A Family Feud in In N out Burger - Assignment Example

This paper is about a family feud that affected the fast food giant, In ‘N’ Out Burger. The assignment is for a business law and the case would be examined from the perspective of laws that govern the family run businesses and the effect of such family feuds on the reputation of the business as well as the brand image of the entities. This paper starts off by giving a description of what the company does and then goes on to detail the standing of the company in its chosen sector. The family feud that rocked the company is detailed from the perspective of both sides of the conflict and the appropriate legal positions examined. The paper concludes by references to instances of such behavior in similar firms and makes the case for a dispute resolution mechanism to deal with such cases. The paper draws heavily from the book on In ‘N’ Out Burger by Stacy Perman that gives an excellent account of the case from all angles as well as the ramifications of the same on the company. The book by Perman, who was a business writer for Business Week before she authored the book, concentrates on the family’s contribution to making what she calls a “typical American brand” where the quality of the product rather than the hype surrounding it speak for themselves. The family’s penchant for letting the brand dictates the success of the company rather than the family’s proclivities are dealt with as well. The philosophy of the family towards their business was "based on three simple words: Quality, Cleanliness, and Service. " The battle over succession began much before Esther Snyder’s death that led to the trustee of the firm, Richard Boyd, who was the co-trustee to two-thirds of the company’s stock to accuse Lynsi Martinez and other executives to force out Esther and fire Boyd unceremoniously. The suit further alleged Mark Taylor, the executive to whom the presidency of the company passed eventually. The case pertains to the issue of succession planning in family run businesses and the fact that the law can be twisted to suit either side in their attempts to shift the balance in their favor. Charges flew over the misuse of corporate funds and sweetheart deals and the feud degenerated to a point where, Esther is made a prisoner in her home, with phone calls and visitors screened by her ex-daughter-in-law. The family feud began in right earnest with each side accusing the other of attempting to wrest control of the company that led many industry watchers to conclude that the days of the Snyder family’s control of the company were numbered and that the company would not retain its distinct identity as a privately owned conglomerate away from the glare of IPO worshipping Investment bankers. As the following quote from the book makes it clear, the statistics pertaining to family businesses that witnessed feuds did not seem to favor In ‘N’ Out Burger’s chances of remaining a single entity. "Historically, the statistics did not favor companies like In-N-Out Burger remaining intact. According to the Family Business Forum at the University of North Carolina, only 30 percent of all family businesses are successfully transferred to the second generation, while only 12 percent make it to the third. After that, less than 3 percent make a successful transition to the fourth generation.” [Stacy Perman, In-N-Out Burger] The odds against the family run business increased with each day as the company’s name was dragged into the public domain as the subject of a bitter dispute over ownership and succession. The case highlights the need for adequate legal protection to the owners of the family in case of such issues balanced with a concern for the employees of the company who may suffer the consequences of such feuds. The point here is that there should be a clear definition of when the professionals take over and safeguard the employees from the effects of succession battles that may leave the company in limbo. To quote from the book, "Frequently the subject of rumor and speculation, the fastidiously private company has always shunned the kind of publicity that, its competitors routinely courted. And while it has rarely bothered to counter or clarify the murmurings, the conjecture has touched on everything from the recipe for its secret sauce to the meaning of the twin palm trees planted in a cross formation at each store—there has even been speculation as to whether the company was run by some kind of Christian cult. Every so often, word that In-N-Out Burger is about to franchise or be sold makes the rounds. While this kind of business gossip has been kicking around for decades, all its customers usually want to know is how soon an In-N-Out Burger will open near them.", [Stacy Perman, In-N-Out Burger] The above quote makes it clear that the management of the company (held by the Snyder family) was intent on what can be called a quiet and determined effort to succeed without outside interference. The reason I have quoted the particular paragraph is to illustrate the point that in case of feuds over the trusteeship of the family run businesses, it is usually the tussle between the professional members of the management team and what can be called the “absentee’ members of the family who are titular in their execution of the family’s responsibilities and do