All in the Family
How family businesses have survived through many generations
Ellen Burkett manages the retail stores and oversees kitchen operations and candy making, while her brother, Thomas Ellis, concentrates on the administrative and marketing duties, as well as the pecan shelling operations of Priester's Pecans.
Photos by Paul Robertson, Caroline Baird Summers, Steve Gates, and Dan Anderson
Family businesses are a mainstay of Alabama’s economy and of the country as a whole.
Various experts say they’re responsible for 50 percent of the U.S. gross domestic product, for 60 percent of the country’s employment and for 78 percent of all new job creation.
But longevity can be a problem for a family business. Most of them pass out of family control by the third generation, and only 4 percent remain in the family by the fourth generation, The Economist reports.
Sometimes the company’s success leads to a lucrative purchase offer by a larger corporation, which the family accepts. Members of the younger generations may have interests outside the business. Or perhaps, hide bound by tradition, the family fails to respond to new economic realities.
Here’s a look at six Alabama family businesses, including five of the longest lasting, with a glimpse into how they have met the challenges of running a successful business while keeping it in the family.
Priester’s Pecans: A Brother-Sister Act
Traveling south from Montgomery on I-65, look to your left as you approach the town of Fort Deposit and you’ll see Priester’s Pecans, a combination country store, restaurant, gift shop and candy kitchen in which you can buy fresh made pecan pie, pecan brittle, pecan logs, pecan bark, in short just about anything you could desire made from pecans.
This store is just the most visible aspect of a family business that cracks and processes 1,500 tons of Alabama pecans per year and distributes its delicacies all over the U.S.
Priester’s Pecan Co. started business in 1935 when Lee C. Priester began selling sacks of pecans next to his Fort Deposit Texaco station. Sales were so brisk that he brought in a partner, Hense Ellis, to help expand the business. Today, the third generation of the Ellis family owns and operates Priester’s—Thomas Ellis and his sister Ellen Burkett.The two are equal co-owners and have a clear division of duties.
“I concentrate on the administrative end of it and the pecan shelling part of it,” Thomas explains. “I also do marketing on the web site and handle shipping. Ellen manages the retail stores and oversees the kitchen operation and the candy making.”
Both Thomas and Ellen have worked in the family business from an early age, although Ellen joined the business almost by accident. As a new college graduate, she was considering her options when a friend suggested the family business. “Neither of us had really thought about it before, but I sat down and talked to my father,” she recalls. “He was looking for a store manager, I had a degree in marketing, and he gave me the job.”
The day finally came when their father thought his children were ready to run the business on their own. As Thomas recalls, “I guess it was 1992 when he brought us into the office, sat us down and said ‘I just want you to know that if anything positive or negative happens around this place anymore, it’s going to be y’all that do it. You work together and if you need me, come find me.’”
David Ketchen, director of the Lowder Center for Family Business and Entrepreneurship at Auburn University, says it can be difficult for a business owner to hand over the reins to the next generation. “People have a hard time stepping outside of themselves to understand that the time is right,” he says. “If you do it too early the company can flounder, but if you do it too late, the leaders may be old and tired. You need to find that ‘Goldilocks’ moment—not too early, not too late.”
Ten years after their father stepped aside, the brother and sister bought the company from their dad, although he remains available for consultation. Ellen recalls one example early in her career when her father’s experience was reassuring. “Once, the water lines froze and it was just flooding and I was freaking out, going ‘What are we going to do?’ I sat down with him and he looked at me and said, ‘You know what, we’ll just have to get it fixed.’ He wasn’t freaking out.
He wasn’t worried. He knew everything was going to be ok.”
Having the experience to draw on is one of the advantages of a family business, but the Priester’s Pecan team knows that bringing in new ideas from the next generation is just as important.
One of Thomas’ sons began working in the shelling operation four years ago and brought some valuable knowledge with him. “Stinson has a degree in agricultural economics from Auburn University,” Thomas explains. “He’s gotten involved in the ever pressing and increasing food safety regulations that we have to meet to sell to some of our larger wholesale customers. As a young person, he’s done a real fine job of coming in and bringing the company up to speed.”
