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The supermarket industry is hoping to bring operators more success with succession planning.As independent retailers face challenges ranging from the growth of supercenters to increased merger activity, some are increasingly tempted to consider selling their businesses or closing shop when the top executives are ready to retire. That concern has led industry trade associations, wholesalers and others

The supermarket industry is hoping to bring operators more success with succession planning.

As independent retailers face challenges ranging from the growth of supercenters to increased merger activity, some are increasingly tempted to consider selling their businesses or closing shop when the top executives are ready to retire. That concern has led industry trade associations, wholesalers and others to push harder in improving these operators' skills in planning for ownership succession. The National Grocers' Association, the Food Marketing Institute, the National-American Wholesale Grocers' Association and IGA are among organizations behind these efforts.

They have developed educational seminars on leadership succession, estate planning, finance and valuation, and a host of other related topics.

There are also signs that independents have a new incentive to work harder at succession planning. Younger generations at these companies see running a small retail operation as a better alternative than joining a downsizing corporate world.

"The nature of the business has become very sophisticated and very competitive," said Paul Adams, corporate director of retail education services at Fleming Cos., Oklahoma City. "There's an interest out there [in succession planning] that maybe wasn't there in the past."

Fleming, which is now seeking to align itself with an established succession program, is one of the companies giving more weight to such planning. "We feel it's something that can bring some benefits to our customers," he said. "It's very important that we play a role and help them make that [ownership] transition easily."

FMI's newly created Family Supermarket Succession Resources Program focuses on the interdependence of retailers and their wholesalers by encouraging joint participation of the two businesses.

"If they don't plan, that makes it much more difficult to pass the business on, and anything that makes it more difficult to pass the business on has, to a degree, an adverse effect on their suppliers and the people who rely on that group of people as a constituency," explained James Baska, president emeritus of Associated Wholesale Grocers, Kansas City, Kan. He is a member of the FMI program's faculty.

FMI's program consists of three one-day-long seminars scheduled six months apart. Each seminar focuses on different facets of the succession issue.

At NGA, Tom Wenning, senior vice president and general counsel, said his organization has worked hard on the succession issue because of the dangers involved to the industry.

"The worst thing that happens is that the business doesn't go on to another generation or that the family isn't prepared to take it over and the business eventually ends. We're trying to find ways to make them succeed for future generations," he said.

Over the last six years, some 154 companies and 410 individuals have attended the D'Agostino/ Silverzweig Entrepreneurial Institute, which functions under the auspices of NGA's Center for Family-Owned Businesses. It is supported by a grant from Quaker Oats Co., Chicago.

Retailers are instructed in the elements of establishing a strategic vision and developing an estate plan, with an emphasis on group discussions and communication.

Nick D'Agostino Jr., chairman of D'Agostino Supermarkets, Larchmont, N.Y., and a member of the institute faculty, said retailers face some of life's most serious matters when planning for their retirement: mortality, the loss of control and uncertainty about their futures.

He stresses to them the importance of dealing with these issues before it is too late. "If you want your children to succeed you, you've got to help them to be successful," he advised.

And D'Agostino noted he is taking his own advice, preparing his sons, Nicholas III and Walter, to assume responsibility for the family business when he retires.

"We are in the process right now of developing a plan with my two oldest sons and the president of the company [Ronald Nevers], who is a nonfamily member, so that they will be able to take over after I leave within the next two or three years," said D'Agostino. "They are very involved in managing the business. I really do think that they could take over."

NAWGA has tapped Neumeier & Co., a consultant group in Timonium, Md., to run its two-day-long family business issues program -- the first of its kind at the organization. Seminars focus on defining company goals and creating policies to accomplish those goals as they relate to food-service companies.

Mike Neumeier, president of Neumeier & Co., said disagreements between family members and their inability to work harmoniously together are the prime factors that cause independent operators to sell off their companies.

Neumeier said the increased attention being paid to this matter will benefit everyone, from business owners to associations. "Three years ago I didn't see very much going on. I think it's a good sign."

John Eldred, director of IGA's Retailer/Campbell's Successorship Program, suggested that more independents are able to pass on their businesses because younger people are more willing to be a part of a small business today in light of the downsizing of corporate America.

