Market Value and Lump Sum

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Case Study: The Crowne Inn: A Classic Case of a Family Business in Turmoil

Davenport University

Professor Carolyn Rourke     

In the case study entitled “The Crowne Inn: A Classic Case of Family Business in Turmoil” outlines a situation within the Johnston family regarding their family business. The dilemma is built against the backdrop of a characteristic family dispute of monetary discrepancy. By and large, the issue lies on that Bruce Johnston who have been running the family bar for over 15 years want out of an oral agreement they made with Bruce’s mother. Bruce and his wife have offered his family to buy out of a residual agreement to pay her $500 a month plus medical expense for ownership of the bar for the lump sum of $50,000. On the whole, Bruce’s mother Barbara, her attorney and the family members on her side of the issue believe this may be too little. Furthermore, they contend they have three options: sell the bar outright for the lump sum, have Brue pay smaller lump sum and continue with the monthly payments, or sell the bar to a third party.

Overall, the main components of this dilemma lie on what is equitable and fair compensation for the bar. Since Bruce and his wife took the reins of the bar they have had steady growth in sales averaging at about 5% per year. In addition, the business is for the most part profitable receiving a profit margin in the line of 0-4% per year. Thus the question is straight forward enough: what is fair price for the bar?

In the deeper sense of finding the right price for the bar has a few more variables involved. The issue of Bruce not being totally punctual with payments to his mother also makes the situation more hostile. Nevertheless, the main focus should be how to resolve the dispute in the fairest manner. In the larger context, the bar is soundly operated enterprise. However, with the bar industry being the maturity stage of the industry life cycle the likelihood of radical growth is...
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