Wagner’s Shoes: Adapting to Change
Tommy and Matt Wagner, of Tuscaloosa, have shoes in their blood. “I am a third generation shoe guy,” says Tommy, owner of three The Athlete’s Foot stores in Tuscaloosa, Demopolis and Northport. “My son, Matt, is fourth generation. My father worked in a department store in Tennessee back in the 1950s. He had a dream of owning his own store, and when he heard that there was a shoe store for sale in Tuscaloosa, he bought it. That was the start of Wagner’s Shoes.”
The store was a typical Mom and Pop shoe store of the time, and Tommy was involved in it almost as long as he can remember. As he recalls, “Summers, my dad would tell me ‘You’re going to work. You don’t have to work for me, but you’re going to work.’ I would scrub toilets, mark shoes in, sell shoes on the floor.”
When Tommy enrolled in the University of Alabama, he continued to work in his dad’s store between classes. Accounting degree in hand, he began running the day-to-day operations, and in 1988 he bought the business.
Those early years of ownership brought challenges. The business environment was changing, and Tommy saw that he had to adapt to survive. “Back in 1992, I could see that the traditional family shoe store business was drying up,” he says. “I took a long hard look and said if I’m going to stay in the shoe business, then we need to change. This was the time when the athletic boom started. So, I went to The Athlete’s Foot in Atlanta and discussed converting to one of their stores.
They said, ‘It’s yours if you want it.’”
Failure to adapt is an important reason why so few family businesses survive to the fourth generation, says Auburn’s David Ketchen. “Inability to keep up with changes is a problem in any business,” he says. “It can be a particular problem in a family business if you have folks that are all going to the same college, learning that particular college’s point of view. You can become very insulated.”
Tommy now owns three stores, which he operates with the help of his son Matt. As at Priester’s Pecans, there is a clear division of duties. Tommy is the president of the company and runs the team division, selling athletic shoes and uniforms to schools in a seven-county area. “I put 50,000 miles on a car per year, on the road from 7:30-5:00 every day,” Tommy says.
“Matt does all the buying, managing, and runs the retail division. He is essentially the chief operating officer of the retail stores.”
As vice president, Matt operates the retail division with a large degree of autonomy, but has a close, informal working relationship with his boss. “We don’t have regularly scheduled meetings,” he says. “We don’t need to. Our offices are next to each other. I can walk in there any time and ask him a question. My dad’s seen most of it, and if I ever have an issue with a vendor, a customer or an employee I can say, ‘This is what’s going on. How do you think I should handle it?’”
Pursell Farms: Transforming the Family Business
Gazing at the manicured greens and fairways of the FarmLinks golf course at Pursell Farms in Sylacauga, a visitor might think that the owners know a thing or two about lawn care. In fact, the course is owned and operated by the Pursell family, once heirs to a fertilizer company with roots going back four generations.
The business began in 1905 when DeWitt Parker founded the Sylacauga Fertilizer Co. to supply the local cotton farmers. The company grew rapidly, and under the leadership of Jimmy Pursell, entered the lawn and garden fertilizer market in the 1950s.
With this growth came the temptation to sell out. “I have been with the company since the 1980s, and I can remember many times when we would be approached by a company that wanted to acquire the family business,” says Jimmy’s son, David. “Our eyes would get as big around as silver dollars and we would think, man we could make millions! But we stuck with it and kept it a family business.”
In the 1990s, the pressure to sell became intense when Citigroup made an offer for the business. After much soul searching the family compromised, splitting the company in half and selling one part.
“It wasn’t an easy decision,” Jimmy recalls. “We probably spent six months working on it—meetings, coming and going, talking about it. Taylor, my oldest son, was working in the consumer division, selling to stores like Home Depot and Lowe’s. He was very much for it and thought it was a great opportunity. We sold the consumer division to Citigroup and Taylor went with them. But there really wasn’t one person driving the decision. It was a consensus.”
