quarterly.exchange | Q3-2019 Table of Contents



Issue:
Q3-2019
Family Business Cover Story

Family has built a half-billion-dollar business

Flanagan Foodservice adapts to change, while maintaining family ownership

by Paul Knowles

Three Flanagans, three different perspectives. Sitting around the board room table are Dan, Murray and Sarah Flanagan, all members of the Flanagan family which has, in 42 years, accomplished an almost unheard-of level of success.

Flanagan Foodservice was founded by Joe Flanagan – Murray and Dan’s father – 42 years ago, as a discount grocery store that soon added delivery services, transporting groceries in the back of Joe’s station wagon.

Once a year, all stakeholders attend a Flanagan family retreat which focus on three distinct categories – family, ownership, and business.

Just over four decades later, Flanagan Foodservice is a half-billion-dollar company. Flanagan’s has experienced growth every single year through its history – and with a gigantic new customer having just signed on, will certainly see significant growth this year and next.

Braced for change

All three Flanagans are excited about the immediate future in their company. And all are braced for change.

Dan is just completing a 21-year stint as President and CEO – coincidentally, the same length of time his father held the position. Joe died in 2000, at the age of 57.

In February, Dan handed over the role of President to Dan Lafrance, who comes to Flanagan Lafrance with more than 25 years’ experience in the consumer and packaged goods industry. Lafrance most recently held the position of Canadian vice-president of sales and food service for the Kraft Heinz Co.


Dan Flanagan

Dan told Exchange Magazine that he is excited about the change. At one time, all four sons of Joe and Dee Flanagan – Dan, Rick, Jeff, and Murray – held leadership roles in the company. But Dan’s brothers gave up their day to day responsibilities some years ago – the family remains the ownership group – and he was left as the sole family representative on site, and as the public face of the company. That, he says, was a lot of responsibility on a number of fronts. A few years ago, Flanagan’s brought in a Chief Operating Officer; upon his departure, the decision was made to split Dan’s responsibilities and hire a new President.

Murray actually retired from Flanagan’s six years ago, but in 2019, at Dan’s request, he returned as interim Vice President of Finance. He is now phasing back out of that role.

Sarah is Dan’s daughter. She joined the company eleven months ago, under a brand-new Leadership Development program, created, she says, “to introduce my generation into the family business.”



A genuine family business

With annual revenues tracking at $560 million, Flanagan’s may not be a stereotypical family business. But make no mistake – it is a family business, heart and soul. The three Flanagan’s shared with Exchange the steps necessary to retain that reality in the face of almost overwhelming growth.

And “growth” has been the operative word at the company from the very beginning. Some of the figures are almost staggering – Flanagan’s has facilities in three locations, totalling 445,000 square feet – and that doesn’t include their one Roseland Produce or three STOP Restaurant Supply businesses. Nor does it include their new 50% ownership with a food distributor in Moncton, New Brunswick – which has opened up the Maritime provinces to the company.

The entities carrying the Flanagan’s brand (not the subsidiaries) have 580 employees. Flanagan’s serves food industry customers all over Ontario and in western Quebec, with a fleet of 85 trucks. And – this is the big news at the moment – the company has just signed up the majority of Ontario Subway outlets, which Dan says will boost business by about 25%.

Flanagan’s three locations include Kitchener (with a 200,000 square foot warehouse and distribution centre, and a 20,000 square food head office building), Whitby (with 180,000 square feet) and Sudbury (45,000 square feet).

The Whitby location is new; Flanagan’s purchased an 80,000 square foot facility, and added 100,000 square feet of refrigerated storage space, a $25 million project in all.


Sarah Flanagan

The new location then took over the business being handled by a Flanagan facility in Owen Sound, which was closed down. And the Flanagan family’s feeling for their family of employees is obvious as the three of them talk about that strategic decision. It was right for the business, but difficult for some employees. All Owen Sound employers were offered jobs at other Flanagan locations (drivers and sales people could all be kept), or they could take a generous buy-out. Dan believes the company succeeded in being fair to its employees in a difficult situation.

“We attend a lot of family business conferences, and it has been a help, no question. I promote it. You learn so much.”

The concept of “growth” also applies to the Flanagan family, which continues to own the private company. Once a year, all stakeholders attend a Flanagan family retreat – and the number of stakeholders has grown. Mother Dee Flanagan is the matriarch of the clan; the four brothers and their spouses are involved; there are 10 members of the third generation (including Sarah, and Murray’s son, Matt, who works part-time for Flanagan’s as the only other family member actually employed there); and two of these third generation members now have significant others who are also included in the retreats – totally 21 in all, to date.

