It's all relative: can a newcomer revitalize a family business—without igniting a family feud? Learn from 3 entrepreneurs who did just that

Entrepreneur, March, 2005 by Chris Penttila

THE 20s ARE A TIME FOR SELF-DISCOVERY, and Robert Douglas Jr.'s 20s were no different. After earning a political science degree in 1995 from Eckerd College in St. Petersburg, Florida, he was off to Maui, Hawaii, to ride the tide for a year as a professional windsurfer. Then it was back to Florida to pursue another interest: flying. Robert Jr. earned a commercial pilot's license and got a job as a flight engineer for a family-owned Miami airline company. By the late '90s, he was flying DC-8s all over Central and South America.

Working for a father-son company made a big impression on Robert Jr., 33. "I looked at it and thought, 'What a great opportunity,'" he says. "I decided to take a leave of absence from the flying job to see if I could work with my father."

His father is Robert Douglas Sr., 72, founder of The Black Dog Tavern Co. Inc., the iconic T-shirt shop and restaurant on Martha's Vineyard, Massachusetts. The Black Dog dates back to 1971, when Robert Sr. opened a restaurant and named it after his Labrador-boxer, whose namesake was the pirate in the classic novel Treasure Island.

By the early '80s, The Black Dog T-shirt was a must-have item for Ivy Leaguers who spent summers on the island, and the store generated national buzz in the '90s, thanks to customers like President Bill Clinton. Robert Jr. created his own buzz when he came back to The Black Dog in 2000 to spend six months as a manager-in-training and quickly transitioned into the role of COO. Robert Jr. had his own ideas for revitalizing the business, but pushing new ideas wasn't easy; some senior managers quit amid the turbulence. "I think [the resistance] was due to my fresh outlook," says Robert Jr., now CEO. "I don't want to call it inexperience, but it was definitely a fresh set of eyes on the business."

Returning to the family business as "the kid" isn't all milkshakes and cotton candy, especially when younger family members see changes that need to happen for the business to remain relevant and profitable. "Young successors bring ideas to the table," says Paula Harveston, a management professor at the Campbell School of Business at Berry College in Mount Berry, Georgia. "It can be a problem, especially when there's no confidence in that person's leadership abilities yet."

This crisis of confidence could become more of an issue. Leadership in 39 percent of U.S. family-owned businesses will change hands over the next five years, according to the 2003 "MassMutual Financial Group/Raymond Institute American Family Business Survey." Thirty percent will go on to be run by second-generation family members, 12 percent will survive into the third generation, and just 3 percent will be handed down to the fourth generation, says Joseph Astrachan, editor of Family Business Review. In fact, the average life span of the U.S. family business is only 24 years.

At The Black Dog, Robert Sr. remains owner, chairman, president and sounding board for Robert Jr. and brother Jamie, 31, who oversees management of its retail stores. (His brother Morgan, 27, is a lunch cook at the tavern, and another brother, Brooke, 22, isn't involved with the business, "but," says Robert Jr., "I'm working on him.")

Having an encouraging parent helps, says Robert Jr., but he still had to sell employees on a new direction. It's been a slow process of outlining his ideas (one of which is a five-year plan for expanding the clothing side by up to 50 new stores--a move that could propel sales to $75 million by 2008), getting everyone's input and answering tons of questions. Some employees might leave, Robert Jr. says, but that's the price of progress. "I had countless meetings with the employees, because they need to be brought up to speed," he says. "It might take three, four, five months to keep on driving it home."

YOU CAN'T GO HOME AGAIN ... CAN YOU?

There's a fine line between the boardroom table and the kitchen table in any family business. Just ask Ellen Picataggio, 35, and husband Pete, 36, managing partners of The Farmer's Daughter, a 66-room hotel in Hollywood, California. The hotel was built in the 1960s and became a neighborhood icon, especially for fledgling actors who could get a room for as little as $25 a night.

Ellen's Korean-born parents bought the hotel in 1997 and continued to run it as a low-budget motel with the help of her sister, Christina. When Christina was killed in a car accident in 1999, Ellen's parents asked her to leave her job as an operations manager for a clothing manufacturer to take over operations at The Farmer's Daughter.

Pete considered leaving his job in business development for software company Symantec to join the family business. Leaving the corporate world was one hurdle; the thought of working seven days a week with his in-laws looking over his shoulder was another. "When they first asked, I said no," he says. "But the more I let my brain get behind it, the bigger a challenge it [appeared to be]."

He joined Ellen, and they started unpacking their own ideas. Ellen wanted to update the motel's design. Pete felt marketing and operations needed a huge overhaul. Both wanted to revamp The Farmer's Daughter into an upscale hybrid hotel-motel, a renovation that would cost a few million dollars. Ellen's parents, who are both in their 70s and spend most of their time off-site but maintain full ownership, resisted initially. "[My parents] come in every day for five or 10 minutes to look around and talk about what's going on," Ellen says. "Their minds are still very much involved in what's going on in the business."