The issue of selling the family business is a difficult one. David Ketchen calls the Pursell strategy of splitting the business and selling part of it “sensible in terms of hedging your bets, taking some cash to distribute among family members, but at the same time maintaining the business for future generations.”
After the split, Jimmy, David and his sister, Chris, operated what remained of the family business, which marketed fertilizer to professional groups, such as golf courses and nurseries.
David came up with a novel marketing idea: they would build a golf course and use it as a research and demonstration laboratory to show potential customers how well their products worked.
In June 2001, they announced the project and construction had just gotten underway when the Twin Towers were attacked on 9-11. Suddenly, the whole country was jittery and the economic outlook was uncertain. Should they cancel the project? The family met to discuss their options. “It’s a time I’ll always remember,” David says. “We sat down, we prayed about it, and we tried to make a decision as best we could. Finally, we decided to move ahead with construction.”
The decision turned out to be a good one, since many other golf course construction projects were put on hold after 9-11, freeing up manpower and equipment for the FarmLinks project.
The religious orientation of the Pursell’s decision making is characteristic of their family culture. With the support of the family, Jimmy Pursell called his employees together in 1976 and announced that from that point forward, the company would be run by Christian principals. “I felt like I might be blowing up a 70-year-old company,” recalls Jimmy. “But I had a conviction that I wanted to do it.”
Jimmy went on to introduce tithing company profits to charity, banning alcohol from company trade shows and offering optional bible study programs. “I was amazed at how well it went over,” he says. “I had more nice letters, more pats on the back. I didn’t lose any employees because of it.”
Lou Marino, professor of strategic management at the University of Alabama, sees such distinctive family cultures as positive features. “This is one of the luxuries of a private family business,” he says. “Being able to have a strong culture that is centered on values such as that is one of the beauties of the free enterprise system. Companies such as that tend to do very well.”
After several years of running the FarmLinks golf course as a marketing branch of their fertilizer business, the Pursell family spun off the fertilizer business as a separate company in order to concentrate on operating the golf course as part of the Pursell Farms recreational resort.
David isn’t sure if any of his own children will join the family business, but two of his sons, currently in college, are interested, and a son-in-law is now director of marketing. So it seems likely that however the business evolves, there will be Pursells involved in it.
Henry Brick: The Third Generation is the Hardest
Since 1945, the Henry Brick Co. has been taking Alabama clay and turning it into building materials, shipping them throughout most of the Southeast and as far as Texas and Illinois.
Starting as a one plant operation in Selma, the company now operates two plants with a capacity of 120 million bricks a year, the largest of any family-owned brick manufacturer in Alabama.
As a member of the second generation, Ted Henry knew that his retirement would mark a turning point in the company. “The third generation has the toughest challenge,” he says. “Having grown up in the business, I have known a lot of family brick businesses all across Mississippi, Alabama, Georgia and the Carolinas. Today, most of those are gone.”
Why is transitioning to the third generation particularly challenging? “Their generation has not necessarily seen the struggles of the start-up or been a part of it,” says UA’s Lou Marino. “They missed part of the pride and the excitement of watching the company get started and go on to great success. They may be really good managers, but the excitement and the interest are not there.”
A few years before Ted retired in 2010, at the age of 70, he began thinking that some long term planning for the future was in order. “It was obvious to me that the storm clouds were gathering back in 2008,” Ted recalls. “So I spoke to the four in the next generation that were working in the company (his sons Davis and Densen, and sons-in-law John Hanning and Jim Cothran) and said, ‘I haven’t done a good enough job preparing you guys for what’s ahead. I can’t just walk out the door when you’re getting ready to experience some really bad business times that you’ve never experienced before.’”
