he is sure that thelosses will continue till the bankruptcy.Keep the business within the family will be very difficult also because there is

just an heir, Manuel Fossa. He expressed his opinion about the familybusiness in many occasions: he doesnt want to run the restaurantin thefuture because he has other aspirations and also because he is too young todecide right now what he will do in the future. Despite his young age, he is

also aware of the financial situation: the restaurant has big liquidity problems;it is losing money instead of earning.All the family members have different opinions about the business future, butthey dont have too much time to decide it. A Chinese family is interested inthe restaurant: the Chinese will pay less than the Borsois familyexpectations, but in this way they could stop their financial and personalproblems. The situation of this family business and of the entire Italianeconomy is really negative: a saleseems to be the only solution. Thisdecision will be really serious for the Borsois family: some members of the

family, as Gianluca and Reyes, would like to keep the business within thefamily because they are really related to it.

In the following literature review, this last issue will be treated in all its mainaspects.


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4. THEORIES AND FRAMEWORKS

4.1. EXITING FROM A FAMILY BUSINESS

Family businesses research suggests that less than a third of familybusinesses arrive to the second generation, 12% to the third and only 3% tothe fourth generation. These percentages enhance the importance of exitstrategies for family-owned businesses (Parrish, 2009).Exiting from a business is generally considered as a very challenging andtough moment, especially when the owner is emotionally related to thebusiness. In a family firm, the feelings of the owners and of the other familymembers are often very intense, putting the nonfinancial aims in relief. Exitstrategies can be problematic, when emotional logic prevails over businesslogic (DeTienne and Chirico, 2013).This event is really difficult, because the sale of the business is somethingseen as the end of entrepreneurship or as a failure. The sale is perceived asa defeat both when family businesses are sold due to poor performance ordue to family conflicts (Niedermeyer and al., 2007; DeTienne and Chirico,2013).

4.2. INTERNAL VERSUS EXTERNAL OWNERSHIP TRANSITION

The transition of ownership to the next generation is usually the favouriteoption. As an alternative, owners can choose to sell their businesses to a newexternal owner. The choice between internal and external ownershiptransition is influenced especially by four elements.Family businesses research suggests that the probability of externalownership transition increases: 1) when the ownership is dispersed in thebusiness, 2) when there are many potential adult heirs, 3) when the othergenerations are not involved in the business and 4) when the CEO is a non-family member.

In general if an heir is available, parents or other family members will preferinternal ownership transition. These plans may change when children growup building their own ideas, opinion, values and independent career plans.In family firms, family plays the most important role: it is a structurecharacterized by strong bonds, strong cohesion and strong solidarity betweenits members. In broad terms, we expect that family-owned businessescharacterized by weak togetherness are more likely to choose an externalownership transition (Wiklund and al., 2013).


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4.2. INITIAL AND RETROSPECTIVE SATISFATION AFTER SALE

However this process might bring some benefits: family business sale is notthe end, indeed it can be a new beginning. Families would like to maximizetheir utility when deciding to sell their firm. The utility of selling a familybusiness depends on financial factors (earning via a sale) as well as on non-financial factors (lifestyle, secure employment, reputation). The utility functionfor selling family business can be represented in this way:UTILITY (sale)= U (F, N) F=financial factors;

N=non-financial factors;U=utility.

Family businesses research indicates that familys evaluation of the businesssale starts during the sale process (initial satisfaction) and ends many yearslater (retrospective satisfaction).In the following figure, we can understand what elements influence initialsatisfaction as well as retrospective satisfaction (t=time).

Decision to sell thebusiness

(1)

Attributes of the saleprocess

(2)

Realized sale price

(3)

INITIALSATISFACTION

(t0)

Remaining interest

and influence afterthe sale

(4)

New family identityafter the sale

(5)

RETROSPECTIVESATISFACTION

(t1)


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The first element that influences the initial satisfaction is the fact that theentire family has to be involved in the decision-making process: the saledecision has not to be left to one single person. The second elementsuggests that the alignment between family goals and buyer goals increases

initial satisfaction. The third element that can effect the initial satisfaction isthe perceived adequacy of the realized sale price.On the other hand, there are elements that can influence the retrospectivesatisfaction: the first one is the remaining family influence or interest on thesold firm and the second one is the creation of a new family identity throughnew activities after the sale (Niedermeyer and al., 2007).

4.4. TIMING

Families are always worried about the perfect timing for selling their familybusinesses. There are many signals to understand that it is time to considerselling: a reduced growth rate, a fall in sales, challenges from newcompetitors, the development of new technologies as well as family conflicts(Raymond, 2012). If a family does not understand that it is a good time forselling, some problems can occur: on one hand they could sell too quicklywithout an adequate planning; on the other hand the could refuse a goodbuyer because they think that better times may arrive (Singer and Wodar,2011). In order to avoid all these problems related to sale timing and topreserve the family harmony, counseling may be very important to plan the

exit strategy. It could help family members to discuss together the issue,because a lack of communication and alignment in family membersobjectives will be the factors for losing the sale (Lansky, 2007).

5. REFERENCES:

1. Parrish, S. (2009); Successfully transferring the family business: a newmethodology, Journal of Financial Service Professionals, Vol.63 (3),

pp.47-55.2. DeTienne, D. and Chirico, F. (2013);Exit strategies in family firms: how

socioemotional wealth drives the threshold of performance,Entrepreneurship Theory & Practice, Vol.37 (6), pp.1297-1318.

3. Niedermeyer, C.; Jaskiewicz, P. and Klein, S.B. (2010); Cant get nosatisfaction? Evaluating the sale of the family business from thefamilys perspective and deriving implications for new venture activities,Entrepreneurship & Regional Development, Vol.22 (3/4), pp.293-320.

4. Wiklund, J.; Nordqvist, M; Hellerstedt, K. and Bird, M. (2013);Internal

versus external ownership transition in family firms: an embeddednessperspective, Entrepreneurship Theory & Practice, Vol.37 (6), pp.1319-1340.


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5. Raymond, D. (2012); Capturing wealth via a sale of the family business,Family Business, Vol.23 (1), pp.24-26.

6. Singer, G.D. and Wodar, B.D. (2011); When you sell your business,will you get what you need?, Family Business, Vol.22 (1), pp.56-58.

7. Lansky, D. (2007); To sell or not to sell- That is not the only question,Journal of Practical Estate Planning, Vol.9 (3), pp.45-47.

No financial data have been provided because of the familys denial.

Family Business Individual Case

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