not play an active role in shaping the destinies of the firm that their ancestors have founded. Given the Snyder’s family’s penchant for keeping a low profile (the founding family of Harry and Esther), the recent troubles in the company arising from the succession planning have come as a surprise to many. The fact that the founders thrived on a “less-is-better-enterprise” and the family’s philosophy of keeping it well, all within the family, the tussle over ownership between the one of trustees of the will left by Esther and Lynsi, the grand-daughter of Esther who was the intended beneficiary assume significance when one considers the ramifications of the nearly half-a-billion turnover firm’s management succession on the brand image of the company. As the following quote from the book puts it, "It wasnt long before the battle was splashed across the pages of newspapers and magazines across the country. At In-N-Out corporate headquarters in Irvine, the inner circle fumed over what they called a "relentless publicity campaign designed to invoke the media in Boyds war" against Lynsi. There was no shortage of coverage. "In-N-Out Lawsuit Exposes Family Rift," blared the Los Angeles Times. Three thousand miles away from the nearest In-N-Out, the Washington Post soberly weighed in with "Iconic In-N-Out Battles Executive over Firms Direction."", [Stacy Perman, In-N-Out Burger] This point would support the rather relatively tame ending to the succession saga as the warring parties agreed on an out-of-court settlement instead of going the whole distance in making the battle a long drawn out affair that would have led to further erosion of the brand image of the company. As would be discussed later, the case of In ‘N’ Out Burger serves to illustrate the ease with which once successful family owned businesses face troubles with the demise or the anticipated demise of the founders. "The Legal endgame came to an abrupt halt with a terse press release on May 10, 2006, approximately two weeks after the transcript of the recorded telephone conversation between Elisa Boyd and Esther Snyder was entered into the record of the Los Angeles Superior Court. The five law firms representing all sides of the dispute announced that a settlement had been reached, effectively scuttling the courtroom showdown slated for October. Their statement declared, "The civil action and the probate actions have been fully and amicably resolved as to all parties to those proceedings, including Lynsi Martinez and Mark Taylor." The details of the agreement, however, remained under wraps, and neither of the sides attempted to clear the air over the matter", [Stacy Perman, In-N-Out Burger] As the succession game ended with an out-of-court settlement, the dust also settled down regarding the tussle over ownership and as the quote from the book states, "By fall, the questions raised for months, among In-N-Out loyalists seemed to have been answered, at least for the time being. The hint of corporate catastrophe was pushed back. The hoopla around In-N-Out seemed to center once again on its burgers.” [Stacy Perman, In-N-Out Burger]. The apparently happy ending to the bitter feud hides the larger questions of how families who have started businesses ought to plan for succession and the kind of control they would give to their professionally appointed managers. What compounds the fact is that in the case of In ‘N’ Out Burger, the trusteeship drawn by Esther had specifically named Boyd and others as the co-trustees. This raises issues related to trust and the fact that this can be misused for personal ends as the case illustrates. The case of In ‘N’ Out Burger also throws up issues about the inheritors of family legacies who fail to live up to the expectations of their parents. This is made clear by the case of Gary Snyder who was in effect an ineffectual member of the management team and who liked to keep things as they are and one insider, "When asked to characterize the mark that Guy Snyder left on, said, ""He just didnt change a thing. He knew well enough to just leave it alone."", [Stacy Perman, In-N-Out Burger] Before concluding the paper it is pertinent to note that the points raised by the case have a direct bearing on corporate America’s approach towards family owned businesses and the range of legal options that seem to be increasing for both sides indicate a need for comprehensive yet concise regulations that would take care of potential issues arising out of these cases of succession planning. As the author puts it, "The dynasty had been preserved." But, at what cost? In conclusion, I have learnt the importance of legal provisions that apply to situations like these that are complicated and not all family feuds end in such manner with many of the cases leading to splitting the companies to reach settlements. As the author repeatedly says, the story of this family-owned, fiercely independent chain" is in fact the story of America. Hence, it is a wake up call to the denizens of family owned companies across America to put their houses in order before they retire or when they anticipate that their time might be up and plan for the torch to pass on. Works cited Perman, Stacy. In ‘N’ Out Burger: A behind the counter look at the fast food chain that breaks all the rules. New York: Harper Collins e-books, 2009. Read More