Each quarter for the next few years, the family brought in a consultant who specialized in industrial psychology, to advise the family on the future. “He did a great job of laying out what the challenges were,” Ted says. “He pointed out that it is difficult to transition a business to the third generation and if you’re going to make it to the fourth generation, these are the things that you’ve got to think about.”
The family governing board has changed over the years. The founder, J. D. Henry, ran the company himself during his lifetime but upon his death, Ted felt the need to broaden the governing board, since ownership of the company had spread out among several second and third generation shareholders.
“To help the ladies in the family to understand more thoroughly what was going on in the business, we added several of them to the board,” Ted says. “Besides me as chairman, my sister and my wife are on the board, along with the four active members of the family and our attorney.” There also is an annual meeting of the 12 shareholders, but to date there has been no issue so contentious as to call for a formal “voting of shares.”
Although Ted never worked for any other company, he required the younger generation to gain outside experience before being considered for a spot in the family business.
“My point is that you need to first get a good education and then find yourself a job,” he explains. “Once you’ve been in the job market for a couple of years, if you want to talk about the brick business, then we’ll look at it.”
This was a course that his son Davis followed. “I graduated from Birmingham Southern in 1991,” he says. “I worked for an industrial supply chain for a while, and then I was with a bank in Selma for a year and a half. I was considering moving to a larger bank and sent my resume to my dad’s assistant to update. Dad saw it on his computer, and the next day he gave me a call and said, ‘Before you do this, we need to talk.’ That’s how I ended up here.”
David Ketchen believes that Ted’s philosophy about family members working outside the company makes a lot of sense. “They are sending them out into the world to get new perspectives from other organizations,” he says. “This is a chance to learn more about how they succeed and bring those insights back into the family business.”
Momma Goldberg: Nepotism at its Finest
Don DeMent, founder of the fast growing Momma Goldberg’s Deli franchise, didn’t always plan to be a restaurateur. His background was in the retail clothing business, but he found that business slowing in the 1970s.
“In that era, the hippies took over,” he recalls wryly. “They were growing their hair long, wearing tank tops and flip flops. They just weren’t buying clothes. So I looked around for something else to get into.”
Don held a lease on his clothing store across from Auburn University, so he kept the store but changed the concept—instead of selling clothes, he would sell sandwiches. Thus was born the first Momma Goldberg’s Deli.
Offering New York-style sandwiches to an upscale clientele, Momma G’s, as it was affectionately known, was an immediate success, so much so that Don eventually was approached by investors interested in franchising the concept.
Approaching retirement age, Don was cool to the idea at first, but in 2007 he finally said that if his nephew, Keith Schilleci, would run the venture, he would agree to it.
“Nepotism,” literally “nephew-ism,” and referring to preferential hiring of relatives, usually has a negative connotation, but family involvement in a company is not necessarily a bad thing, says Lou Marino from UA. “At the end of the day, it’s got to be a meritocracy,” he says. “If it doesn’t become a meritocracy it will be nepotism that will be one of the first nails in the coffin of the company.”
For Schilleci the opportunity seemed risky but exciting. “I had a good job as a sales and marketing representative for a furniture manufacturer, but I had been doing the same thing for a long time and was looking for a change,” Keith recalls. “Don called me at home and ran the plan by me.” And Keith made the move.
Keith was made president of the company, but his first job was managing a Momma G’s deli. With no managerial experience, Keith found the work challenging but rewarding. “This was a piece of the puzzle that fell right into place,” he says. “I was able to learn the business, learn the ropes, talk the language, so that I could sell the franchises with a working knowledge of how they worked.”
Don recalls that his nephew made a smooth transition from sales to management. “One thing Keith did so well was to make a personal connection with the customers,” he says. “It almost irritated me the way people would say, ‘I was over at Keith’s to have lunch Sunday,’ and I would think, ‘Hey, you weren’t at Keith’s, you were at Momma Goldberg’s!’ But he was doing the right thing, embracing the customers so well that they felt that he was the restaurant.”
This strategy seems to be succeeding. Momma G’s opened its 20th deli in October of this year, and there are seven more branches under construction.
