Financial Planning for Restaurant and Franchise Owners

At a glance

• The main takeaway: Restaurant and franchise owners are often solely focused on the growth of their business, but it’s just as important for them to devote time to planning for their personal financial security. 
• Impact on your business: A thoughtful personal financial plan can help restaurant and franchise owners protect their wealth, secure their family’s future, and assure a comfortable retirement.
• Next steps: Schedule a consultation with an Aprio wealth advisor to start building your personal financial, estate, and retirement plans.

The full story:

As a restaurant or franchise owner, you have spent the better part of your career building your business. In fact, your business may be intertwined with other important aspects and relationships in your life — even your family and friends. When so much of your identity and goals are tied up in your business, it may be difficult to think of life after you have flipped the “Closed” sign for good.

But that doesn’t mean personal financial planning should fall on the back burner. A thoughtful financial plan can help protect your wealth, secure your family’s future, and assure a comfortable retirement. What’s more, it’s essential to have a plan that dually allows you to position your restaurant or franchise for continued, long-term growth.

Here are some essential financial planning tips to help you get started.

1. Estate planning: Protecting your legacy

As a business owner — regardless of your industry — estate planning is essential to safeguarding your assets and ensuring a smooth transition for your heirs. There are a few basic estate planning documents and actions you need prioritize before you engage in long-term legacy planning (which we’ll get to later):

• Create a will and trust: A will is the cornerstone of your estate plan; it outlines how your assets will be distributed in the event of your death or incapacity. Separately, a trust is a vehicle that protects your assets, helps your loved ones avoid probate, and can even mitigate the impact of estate taxes on your wealth.
• Designate beneficiaries: It is imperative to set appropriate beneficiaries for your business assets, life insurance policies, and retirement accounts. You should also continue to update them as you endure life changes (such as a divorce or the birth of a child).
• Establish a succession plan: If you want your restaurant or franchise business to continue operating after your retirement or passing, create a detailed succession plan to designate future leadership and ownership. Engage a professional wealth management and financial advisory team for help with preparing your successors to take the reins once you have exited the business.

2. Retirement planning: Securing your future

It’s never too early to start planning for your retirement. Unlike traditional employees, restaurant and franchise owners must take an active role in setting up their own retirement plans.

You can start the process by prioritizing the following steps:

• Diversify your retirement savings: The retirement account you choose to invest your savings is dependent on your unique situation, goals, and retirement time horizon. The SEP IRA, solo 401(k), and SIMPLE IRA are often popular vehicles among owners, because they offer certain tax advantages and allow higher contributions than traditional plans. Your financial or wealth advisor can help you navigate the decision-making process to choose the vehicle that’s right for you and your goals.
• Factor in your exit strategy: This step ties in with the estate planning tips I shared above. Look back at your succession plan and consider how you will transition out of your business. Will you sell it, pass it down, or take a passive role post-retirement? Work with your professional financial team to strategize your exit and make sure it coordinates well with your retirement income plan.
• Build passive income streams: Since restaurant income can be unpredictable, you may consider introducing other wealth-building activities in your retirement plan. Some owners opt to invest in real estate or the financial markets to create more income stability in retirement.
• Review your insurance policies: Sit down with your professional advisory team and evaluate your insurance needs. Long-term care and disability coverage can protect your retirement savings from unexpected health or emergency expenses.

3. Legacy planning: Leaving your mark

You have invested countless hours in your restaurant or franchise business — and it’s important to ensure the wealth you have worked hard to build creates a lasting, positive impact on generations to come. Proper legacy planning helps ensure that your wealth is secure to benefit future generations and causes you care about:

• Charitable giving strategies: If there is a certain philanthropic cause that is important to you and your family, consider contributing to a donor-advised fund or a charitable trust, which can help you support charitable organizations while receiving personal tax benefits.
• Education funds for heirs: Many business owners choose to use some of their wealth to support their children or grandchildren in their educational endeavors. Consider setting up 529 college savings plans or trusts to fund educational expenses in a tax-efficient manner.
• Regular financial reviews: Your financial, estate, and retirement plans aren’t “set-it-and-forget-it” vehicles. Be sure to update your strategy and plans on an annual basis to adapt to life or tax law changes.

The bottom line

Personal financial planning is just as important as managing your restaurant or franchise. By proactively addressing estate planning, retirement savings, and legacy planning needs, you can secure your financial future and make sure your hard work benefits the next generation.

A professional financial advisor, estate planner, and CPA can collaborate with you to tailor a plan that aligns with your personal and business goals. To start building your personal financial plan, schedule a consultation with Aprio today.

Related Resources

• Aprio’s Restaurant, Franchise & Hospitality Services  
• Aprio Wealth Management
• Selling Your Company? Here’s How to Get the Best Deal