There's a fine line between the boardroom table and the kitchen table in any family business. Just ask Ellen Picataggio, 35, and husband Pete, 36, managing partners of The Farmer's Daughter, a 66-room hotel in Hollywood, California. The hotel was built in the 1960s and became a neighborhood icon, especially for fledgling actors who could get a room for as little as $25 a night.
Ellen's Korean-born parents bought the hotel in 1997 and continued to run it as a low-budget motel with the help of her sister, Christina. When Christina was killed in a car accident in 1999, Ellen's parents asked her to leave her job as an operations manager for a clothing manufacturer to take over operations at The Farmer's Daughter.
Pete considered leaving his job in business development for software company Symantec to join the family business. Leaving the corporate world was one hurdle; the thought of working seven days a week with his in-laws looking over his shoulder was another. "When they first asked, I said no," he says. "But the more I let my brain get behind it, the bigger a challenge it [appeared to be]."
He joined Ellen, and they started unpacking their own ideas. Ellen wanted to update the motel's design. Pete felt marketing and operations needed a huge overhaul. Both wanted to revamp The Farmer's Daughter into an upscale hybrid hotel-motel, a renovation that would cost a few million dollars. Ellen's parents, who are both in their 70s and spend most of their time off-site but maintain full ownership, resisted initially. "[My parents] come in every day for five or 10 minutes to look around and talk about what's going on," Ellen says. "Their minds are still very much involved in what's going on in the business."
The Picataggios gave Ellen's parents an ultimatum: Either you let us change some things, or we're outta here. "We sat down and said, 'If this is just going to be a Motel 6, we can't stay here.' That was step one," Ellen says.
The Picataggios also pressed her parents' hot button--the bottom line--by writing a business plan, preparing a sales pitch and letting them do the math. It worked: The renovation was completed in 2003, redecorated rooms are going for $115 to $122 a night, and The Farmer's Daughter has become a Hollywood nightspot for celebrity parties. Sales for 2005 are expected to reach $2.3 million.
Family members have to make a stellar case for any changes they propose, says Larry Bennett, director of the Larry Friedman International Center for Entrepreneurship at Johnson & Wales University in Providence, Rhode Island. To be taken seriously, "you have to quantify your rationale better than you would in a nonfamily business," he says. "You have to have an attorney's mind-set. That means knowing the answer before asking the question."
For the Picataggios, approaching Ellen's parents as investors and understanding their perspective was also key to changing their minds. "You have to keep it on a professional level," Ellen says. "That made a huge difference."