The business structure of the company is fairly simple. As chairman Don presides over the annual stockholders meetings, while Keith gives the reports. Don’s wife is also on the board as vice president. “She ran a Momma Goldberg’s restaurant in Columbus, Ga. and did a wonderful job, absolutely fabulous,” says Don. “But she just didn’t like the restaurant business. So she left that position but stayed on the board as an adviser.”
The family will continue to be majority shareholders for the foreseeable future, but Don’s share of the company will decrease as he gradually turns over a portion of his shares to Keith. It is not certain if other family members will join the business.
Don’s son, a sales representative for a North Carolina company, “has extremely strong sales abilities and is a real people person,” says Don. “But right now he likes what he’s doing and I’m not going to encourage him to get into the family business if that’s not what he’s always wanted to do.”
Bon Secour: The Company as Family
The Deepwater Horizon oil spill in April 2011 was a crisis for many Gulf Coast companies, but none more so than Bon Secour Fisheries.
First established as an oyster house in 1896 by Danish immigrant Frank Nelson, Bon Secour soon began harvesting its own oysters and later began shrimping. Today the company supplies fresh Gulf seafood to restaurants and grocery stores throughout the Southeast, operating a fleet of five shrimping boats and processing shrimp and oysters in a 30,000-square-foot plant.
The millions of barrels of crude oil spewing into the Gulf posed a grave danger to fishing operations all along the coast. “That was very difficult to deal with,” says Chris Nelson, vice president of oyster procurement. “We met quite often to talk about what direction and what strategy we should take to minimize the impact on our company. A number of places closed or laid off their employees, but we wanted to avoid that if at all possible.”
Bon Secour’s desire to retain its employees even at the risk to its profits is characteristic of many family businesses. As David Ketchen comments, “In a publically traded company, you have to answer to shareholders. If you’re carrying a lot of expenses in the form of paying employees when there’s not much work to do, you’re going to have shareholders pretty upset. In a family-owned business, they only have to answer to each other. Lots of times there is a family culture of being supportive and seeing the employees as part of an extended family.”
The Bon Secour board of directors is composed of the founder’s grandson, John Ray Nelson, his three sons Chris, David and John Andrew, as well as the company’s information technology specialist and their comptroller/accountant.
The presence of three brothers on the BOD raises an interesting question: how does a family business decide who gets what position? According to Chris Nelson, it’s simply a matter of the candidate’s interest and ability for whatever spots happen to be open. No one is groomed for a position; it’s up to the individual to decide for himself what position he would like to try, or whether to join the family business at all.
Although Chris has worked at Bon Secour part time and summers since grade school, he wasn’t always sure he would join the company. However, in 1989 he found the perfect spot. “I was always particularly interested in the oyster production end of the business, so that’s where I settled,” Chris says. “In college I studied biology, and I got a marine science degree in graduate school. So the things that are more science oriented tend to gravitate my way.” Chris’s science degree helped him understand the new regulations on food safety that came up in the 1990s.
His oldest brother, John Andrew, studied economics in college and became president of the company. The middle brother, David, who studied economics and has a master’s degree in business administration, became vice president of sales. “I’m not as conversant with accounting and such things,” Chris explains. “My two older brothers are economics majors, so they had more exposure to that side of the business. We have a good mix of skills, the three of us working together.” Although their father is no longer so active in running the day-to-day business, he remains chairman of the board.
During the early weeks of the Deepwater Horizon oil spill the BOD met every few days and finally made what they thought was the best decision for all concerned. “We decided not to shut down or lay off employees,” Chris says. “Many of our employees did end up working less hours than they normally would have, but they maintained their positions.”
As these profiles show, there are many strategies for operating a family business. But all successful and long lasting family businesses share some traits—family members that want to work in the business, recruitment based on merit and the ability to respond to changing times.
William Stevenson is a freelance writer for Business Alabama. He lives in Huntsville.