A Hard Look at Surviving Multiple Generations

A Hard Look at Surviving

Multiple Generations

an interview with Doug Renfro of Renfro Foods

In 1940, with the Depression still a vivid memory, George Renfro took a big risk for a man with a family. He quit his job selling restaurant supplies and condiments. With little more than sheer determination and the support of his family, George and his wife, Arthurine, co-founded George Renfro Food Company in the garage of their north Fort Worth home.

With annualized growth of 10% for more than half a century Mrs. Renfro’s salsa now ranks as one of the nation’s top five best selling salsas distributed by specialty food distributors.  They manufacture and distribute more than 100 products, including 25 Mrs. Renfro’s products to all 50 states, western and eastern Canada, the Caribbean and United Kingdom.  This third generation business is one of the nation’s five largest family-owned and managed salsa manufacturers and the nation’s largest producer of chow chow, a Southern relish made of garden vegetables, vinegar and spices. Today, the second generation, Bill and Jack, along with grandchildren Doug, Becky and James who are active in the day-to-day operations at Renfro Foods, and its Mrs. Renfro’s label, continue to grow at a fast pace.

In this interview with Ted Clark, Executive Director of Northeastern University’s Center for Family Business, Doug Renfro discusses their business and how to survive through multiple generations.

Ted:  Doug, you are the third generation at Renfro foods.  Why do so few family businesses survive through multiple generations?

Doug:   There are so many pitfalls and dangers it’s easy to fail.  As soon as you employ some nonproductive, incompetent family members you have trouble, and certainly you have entitlement, jealousy, the temptation to milk the company because there are too many people wanting to take too much out.   You know, Bob has a company Lexus so I need to have one too, even though I don’t really want one.  It’s very easy to focus on one’s self and to forget to reinvest in the business.   We have always strived to reinvest in the business so we won’t look up one day and have an antiquated plant.

Ted:  What is it then that separates the successful from the majority, what is it that you have to do to avoid those traps?

Doug:  In our case we have always let family members go pretty quickly that weren’t going to work out.  And family members didn’t try to come in that had no interest in the business, which was nice.  There were three members in the second generation but only two entered the business.  In the third generation there are seven members but only three of us are in the business.  Of the other four, two never had an interest, and the other two didn’t work out.  And of the two that didn’t work out, one of them has gone on to start their own business.  For the fourth generation we have a few rules.  You have to go to college and graduate and work somewhere else for at least a couple of years first.  We already had someone who decided they didn’t want to continue college and they are not working here.  It’s sort of a tough love situation, but you have to look out for the health of the company.

Ted:  So are there any things that you are doing to insure the future generations of the family business?

Doug:  Unfortunately we’re not that advanced, and most of the others are fairly young.  Although, there has been one that decided not to finish college immediately, and he is being given the opportunity to work elsewhere.  He didn’t necessarily want to work here anyway, which is fine.  Another one is just starting college, and all the others are in grade school or early high school.  I personally just want my children to be happy.  It would be neat if they came and made salsa with us but I can’t think that far out right now. I’m still trying to figure out how to pay for college for three kids.  From another perspective, one important thing is networking with others.  I have a few friends who are second and third generation family members in the industry so we see each other three or four times a year across the country at trade shows.  We get together at the bar and talk about how to handle this, and what have you done in this area, and it’s really helpful because there is not that many of us out there.

Ted:   When you say “not that many of us” do you mean other family business members?

Doug:  Yes, especially second and third or fourth generation members.   We have some common issues regardless what the company does, in terms of compensation, and hiring non-family executives, and all that sort of thing. It’s very helpful to see what someone else is doing.

Ted:  When you get together with those other multiple generation businesses owners, what are the issues that you talk about?

Doug:  Transition between generations, how is it being handled.  Some people want to take full salary and come in till the day they drop dead other people want to have a gradual retirement transition.  We talk about the compensation format for non-family executives, the structure, and how you keep somebody motivated who knows they have the wrong last name and they are never going to get above a certain spot.  Plant efficiencies, we are operating at a level below these mega firms so in terms of how we structure capital machinery, that sort of thing we have commonalities and common problems that are totally different than somebody running a Nabisco plant.

