Estate Planners have an endless list of horror stories of how family businesses thrive in the first generation, stagnates in the second generation and collapses in the third generation. There is even the saying “shirtsleeves to shirtsleeves in three generations” (though there are many local variations of this saying). It is refreshing, therefore, to hear from one family and one retail business in Detroit Michigan that is thriving under the management of the third generation, despite the odds being against them, the changes in Detroit in the last 70 years and, most recently, Covid-19.
Founded in 1949 by two brothers, Ackroyd’s originally provided meat to the Scottish community of Detroit. When they found that there was a high demand for Scotch Pies, pastries with meat fillings, they branched out into making their own pie crusts, which they continue to this day. Because they sell tea cakes, scones, meat pies and other small but luxurious items, they have been able to ride the waves of economic boom and bust in Detroit. Megan Ackroyd’s father took over financial operations from her grandfather in 2012, with Megan buying the company after her grandfather’s death, from her grandmother. Now Megan’s father is an active employee “in the trade” though semi-retired, while Megan acts as the company’s fulltime CEO.
Although Megan worked at the Bakery when a child, she did not work in the family business right out of college. For seven years, until she returned to Detroit in 2009, Megan worked for Compass Group in North Carolina, the world’s largest contract food service provider in logistics and supply chain for the global company. Megan feels that working away from the family business was an overall benefit as she came away with different experiences and perspective on the food industry. She partnered with her father in running the family company when she returned.
In 2020, Covid-19 forced the closure of the Bakery’s physical location. Megan was able to oversee a successful shift from a local, and in-person shop, to a national, online sales experience. This includes shifting from sale of individual items to sale of packs of multiple items.
It may seem that succession of ownership was a carefully planned and executed process, but in fact it was not. Her grandfather kept control of day to day financial management of the business until 2012, while her father managed all other operations. When her grandfather was 84, he turned over the finances to Megan and her father. The main argument she and her father used in persuading her grandfather to make the change was going through “what if” scenarios of her grandfather being unable to continue the management of the business. Despite giving up control, her grandfather did not give up ownership of the business, which Megan’s grandmother inherited on her grandfather’s death. After some confusion over her grandmother’s pay for her interest in the business and how her grandmother would sign off on those things only the stockholder of the business can do, Megan bought all of the stock in the company.
Megan is now in the final steps of moving the business and acquiring new equipment as a strategic investment in the long term growth of the business. This is quite a departure from her father’s and grandfather’s investment in the equipment and space which was more of the “make, make do or do without” investment style. She also participated in Goldman Sachs
No one can argue with Megan’s past and present success as owner and manager of Ackroyd’s Scottish Bakery, but as with most family businesses – even successful third-generation businesses – there is always the question of how sustainable the success of the business will be beyond Megan’s tenure. Does the business have sufficient resources, both financial and staffing, to carry on? Is the process for the family to maintain control during the succession of ownership adequate? Is the learning and innovation Megan has brought to the business ingrained in the operations of the business? These and other issues are most often brought up with a Board of Advisors, who can force the owner manager of the family business to take a Sanity Check on the sustainability of the success of the business in the long term.
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