I have my eye on semi-retirement. With that in mind, I’m planning on hiring a managing partner to run my independent Pizza Parlor. My thought is to bring in someone at about 40K salary and “credit” them with another 15k or so a year for 8 years. The earned credit would go toward the incremental purchase of 25% of the business. What I’m hoping for is to find a qualified, hungry, entrepeneur who wants to operate his or her own ship and earn ownership at the same time.

Our business has very solid history of over 1M in sales annually with dine-in, take out, and delivery.

Has anyone else ever done anythng similar to this ?

I’m in the process of doing something like this right now with a second location. I would recommend making the managing partner buy a small portion up front, even if it’s only 5 or 10 thousand dollars worth. S/he needs to have some risk in the operation, and this shows they WANT to own a business.

We’re also putting our manager under contract. If he leaves within the first 5 years, all of the ownership that we’ve given him comes back to us, and he’s left with only the portion that he’s buying into up front, which only equates to about 5% of the business. Basically, his ownership has to vest.

You should also tie the amount that you’re “crediting” him with each year to the annual profit. Maybe 10% of the annual profit each year goes towards purchasing equity, or whatever figure you come up with. If you just give it to him, where’s the incentive to really be profitable those first few years?

Another difference that we have is that the managing partner will eventually buy up to 51% of the business and have full control (over 6 years). After that, they have the right to buy the other 49% from us at fair market value and continue paying royalties. You need to find someone that truly wants to own a business and is willing to put in the sweat equity to get there. It will probably be hard to find someone with an entrepeneurial spirit that will be happy with only 25% of the business… They’ll still have a boss to answer to.

Insightfull comments and suggestions… Greatly appreciated. Thank You for the reply.

Just make sure to retain at least 51% if you want to keep in total control of your establishment.