By Richard M. Segal
May 1, 2008
General Linen & Uniform Service
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William and Irene Schumer are octogenarians - 86 and 85 respectively. They are the owners of an iconic Detroit family business, General Linen & Uniform Service (www.general-linen.com). If you live in metro Detroit, you have seen their trucks and eaten at some of the fine establishments that use their linen service. Their modesty prevents me from listing clientele, but they service most of the finest eateries, many restaurant chains, as well as some hotels and casinos.
Bill and Irene still run the business and report for work daily.
Bill is the second generation in his family’s business. The business is rich with history and tradition. The current company headquarters is at 411 Piquette - the site of the early Ford factory.
The General Linen plant is closer to the old Hastings Street (now I -75) where Bill’s Father, Harry Schumer, went up and down the street renting aprons and towels back in 1919. Harry, a Polish immigrant, entered America in 1913 at the age of 15. He had a partner, Leo Gold, who he bought out.
Upon his return from WWII, Bill first used the GI Bill to gain a master’s in economics from Columbia University. He was planning on a career as a diplomat, but getting married to Irene, starting a family and the desire to be near family brought him back to Detroit in 1948 and a career in the family business. Since then, General Linen has done just fine.
With 140 employees, 24/7 service and a strong executive team General Linen is doing better than ever. The Schumers attribute their recent growth in revenues to their management team and management style. They have daily meetings with department managers and have set up an executive committee of top management to handle tactical and strategic issues. The owners of General Linen & Uniform Service seem to have carved out a niche of the who’s who in Detroit’s hospitality industry and the Schumers are enjoying their success. The key is extraordinary customer service.
Bill and Irene aren’t only a successful business team, but they are a good parenting team as well. They have three adult married children who were taught independence early on. The oldest daughter is an educator married to a doctor, the second daughter is an SEC attorney and the youngest son is a physician in private practice in Washington state. They have 10 grandchildren spread out all over the country interested in various careers like science and the arts.
The problem? No one in the family is interested in General Linen.
One of the reasons Bill and Irene have been holding onto the company is the hope that someone in the family - a grandchild, perhaps - will take an interest in their life’s work and continue the family business. At this late point, it doesn’t seem like this is going to happen. The Schumers know more about what they don’t want for General Linen than what they do want. For sure they don’t want to sell to one of the big national competitors - and they have had the offers. They want to maintain a culture of serving the Detroit area. And while they admit that they will “explore all their options,” it would be their desire to have their loyal employees “become the future owners of General Linen.”
Oliver Products Company
In Grand Rapids, another family firm, Oliver Products Company (www.oliverproducts.com), had succession issues as well. This company, founded in 1890, began its modern age with the development of a bread-cutting machine. Today they are not only in food packaging, but also in medical packaging. They are global in both product manufacturing and sales.
Although the family has chosen to remain anonymous, it seems that they too may have run out of interested family to continue the business. There were seven family shareholders and only two were actively in management. The managing family members were in their 50s when they decided that it was time to explore the “sell option.”
A private equity firm from Milwaukee, Mason Wells (www.masonwells.com), wound up purchasing Oliver Products and runs the company very much like the family did before. Interestingly enough, managing director Greg Myers had targeted Oliver Products years prior to the actual purchase. Mason Wells prospects for lower-end, middle-market ($50 to $250 million annual revenues) Midwestern firms in the packaging industry, and Myers had been sending letters to Oliver Products’ ownership inquiring about a possible sale. After the family went to an investment banker to explore the sale option, it was Myers’ earlier letters that kept them in the negotiations and eventually with the purchase. The fit between Oliver Products and Mason Wells seemed to be perfect.
One of the big fears of family firms selling out to private equity firms is that their company will be dissected and sold off like the corporate raiders of old. And that their old loyal employees will be left on the street - unemployed. That’s just not true!
This story has a happy ending. The new Oliver Products organization looks very similar to the old. There is a new president and CEO, Jerry Bennish, who brings a great deal of industry knowledge with him. In fact he knew the previous owners. Bennish, along with two Mason Wells representatives and two outsiders make up a “professional” board of directors. Other than that, the management team and labor pool remains pretty much intact with a minimum of turnover.
Furthermore, with the influx of needed capital, Oliver Products has been able to expand operations overseas and grow at a 10 percent revenue rate. Productivity is also up 20 percent and Myers says, “Investing in the business opened China on the medical side and we are growing in the Netherlands. We are also growing in the U.K. in food service.”
Bennish says data driven decisions have “empowered the management team and left them enthusiastic.” He finds this one of the positive changes that the sale brought to Oliver Products. Yet the new ownership has maintained the same bonus and profit sharing plans as the family previously offered, keeping the transition as seamless as possible.
Everyone seems to be abundantly pleased with the outcome, so much so that Bennish has an occasional lunch with one of the previous owners.
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Greg Myers of Mason Wells thinks very highly of family owned businesses in general. He points out, “The family dynamic and culture of serving the customer is paramount. They’ll knock down walls to serve their customers and we don’t want to lose that.”
Summary
If your family’s business has decided that succession isn’t in the cards, explore your options. Your options are limited: absentee ownership (keep it in the family), liquidation, or sale (either internal or external). If you are leaning toward an external sale, don’t count out the private equity buyer as they can provide a happy ending for everyone.
Richard Segal is the chair of the Family Business Council, a membership organization of family-owned businesses. He can be reached at [email protected].
