Partnership Pitfalls: When everyone is in charge, no one is in charge.
So… you and your best friend, brother, or spouse want to go into business together? Of course, you agree on everything right now, but what happens when you don’t? In many cases being realistic and pragmatic can be the kindest, most loving thing you can do for your partner and yourself.
We asked our very own Maine SBDC Business Advisor Chris Cole to speak to what happens when partnerships break down based on her experience from an employee’s point of view and as a co-owner of a business.
An Employees’ Viewpoint:
Partnerships can consist of a financial backer with a skilled partner, people who have complementary skills, multiple members with equal abilities, spouses, family, or friends. With any of these scenarios, there should be a clear understanding of the roles and responsibilities of each partner.
As an employee, I worked for a popular specialty sandwich restaurant that was local to Maine and New Hampshire. (Wonderful Sandwich Shop), great food with a personality. Mention it to anyone who frequented Portland in the 1990s they would remember the Signature menu item, a huge sandwich delivered to your table by the entire wait staff banging pots and chanting. The two owners had lit fire with their concept. Not only did customers want to eat there, but folks in the industry also wanted to work there.
The original shop expanded into seven very quickly. During that time though, the owners had lost oversight of the individual restaurants. The growth was unmanaged by the partners. This led to the staff coming into work and finding expensive, necessary pieces of equipment missing. One of the partners had moved it to the newest location and the other partner was not aware that this was happening.
During the fifth year of (Wonderful Sandwich Shop), things started getting worse. That winter line staff were asked by the managers not to cash our paychecks for days beyond the issuing date. The company did not have the funds to cover them. This caused tremendous hardship on employees that lived paycheck to paycheck. Even though revenue remained solid and growing, staff cuts occurred in an effort to reduce costs. By the spring of the sixth year (Wonderful Sandwich Shop) was closing locations or selling them off. Apparently, one partner had been filtering money into their personal bank accountant, in a sense stealing from the company.
Another cafe that I loved working for was owned by a husband and wife. He was a CIA-trained chef who managed the sous chefs and cooks, and she managed the marketing, finances, wait staff and the bakery. Seemed like the perfect balance and they even lived above the restaurant. The food was excellent and I learned a tremendous amount from both of them.
Unfortunately, both owners had very strong personalities and did not communicate with each other. Instead, they used the staff. I recalled many times platting up a dish as the husband had required only to have the wife come in and have me redo it to her standard. The servers were trained a specific way by the wife and the husband would reprimand them for doing it as they were taught. This happened in every aspect of the operation and on a daily basis. The business started to get a reputation as a place not to work and we lost some good people.
In spite of the staffing issue, the business continued to expand into catering, supplying desserts to other restaurants, and we took over the food service for a local company. The operation was moving in a horizontal position instead of vertical growth. I had to start my days in the new offsite bakery, load up my own truck to deliver to the café, cook breakfast, and then pack up my truck to get to the food service accountant in time to serve the lunch.
The husband really wanted to concentrate on the high-end dinners that the restaurant had been known for and the wife wanted to expand the business in multiple directions. All of the employees felt the tension and more people gave their notice. The staff that remained ran around trying to keep up. Then one morning I arrived at work to find the doors locked with a note stating, “Closed for business until further notice”. The business never opened again, the couple divorced, and the real estate was sold off.
Both of these situations put the spotlight on how much bad partnerships affect employees, which ultimately will have a negative impact on the entire operation.