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Last Update: Monday December 18, 2017

Key Idea: Anticipate all Future Possibilities

Succession planning should not be left to the survivors. When founders of business die, the business often dies with them.  Not so at President of Hot Dog On A Stick.   Freddie Thode talks about the founder's decision to set up an Employee Stock Ownership Plan as a succession planning tool.

Key Question:

A: 

Succession planning should not be left to the survivors. When founders of business die unexpectedly, the business often dies with them.

The founder's survivors usually have other motivations and liquidation is the most efficient way to get capital out of the business. The intangible value of the business is lost, the employees suffer, and the business goes away.

Dave Barham knew he was going to die. Funny thing is, all of us know we are going to die. But, Dave was a little different. In his last year, he hammered out his succession plan. The rest is history, the founder's story extended well into the future, with his values and love of life carried forward within the joy of today's owners and their creation of delicious food.

Q: What are most of us waiting for?

 A: We are not waiting; we, to date, had not known what our options were. Here at Small Business School, we do not even have a formal will. We have personal wills but not a business will.

We are not in denial. We could die any day now, but we just have not slowed down long enough to do it. Foolish? Stupid? Yes. But, the heart of it is that we also never thought we had much of any real tangible value in this business and "Why make a mountain out of a molehill?" How short-sighted of us! As a result of this show, we are going to make a full-court press to put a succession plan in place and also to do some form of ESOP, employee stock ownership plan, or SCOR.

Think about it

What is your succession plan? If you don't have one, do you think you should? What can you do now to start planning for later?

Clip from: Employee Stock Ownership Plans (ESOP)

Meet Ray Smilor, Rady School of Management, Univ. Calif. San Diego

SAN DIEGO: In this special episode you will meet many people who understand Employee Stock Ownership Plans (ESOP).   ESOPs are keys to the future for any growing business.  Though each word is quite operative, the most important is ownership.

To understand ownership, we have to understand something about the value of what is owned. It is a lot more than a  business valuation.  It is about business sustainability. 

Ray Smilor and Dr. Robert Beyster (SAIC) are experts on the subject.  Once a person is actively participating in the bottom line or the profit line of the business, once they are vested, don't you think they'd act differently and care more? Ray Smilor says that typical productivity increases 4-5% per year.

What would that do to your profit line?

Go to all the key ideas and videos from this episode...

Hot Dog on a Stick, Inc.

In Memory of Freddie Thode, a very special person, CEO

5601 Palmer Way
Carlsbad, CA 92008
7609300456

Visit our web site: http://www.hotdogonastick.com/

Office: 7609300456

Business Classification:
Beverages, food services, retail

Year Founded: 1946

Anticipate all Future Possibilities

HATTIE: (Voiceover) Employees at Hot Dog on a Stick act like owners because they are. Hot Dog on a Stick is just one of 11,500+ employee-owned corporations in the US today.

The ESOP Association named it the #1 ESOP in its Western division in 2003. There are 1,400 employees in 110 locations. This team is preparing to open one of the 15 Muscle Beach Lemonade stores, while another team across town is busy serving up customers at the Hot Dog on a Stick store in La Jolla, California. Founder Dave Barham started the business in 1946 on the beach in Santa Monica, California. Freddie Thode is president.

FREDDIE: We are 100-percent employee-owned. When Dave passed away in 1991, Dave left the company to his employees.

Unidentified Employee #1: We just finished up a batter. I'm going to take it over to the batter bowl and for safety purposes and also to give the audience a real show, I'm going to say, `Batter up.'

FREDDIE: The way that Hot Dog on a Stick actually got started was Dave bought a small little cooker and had some oil in it and floated the hot dogs on top after he dipped it in his mother's corn bread batter.

Unidentified Employee #1: We're going to start with two fresh turkey hot dogs. Dip them into our founder's mother's corn bread batter. Pull it straight up for all the customers to see. Cross over. Bring your elbows in.

FREDDIE: I think our product is good because we serve it fresh. We never, ever use a heating tray.

Unidentified Employee #1: And they cook for about three minutes. FREDDIE: The lemonade is something that is very special. It accounts for 55 percent of all of our sales.

HATTIE: Why does your lemonade taste so great?

Unidentified Employee #2: Well, when we stomp it, we're stomping the oils out of the lemon rinds and it gives it that special kick that everybody loves. You can smell the lemonade and you can smell the flavor in it. We like to serve it without a lid. Lots of samples of lemonade go out.

HATTIE: (Voiceover) Hot Dog on a Stick employee owners love their uniforms and because of the famous hat, there is never a bad hair day. Unidentified Employee #3: You get up in the morning. You might be running a little late. You don't even have to think twice. You just throw on your uniform and go. And it's definitely a good plus. Unidentified Employee #4: Look for foreign parts. Keep it nice and clean, everybody.

HATTIE: (Voiceover) Everyone sees their job as a performance for the customers. Unidentified Employee #1: Giving the customers a show all the time.

HATTIE: (Voiceover) Hot Dog on a Stick was the first food store in a mall. In 1972, Dave Barham convinced a mall owner in Murray, Utah, to rent him space.

FREDDIE: There was no food court. There was nothing like this. Dave was definitely a pioneer.

HATTIE: When did he get the `Aha. Guess what? No one lives forever. How do I make sure my company lasts beyond me?'

FREDDIE: He wanted to leave the company in the hands of people that could take it and make it survive for the next generation. About a year before Dave passed away, he started putting together a succession plan and the plan ended up to be an employee ownership plan.

HATTIE: Did he do research, call attorneys, go to the Beyster Institute? How did he come up with the ESOP idea?

FREDDIE: Fortunately for all of us, he had a very good attorney that advised him and we also brought in a great ESOP administrator who was able to help put that together. By the way, those two people still work with Hot Dog on a Stick.

HATTIE: The attorney and the ESOP administrator?

FREDDIE: The attorney and the ESOP administrator. It is a wonderful thing to know that they knew Dave and they knew the dream that he had that someday this would carry on-- his legacy would live forever. And I believe that that will happen because of what he did

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