Dealing with a new owner seeking help for sold business...

[jeromedawg]

Hey guys,

Continuing on the subject of my in-laws selling their business, the new owner just called my wife for help because apparently all the employees are upset with the way she manages and are starting to leave - they are also threatening to sue her.  She's asking my in-laws to help her understand what's going on despite everything being handed off (it has been two months now). In most cases, people would say "sorry it's your business now" - however there are some strings attached here; namely that my in-laws agreed to seller financing for $60k which the new owner is supposed to pay back over the course of two years. So it seems like they would want to have a vested interest in the success of the restaurant. Part of the problem that has led to this is most of the employees having a sense of entitlement that my in-laws didn't put into check. Anyway, at the rate things are going it's not looking very good with the new owner. You'd think she would have been more aggressive trying to find new workers but it seems like it's not that easy. Not really sure what's going to happen at this point in time.

If she defaults my in-laws will be out their money though the restaurant will go back to them. However, the landlord and his broker have already discussed this and if that ends up happening, they will likely either close the business or take it over themselves. Not sure if they would consider paying out my in-laws for the lost amount but I'd initially lean towards not.

Any ideas or suggestions?

[Mustache ride]

This might be harsh, but owning a business with employees requires you to be a good manager. The owner needs to fix the relationships and set clear boundaries, and if any of the employees don't follow them then they get replaced. If they can't be replaced right away, make the situation workable until you find someone else. Make sure to document unacceptable and insubordinate behavior and your willingness to work with the employees to get back on track. If/once that fails, cut them loose. I understand the owner is knew, but if you can't manage now I'm not sure learning on the fly is going to work out long-term either.

[Fishindude]

Two months is not near enough time to transition business ownership over from one party to another unless the buyer was already a full time manager of the place.   Six months to two years would be more like it.   It would be in your parents best interest to jump in and help out a little bit more through the transition, so the thing doesn't blow up.   Having said that, the new owners should pay a fair hourly rate for their time.

A couple partners and I recently sold a business and the whole process took (7) years from start of discussions to my exit.

[ender]

"Threatening to sue" implies something major happening, which isn't listed in the OP.

I would 100% understand what this means before getting too deep into this.

[jeromedawg]

Two months is not near enough time to transition business ownership over from one party to another unless the buyer was already a full time manager of the place.   Six months to two years would be more like it.   It would be in your parents best interest to jump in and help out a little bit more through the transition, so the thing doesn't blow up.   Having said that, the new owners should pay a fair hourly rate for their time.

A couple partners and I recently sold a business and the whole process took (7) years from start of discussions to my exit.

Yikes! This is crazy! My in-laws were hoping to retire and walk away. I'm not sure why they decided to seller finance part of it but my FIL was desperate to appease the buyer. Most of the decision as to who the buyer was lays squarely on the landlord, because he was insistent that it be a buyer who continues to run the Chinese restaurant as-is. The new owner came in talking as if she has had experience. Then once they handed the keys over (in an early transfer of ownership) things slowly started crumbling. Finally, the liquor license transferred end of Feb and escrow closed and that's when things really took another turn for the worst. My in-laws have been out of town visiting relatives in Asia (initially it was a family emergency and my FIL's youngest brother passed away) and then they requested to extend their stay.

"Threatening to sue" implies something major happening, which isn't listed in the OP.

I would 100% understand what this means before getting too deep into this.

This might be harsh, but owning a business with employees requires you to be a good manager. The owner needs to fix the relationships and set clear boundaries, and if any of the employees don't follow them then they get replaced. If they can't be replaced right away, make the situation workable until you find someone else. Make sure to document unacceptable and insubordinate behavior and your willingness to work with the employees to get back on track. If/once that fails, cut them loose. I understand the owner is knew, but if you can't manage now I'm not sure learning on the fly is going to work out long-term either.

I don't even know what this means fully but at least one or two employees have accused her of not paying fairly and that she's shorting them. The head waitress (who we learned was likely stealing from my in-laws when they ran the business) confided in my in-laws and my wife that the new owner would violate labor laws somehow by not telling them they had to take their break(s), having them work the entire time, and then docking an hour of pay claiming that it's because she can't pay them for "break time" hahaha shady. The thing is, because this woman has stolen from my in-laws, we don't know if anything she says is legit anymore. The new owner also told us that she's aware of this (actually, this is how it was brought to my in-laws' attention) and that this waitress was going to be the first to go. That's just one aspect. It seems like the new owner is trying to clear house... I actually found out *after* posting this that the new owner's husband/partner went and fired the head waitress and a couple waiters accusing two of them of stealing and one of them for insubordination. Of course the version of their stories I'm expecting to be different. My wife has never trusted the new owner either from day one - she seems neurotic and we've heard stories of her telling complaining customers that she doesn't care about what they're complaining about. It just sounds like a complete mess right now.