Funded by Campbell Soup Co., Camden, N.J., the IGA program started about two-and-a-half years ago and participants were required to make a three-year commitment. The effort will soon produce its first graduates -- a class of 27.

In the IGA program, retailers commit to three days of seminars each year. They also promise to complete reading assignments and to communicate with others in the program throughout the year.

"We're not looking for volume, we're looking for continuity," Eldred said. He is also academic director of the Family Business Forum at the Wharton School of the University of Pennsylvania.

Duane Martin, son of the owner of Martin's IGA Plus, Effingham, Ill., is one participant in the IGA program. "I like being an entrepreneur and being in charge of my own destiny," he said.

Now a three-store business, Martin's was started by Duane's grandfather in 1946. It was then passed to his father, Newlan, who will soon pass it to him. Newlan is also a participant in the IGA program.

Duane said the IGA program taught him how complicated succession planning can be. "There are unseen factors out there that you might not want to address. You're dealing with mortality," he said.

It is difficult to determine just how many family-owned and independently owned grocery companies in the United States are affected by succession issues. According to industry estimates, there are about 12,000 grocery companies with 10 or fewer stores under a common ownership; larger store groups are often classified as chains but many of those are also family-owned. For many grocery companies, succession planning often goes beyond merely passing ownership to a relative.

When retirement comes around for Tom Feldpausch, president and chief executive officer of 21-unit G&R Felpausch Co., Hastings, Mich., and his brother Richard, chairman, both are planning to leave the company to a mixture of family members and "key associates," some of whom have been with the company 30 or more years.

"We look at it as a big family," said Tom Feldpausch.

Their father founded the company in 1933, then passed it on to his children and some trusted employees in the 1960s. Now Tom and Richard, after participating in NGA's program, are preparing their successors to assume control.

"We're in transition. We're working on enhancing their abilities to accept more responsibilities," he said.

For all the companies that are successful at succession planning there are some who decide to go a different route. Larry London, president of Geneva Corp., a mergers and acquisitions group in Irvine, Calif., said many retailers are still selling their stores to the highest bidder and there are plenty of them. He has 241 buyers seeking to acquire "midsized" grocery chains -- those with six to 40 units that are worth between $1 million and $100 million.

Many retailers sell out because of the enormous capital investments required to continually upgrade technological systems while simultaneously providing top-of-the-line quality and service, he said.

"It's a frustrating business and they're looking to get rid of that frustration," he explained.

Some industry experts who promote succession planning warn the process is more effective if started earlier.

Retailers should start planning at least three to five years before they want to retire, according to NGA's Wenning, because of the complex tax structures and seemingly infinite legal limitations placed upon those seeking to transfer a business from one generation to the next.

In fact, staying with a company after it has been transferred to new owners might be a good idea so that the new management can get a feel for its new responsibilities.

That's what Paul Butera, president of Butera Finer Foods, Elgin, Ill., did when he sold his company to his employees two years ago. He is still with the company, but sometime in 1996 his son, Joseph, will take over as president and general manager when Paul officially retires.

When he was looking to get out of the business two years ago, his wholesaler, Certified Grocers Midwest, Hodgkins, Ill., contacted its bank, the National Cooperative Bank, Washington, to suggest that its customer was a good candidate for an employee stock ownership plan.

"The owner wanted to sell and he wanted to share his good fortune by giving his employees the opportunity to own the company because they contributed to his prosperity," said David Schoeder, vice president of the bank. He said the bank has structured some 30 to 40 deals for retail grocery companies.

After completing the sale of the company to his employees, he provided an incentive for them to stick with it. If those who have already been with the company 10 or more years can stick it out until the year 2000, they can split a $600,000 pot.

One retailer who started planning for succession early was Tom Goodner, owner of Goodner's Supermarkets, a six-store operation in Duncan, Okla.

"I started [planning] about three years ago, and I'm not all the way there yet. It's tough," Goodner said.

He took over the business in 1981 from his father, who founded it in 1937. Now he is planning to deliver it into the hands of his three children upon his retirement. He said he has never considered selling out to a larger corporation.

He emphasized that retirement doesn't require cutting off all involvement with the company, it just means taking a break from the everyday hassles and letting someone else handle them.