The ‘cracks’ in the family-run business model

The family-run business model has certain vulnerabilities and is prone to breakdowns that can lead to serious consequences.



Analysts have said that Kao Sieu Luc ‘played fair’ as he continued providing sandwiches to the shop chain run by his ex-wife until she could build new workshops and stabilize the labor force.

After the divorce, Kao left with empty hands, while the Duc Phat brand which he and his wife developed for 20 years was taken over by his wife. With $400, he started his business from scratch with ABC Bakery.

After 10 years of development, ABC now has 33 shops and big loyal clients that everyone would dream of, such as Mc Donald’s, Carls Jr., Burger King and Dunkin’ Donuts, some coffee chains such as Starbucks and The Coffee Bean & Tea Leaf and large supermarket chains such as Aeon, FamilyMart and Circle K.

ABC Bakery is also developing a chain in Cambodia.

ABC Bakery is one of the typical stories about family-run businesses. However, analysts commented that not all business families can break up so gently. In most cases, family-run businesses are divided by disagreements over ownership, division of property and other interests.

The family-run business model has certain vulnerabilities and is prone to breakdowns that can lead to serious consequences.

The two co-founders of Trung Nguyen coffee brand, for example, had a noisy divorce. The Binh Duong Planning and Investment Plan in 2016 decided to abrogate Dang Le Nguyen Vu’s (the husband) legal representative status in Trung Nguyen Instant Coffee, which owns the G7 brand, and gave the status to Le Hoang Diep Thao (the wife).

Diep Thao is the founder and now holds the post of CEO of TNI, a company headquartered in Singapore. Thao’s TNI exports products to over 60 countries in the world, including the US, China and Thailand.

According to Euromonitor, G7 now accounts for 4.7 percent of the market share, far behind Nestle’s and Vinacafe Bien Hoa’s market shares of 38 percent and 37 percent, respectively.

A branding expert commented that successful companies tend to develop into public companies with family members holding shares instead of holding the management rights.

The disputes over businesses and assets after divorce show the weak side of family-run businesses compared with joint stock companies.

The divorce case between Tran Van Muoi and Pham Thi Huong Giang of the Nam Sao International Group was very noisy because it affected the group’s operation. The case stirred up the public as the disputed assets were worth VND2 trillion. Meanwhile, Giang claimed that her husband dispersed and hid assets.

The most expensive divorce case was the one related to the couple owning Bao Son Group – Bui Duc Minh and Nguyen Thanh Thuy, with total assets worth VND10 trillion.

Thanh Lich / vietnamnet