My wife told my in-laws just not to go too involved with all this stuff and to stay out of the legal matters (new owner was trying to get my wife to ask my FIL if he could do some 'recon' for her and find out what's going on with the employees wanting to sue her, etc). She told them just to stay neutral and offer help regarding the restaurant itself. In the purchase agreement, it does say that they should be available for consulting up to 60 days after close of escrow, and it doesn't say that they need to be there in person either. Given the circumstances, it's obvious the new owner was a phone call away (and finally talked to them last night, as far as we know). This whole time she could have asked them for advice on various things and I'm sure they would have given it but she waited until she was knee-deep in trouble.... again, I don't know what the *full* story is either and not sure if we really want or need to know. But this goes back to the whole seller financing thing - before we could even tell them not to do it, my FIL had already agreed to it and signed the purchase agreement. So they kinda opened up the door to risk in that sense.

[ender]

Honestly this sounds like a huge train wreck from well before the official transition happened.

Let's just list the facts I'm aware of:

• New Owner (NO) called your wife for advice instead of the previous owners
• NO is asking for shady things from your actual inlaws
• I'm not sure your inlaws were doing a good job of running things in the first place
• It sounds like the continuity plan was approximately 0% effectively utilized

This whole thing sounds like it's straight off of a mockumentary type of "how not do to business" - maybe it's less absurd in reality but I'd want absolutely nothing to do with this trainwreck if I were in your situation, given what you've listed here.

[jeromedawg]

Honestly this sounds like a huge train wreck from well before the official transition happened.

Let's just list the facts I'm aware of:

• New Owner (NO) called your wife for advice instead of the previous owners
• NO is asking for shady things from your actual inlaws
• I'm not sure your inlaws were doing a good job of running things in the first place
• It sounds like the continuity plan was approximately 0% effectively utilized

This whole thing sounds like it's straight off of a mockumentary type of "how not do to business" - maybe it's less absurd in reality but I'd want absolutely nothing to do with this trainwreck if I were in your situation, given what you've listed here.

I agree wholeheartedly. Part of the reason she called my wife is because my wife was helping out *a lot* during the transition before and after my in-laws left for Asia per the family emergency (this happened in early Feb so they've been gone for a long time!).

My in-laws allowed the employees to run the restaurant, and maintained the status quo of silently allowing their employees to walk all over them. If you look at what has happened, it basically sounds like a bunch of whiny spoiled employees who had it good for so long and who are now upset at change - many of them have been working there for more than 10-15 years, so it makes sense that they would feel entitled! In short: they had it coming and should have seen the writing on the wall. But the culture of entitlement, which my in-laws fostered, definitely didn't help.
At the same time, my in-laws were working 10-12hour days *every day* - it was ridiculous. I'm not the first to say that they're not very smart people or business owners but it is what it is.
So many things about they way they ran their business just sounds terrible but somehow they did enough to make it work - I guess after doing it for 20-30+ years, even if you're not "great" at it, you learn how to work with what you have. They weren't even making much off the place either...
Even the whole process of how escrow was done was a nightmare - they, with great risk, decided to hand the business over to the new owner *before* close of escrow due to the length of time it would take to get the liquor license.

But despite all this, my wife loves her parents very much and wants to help them get out of this situation and on with their lives as well as trying to help make sure that they're living relatively comfortable without burning through all their savings (which isn't much at all). I think she's the type who grew up plagued by being forced to experience all the mistakes her parents have made (at one point they were in the negative and she recalls water and power to their apartment being shut-off). So she has learned to be so extremely conservative about anything she does that she's nearly entirely risk averse, to the point where things are at a standstill and there's little to no progress when it comes to decision making or figuring out how to do things self-sufficiently. This translates to a lot of things in her life but she has gotten better - for all of us, it's just a part of growing up.
Anyway, I think she feels like she has to help her parents "fix" themselves - I know she knows that she can't but there's this urge to do as much as she can to help them out. I generally support her in this, as long as it doesn't take too much from our family. I WFH full time so I already get to spend a good amount of time with my wife and kids. Her dealing with all this crap, well at least when it was still in escrow, was sort of like a part time job w/ heavier hours.