A well planned transition is key to sustaining business success

Having a strategic business plan, ideally framed with the help of expert professional advisers, can make the difference between success and failure. Typically, 10 per cent of small businesses fail in their first year, more than 30 per cent in their second year. By the end of year five, anything up to 50 per cent of new businesses have ceased trading.

The restaurant business is a tough commercial sector, a place where the failure rate has always been high. Walking the thin line between accommodating changing customer tastes and keeping the costs of labour and materials within budget, it is a business where tight controls and constant attention can mean the difference between success and failure.

Managing to maintain high culinary standards and remain a popular venue for special occasions over a number of decades is a feat few restaurants achieve.

Established in 1981, Restaurant Patrick Guilbaud has become one of the most famous fine-dining locations in Ireland. Acclaimed for its classical French cuisine and 30,000-bottle wine cellar, this two-Michelin-starred establishment remains the ultimate destination for special occasions.

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The Michelin Guide attributes the restaurant’s success “to the eponymous chef himself – who has certainly earned his place in Irish culinary history”, adding, however, that “it is also due to the team Patrick Guilbaud has built around him over the years, each of whom elegantly plays their part in creating an extra special experience for each and every guest”.

Getting a Michelin star is one thing; adding a second and then holding on to it is something few restaurants accomplish. Patrick Guilbaud won his first star in 1988, followed by a second in 1996, and has held both for almost quarter of a century. Over his 40 years in business, the chef-patron has seen many changes, not least in the explosion of restaurants in our capital city.

“When I first came to Dublin in 1981 there were perhaps only 350 restaurants in the country but today Dublin alone has over 3,000,” he says.

In a sector notorious for its business casualties, Restaurant Patrick Guilbaud plays to strengths built up carefully over 40 years.

“I love to work with young people, to teach them the trade, pass on experience and see them become successful in their careers,” says Patrick. “This is a young person’s business and having them coming through and working hard together has helped to keep me young as well.”

With many of the same staff in place for more than a decade, for Patrick, keeping his core team together remains another key factor in the success of the restaurant.

“We respect our staff and try to make the whole thing enjoyable, a place to work but also where they can have a good time,” he says. “It helps them to progress in life and helps us by being part of the great team we are so fortunate to have here.”

With his son Charles well established within the management structure, the next generation of this famous institution is securely in place, ready to meet the challenges and opportunities that lie ahead.

“It can be difficult for sons to live up to their fathers’ names and I was very conscious of that, and didn’t want to put undue pressure on Charles,” says Gilbaud snr. “I am at an age when it is time for me to let go a little bit. Charles is very honest and hardworking, and is much more calm and cool under pressure than I am.”

Following his father into the family business was a natural progression for Charles, but only after experiencing other areas of life.

“I always loved food and dining out but had never really thought about working for Dad, or making my career in the restaurant business, until I actually went out and experienced different jobs,” he says. “This business makes you a Jack of all trades – one minute you’re a plumber, the next you’re talking to insurance brokers and later still dealing with fish and meat suppliers. There are so many moving parts to making the restaurant work and I find all of that very interesting and enjoyable.”

Coming into the family business for Charles was not just about joining his father; there was also the extended family of dedicated, long-serving staff.

“When I started into the business properly in 2011 it wasn’t just my father I was learning from but also the wealth of experience for all the other people who have been with us for so long,” he says. “My father is the best resource I could possibly have in terms of his experience – but that is not to say we always agree on everything.

“In this business, you learn by doing rather than sitting down to a lesson; it is more about watching how things are done first hand at the cooker.”

The bonds built in the heat of a busy kitchen are what sustain the Guilbaud success as it transfers into a new generation.

“We are all a family, and one that works to help each other perform to the very best of our ability through long days united in a common purpose,” says Charles. “Stress and happiness live together in a busy kitchen, and [that] promotes a special kind of camaraderie that you only get working in this kind of environment.”

Key steps in an efficient transfer to the next generation

“Family businesses are the backbone of the Irish economy, sustaining jobs, supporting communities and providing essential services for generations,” says Conor Lupton, partner in O’Flynn Exhams LLP, a full-service law firm based in Cork.

“These businesses face the same challenges as any other company. However, they also face additional pressures when it comes to succession, shareholders, corporate governance, dispute resolution and specific family law issues. These businesses can ensure they remain on a solid footing for the future by taking the time to consider the specific legal issues and put a plan in place.”

As one of Ireland’s longest-established law firms with a history dating back to before 1799, O’Flynn Exhams LLP has a strong track record of supporting family firms across Ireland.

“Crises and challenges themselves are rarely unique. How businesses deal with them differs,” says Lupton.

Deciding the future of a family business can be complex but it doesn’t need to be a fraught experience, he explains.

“It is critical to plan the transfer from one generation to another by assessing which members will be actively involved in the business and to consider what shareholding rights should be passed to different family members.

“Often the most active members hold full voting rights and shares; family members who are not as active may hold shares with financial rights but no voting rights.

“We recommend that in addition to considering the legal implications, family firms should take specialist tax advice to discover the most tax-efficient way to pass on the business. Transactions can be planned to ensure they maximise the tax reliefs that are available.”

It is extremely important that a shareholders’ agreement is put in place when more than one family member holds shares in the company, Lupton adds.

“From our experience, the exit strategy for shareholders is the most important matter to deal with in this agreement,” he says. “A clear and unambiguous strategy, that all parties are aware of, can substantially reduce the risk of future tensions or issues between shareholders.

“Family constitutions can be used to set out the values and principles of a family business. Care should be taken with these documents to ensure that they do not conflict with the legally binding shareholders agreement or that they don’t provide unintentional legal rights to anyone.”

Tensions can rise within family businesses and, due to the close relationships involved, these have the potential to spill over into serious disputes, especially when dealing with money, power and emotions, Lupton points out.

“In order to prevent tensions from descending into a dispute to rival scenes from a popular US TV drama, the mechanism for dealing with disputes should be set out in advance in the shareholders agreement. It is our experience that alternative dispute resolution measures such as mediation are ideally suited to family businesses.

“The courts in recent years have given the clear message that family business disputes should be dealt with outside the courts if at all possible. Once the dispute has been identified, an early reference to mediation can assist in halting the rise of tensions between the parties.”

One matter of concern within family businesses is the effects a judicial separation or divorce may have on certain assets, such as shares in family companies.

“The shareholders can create a strategy to deal with this as best they can by putting appropriate clauses in shareholders’ agreements and constitutions to anticipate possible court orders made in family law proceedings. While prenuptial agreements and postnuptial agreements are not yet legally binding in Ireland their use can be helpful in protecting family business assets.”

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