A Survivor's Defining Moment
May 1, 2006
A Survivor’s Defining Moment
Dan Malovany, editor
Every chief executive eventually faces a difficult situation and makes a critical decision that ultimately determines the future of the company.
For Franz Family Bakeries, also known as United States Bakery, that time came in the early 1980s, when Philip Morris approached the baking company about acquiring it.
Owner Joe Franz, who had been CEO of the company since 1954, thought maybe the time was right. He told Bob Albers, then executive vice president and general manager of the company, “Why don’t we do it?”
Albers then took a couple flights to negotiate a deal with executives at Philip Morris’ headquarters in New York.
“We didn’t know what price we were going to get, except at that particular time, multiples were going high, and we had a good idea about what we would be getting,” Albers recalls.
Before his final trip, Albers sat down with Franz. “This is not bad,” he told Albers. “You get to retire. What are you going to do?’
Albers replied, “I’m going to go out and buy myself another company and grow it.”
“You’re not going to retire?” Franz responded.
Albers said, “No.”
“Then why are we selling this one?” Franz countered.
“Because it’s your company,” Albers said. “You want to sell it. It’s your choice.”
Franz thought about it for a second and then said, “Let me tell you, Bob. Two things. First, I’d like a promise from you that you will take care of my family and watch out for their needs over the years. Number two, some day when you’re my age [and] you’re faced with this decision about what we’re talking about here, I want you to give the young people in this company an opportunity to experience what you have experienced and what I gave you.”
Now the current chairman and CEO, Albers notes that the company took care of the Franz family after Joe passed away in 1988. Additionally, the bakery takes care of top managers by giving them shares in the business as a way of retaining top talent. Moreover, for the last 50 years, the business has had a profit sharing plan where 15% is contributed to participants. The goal is to provide a nest egg for loyal employees upon retirement. That’s how you build a solid, loyal team.
“We didn’t spend all this time to hand it to somebody to take it down,” Albers explains. “We have been careful and have assembled a team here where we have a lot of confidence that can carry this company for another 100 years.”
Now, at 64, Albers would like to leave the next generation with the same advice that was left to him by Franz.
“Don’t think personal,” he says. “Think what’s best for everybody, and when the time comes, just make the right decision.”
Making the right decision is how Franz Family Bakeries and Schwebel Baking Co. of Youngstown, Ohio, survived over the years. Both are strong, regional, independent baking companies celebrating their 100th anniversary this year. They’ve persevered by being nimble and responding quickly to consumer trends. They take calculated risks, but they’re also fiscally cautious.
Too often these days, family businesses sell their souls to venture capitalists and other investment funds, which then flip them to another owner in five to seven years. That’s not necessarily bad, but the companies often lose something in the process.
“When venture capitalists buy you, they don’t have the heart or the loyalty to persevere when times are tough,” Albers says. “If they can get their money, they’ll do anything.
“They don’t think, ‘I’m going to lose a lot of people, I’m going to hurt a lot of people or I’m going to leave a community,’” he adds. “They don’t think that way.”
“I don’t say it’s wrong,” Albers continues, “but they are more into returns and ‘what do we give our shareholders, what do we give our investors, and how can we get the maximum turn on them?’”
Congratulations to Franz, Schwebel’s and all the other survivors in the snack food and wholesale baking industry.