Market Basket third gen Arthur S Demoulas, who experienced huge staff and customer backlash when he fired his cousin from the helm of the family business, has still come out on top in the long-running family feud, according to a family business expert.
The New England-based supermarket chain, which has annual revenues of $4 billion (€2.9 billion), became the target of staff-led rallies calling for Arthur T Demoulas to be reinstated after his ousting in a board vote led by his cousin.
In response, Market Basket employees quit their jobs and encouraged customers to boycott stores, costing the firm up to $10 million per day.
Local media reports up to 10,000 protestors attended one rally, urging that their beloved chief executive be reinstated.
After six-weeks of protracted negotiations, Arthur S, who was unable to find an outside investor, sold his 50.5% controlling stake to his cousin and rival for $1.5 billion.
Ted Clark, director of the Northeastern University Center for Family Business, however, believes that while both sides of the family have achieved their goals Arthur S came out on top.
“There’s been rumours in the press for a long time that Arthur S wanted to sell the business. He did that. He sold the business. And apparently he sold it at full price,” he said.
“Arthur T, on the other hand, who reportedly only wanted to buy a controlling interest, has instead bought the whole company and been saddled with $1 billion in debt and half a billion in equity financing.”
According to Clark, the enormous obligation could have a negative impact the very business model the employees were trying to protect, alongside a popular profit-sharing scheme that saw long-serving staff share in the firm’s success.
Supermarket analyst David Livingston of Supermarket Location Research agrees, but suggests that employees will accept the changes as long as Arthur T heads the company.
“I believe Market Basket will get back to at least 90% of the pre strike levels which is still very good. But no small regional grocer can take on $1.5 billion in debt and stay the same. Employees have to understand that their jobs were saved by this debt and I believe they will willingly share the load,” Livingston said.
The analyst also questioned whether Arthur S will in fact go through with the deal, adding that there is a genuine possibility that the third gen is setting Arthur T and his employees up for further disappointment.
Yet while the future remains unclear, Clark believes that family businesses can learn a great deal from the Market Basket saga, suggesting that family business owners should maintain better relationships with managers and employees.
“Where Arthur T did a masterful job, the owners of the business did not create a strong relationship with customers or employees.”
According to Clark, media reports suggest Arthur T’s “well-oiled” reputation was assisted by a public relations company used to help manage his relationships with staff.
“Another lesson could be to ensure that the ownership of the business prohibits conflicts of interest between management of the business and owners of the business,” Clark said.
Now that Market Basket stores are almost fully restocked, the company has announced plans to open three of the five stores it had in developement before the employees began protesting.