The retreats focus on three distinct categories, says Murray – family, ownership, and business. The family time is fun time; ownership is seen as distinct from business operations, and that distinction is key to allowing the company’s leadership – now almost entirely non-family – to function.

Leadership Development

This does not mean there will not be family leadership in the future; in fact, Sarah’s Leadership Development program is all about preparing her for a leadership role in the company. Her time is divided between job shadowing and hands-on work. She is moving through the various Flanagan departments, from HR to shipping – and yes, she has spent her hours hauling boxes.

She told Exchange that when she first started into the program – as the first-ever Leadership Development participant – there was more emphasis on job shadowing, but she quickly realized that she wanted hands-on experience, and the program has been adapted to make it more practical.

“We are definitely more strategic now than we used to be, having strategy, a plan, and priorities. Everything’s aligned around these... We’re more laser-focused.”

Sarah has also joined two Flanagan committees (food safety, and culture), and is heading up the driver recruitment effort – a key role at a time when drivers are hard to find.

Exchange asked if other Flanagan third-generation family members will also be brought into the Leadership Development stream; the answer underscored the focus Flanagan’s has on cutting-edge professionalism. Having the right last name may mean you have an ownership share, but it certainly does not guarantee a job at the company. Dan explains that to qualify for the Leadership Development program, a family member has to have a post-secondary degree or diploma; must have at least two years of outside work experience; must gain the approval of all four Flanagan brothers; and must apply to, be interviewed by and approved by a committee of non-family leaders at Flanagan’s.

It’s a rigorous process; and that probably helps to explain why this family business is also a wildly successful business by any measure.

Dan and Murray agree that the recruitment of non-family leadership has been a major plus for Flanagan’s. Dan also stresses that success has come because of “the employees. They make it happen, every day.”

He points out that, “we try and do a good job of engaging them and making them happy to be here, being open, transparent, treating them fairly.”


Murray Flanagan

Murray says this has been achievable because Flanagan’s has traditionally had “a fairly flat organizational structure.”

But at the top at Flanagan’s – apart from the CEO’s office – are a lot of names that are not “Flanagan.” And that, says Dan, is one way to guarantee the company is always getting “new blood, new ideas.”

He adds, “We are definitely more strategic now than we used to be, having strategy, a plan, and priorities. Everything’s aligned around these – objectives, performance management, compensation. We’re more laser-focused.”

But he’s not negating the experience, skills and integrity that the Flanagan family has brought to the business has been unimportant. “We’ve all got certain skills. The more skills, and the higher level of skills, you get within your organization, the better off you will be.”

Murray adds that bringing in outside expertise has been important because since Joe made his first delivery with the station wagon, “we’ve grown up in the business. Our experience has been very narrow.”

Having been away from the day to day for six years, on his temporary return Murray found a company that has “a higher degree of accountability… I attribute that to some of the senior leaders we have brought in.”

Outside leadership “may fill a gap between generations of a family.”

Flanagan’s has also created an advisory board, bringing together four outside experts to bring their skill and vision to the company, from a governance perspective. The Flanagan leaders interviewed 10 possible members of that board, and chose four – Dennis Grimm, Anthony Longo, Hugh Loomans and Laryssa Topolnytsky.

The Flanagans make it clear that while having non-family leadership at the top may be seen as a succession plan, it does not indicate there is any intention on the part of the family to sell the company. Murray points out that, while family business succession often involves outright sale of the company, “it doesn’t have to be that. There are many family businesses that have no family leadership at all.”

Dan notes that those are often the larger businesses. And Murray adds a fillip to the discussion. The other possibility is that outside leadership “may fill a gap between generations of a family.”

Flanagan Foodservice may be a non-typical family business – because of its size, and the presence of non-family leadership – but the Flanagans clearly see themselves in those terms. They are involved in key family business organizations – Dan is a Past-President of the Centre for Family Business, and Murray is on the national board and local advisory board of FEX (Family Enterprise Xchange).

Murray says that Flanagan has “implemented a lot of best practices” learned through those associations, and Dan adds, “We attend a lot of family business conferences, and it has been a help, no question. I promote it. You learn so much.”

One suspects that the other family businesses at such gatherings could also learn a great deal from the Flanagan family who have built a discount grocery story into a half-billion-dollar enterprise.

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