Ted:  You talk about the business, as well as the family business issues?

Doug:  Yes, we talk about those as well.

Ted:  What are you teaching the next generation to ensure a successful family business?

Doug:  There are a few keys, perseverance, realizing you are going to have good days and bad and good years and bad, and that you should have a long-term perspective.  Not being publicly traded, we have the luxury of being able to decide if we should take a loss for a period of time because it’s in our best interest to do so.  If we really feel we need to invest some money that may not pay off immediately we can do that because we have no one to answer to but ourselves and the banker.  Quality and integrity are the main reason we have been around for so long.  That we do what we say we are going to do, and in an industry where you prepare somebody else’s recipe for them that is a very delicate position.  It is a very large temptation sometimes to substitute ingredients on an unauthorized basis.  We are very up front with customers; we give the customer the choice.  We tell them that this will cost you more, this will cost you less, this would have this quality, but you know it’s all their choice.  They approve all changes to formulas and so it’s known in the industry that we have a very high level of integrity and therefore people call us and ask to make things for them.

Ted:  What changes has your generation brought to the business?  Does each generation leave its own mark on the business?

Doug:  Yes.  The generation before us had literally been at a point fifty years ago where they filled the jars with a spoon, now we are running one hundred bottles a minute on a machine.  Certainly we’re not Coca-Cola fast but it’s on an order of magnitude or two beyond.  Also the second generation had zero interest in computers.  Now we have machines that are basically run by computers.  We have just put in a full accounting system that includes lot tracking to comply with bioterrorism laws.  We can tell you within a few minutes every jar that was produced and where it went that used one particular box of black pepper for example.  Management reporting analysis has all come in from the third generation.  Frankly, the second generation was more focused on not going broke for so many years.  The strategic issues for them were how do we keep the business going next year and how do we draw out enough to keep paying our family expenses.  They still come in and contribute an average of four days a week but it’s great that they are able to sit back some and enjoy the rewards of their investment so to speak.

Ted:  Day in and day out, what drives you to grow the business?

Doug:  Well, my three children getting bigger is a good reason.   And then there’s ego.  You know half of our business is our own Mrs. Renfro’s brand.  It’s satisfying to walk into a store and see your name and your grandmother on the jar and to grow within the category.  Its very exciting to see our product selling a hundred thousand jars in the Boston market where we had zero just ten years ago.  It’s also fun to see Canadian sales grow to six figures from zero.  We just received our first order from the United Kingdom.  Developing new items, and new markets, and new ways of thinking creatively as to how can we get new customers without going broke.  Those are the sort of things that keeps us busy and keeps us driven.

Ted:   Thirty years from now when your kids are talking about you, what do you think they will say about your generation running the business?

Doug:  That’s a tricky one.  Hopefully that they were creative and efficiency driven but still maintained a sense of humor.  And hopefully they will also have that attitude.  If they don’t, then I think we will have failed to some degree.  Because if you just wanted to work really hard you can go work at any major corporation, but to have the satisfaction and be an innovator and have high integrity and have fun, that’s really challenging to pull all of that off at the same time.

Ted:  Is that what brings you to work every day?

Doug:  It is.  I spend one minute working on formulations, and one minute working on financials, and the next on personnel issues, and the next on our computer network. It’s just very refreshing to not be buried too far into one area.  Also to have the ability to have an impact and come up with ideas and implement them and see the results and if they save money or make money you actually get to keep a piece of it.

Ted:  Doug, last question.  What advice would you give to first generation business owners working hand in hand with their children?

Doug:  Don’t be too hard on them.  You see so many times where one older generation wants to make sure that their children are the best workers, and as a result they are so hard on them that they drive them out of the business.  They don’t want to do that but you see it over and over again.  So I guess basically, you should treat them like any other employee, and you should want all the employees to be hard working and conscientious and accurate, and if they are not, you should fire them and get another one.  Don’t be such a drill sergeant that you take all the fun out of it and they leave.  Don’t be afraid to share credit.  We have a lot of give and take here. It’s a very democratic atmosphere and that’s necessary to be able to survive the day-to-day crisis.