The Story Behind Canada’s Real Succession Family

How a family feud nearly brought down the food dynasty that owns Swiss Chalet

The roots of food service company Recipe Unlimited, which owns popular Canadian chains like Swiss Chalet, East Side Marios and the Keg, can be traced back to 1883. A man named Thomas Patrick Phelan founded the Canada Railway News Company with his three younger brothers, hiring cousins and nephews to sell newspapers and snacks to weary customers at train stations across the country. When airplanes replaced trains as the popular way to travel longer distances, the company pivoted and began hawking catered meals to airlines. By 1968, under the direction of Paul James Phelan, Thomas Patrick’s grandnephew, the company was renamed Cara Operations, went public and had sales of $30 million a year–nearly $300 million in today’s dollars.

Cover of a book titled: The Phelan Feud. it features an old black and white photograph of the Phelan family that is ripped right down the middle.

But in the 1990s, the family was plagued by a massive feud between Paul James’ offspring—Gail and Rosemary vs. their brother Paul David—over who would assume control of the company after their father’s death. Paul James had neglected to lay out a succession plan for the company, a massive gaffe which would go on to alter both the fate of the Phelan family and their business. Today, the Phelan family maintains a 20 per cent stake in Recipe Unlimited and is among some of the wealthiest dynasties in the country’s history.

Related: How to Set Up a Solid Succession Plan

Canadian Business spoke with journalist Stephen Kimber, author of the new book, The Phelan Feud: The bitter struggle for control of a great Canadian food empire, about why the Phelans might just be the Canadian version of the Roy family from the popular TV series Succession, the pitfalls of family businesses and what lessons business leaders can take to heart in order to avoid making the same mistakes.

How are the Phelans like the Roy family in Succession

The problem was, the patriarch of the family, PJ decided to step away from day-to-day operations while he spent his time sailing or drinking with his cronies in the Toronto Club–but he never singled out one of his children to take over the company.

PJ had four children, Gail, Sharon, Paul David (PD) and Rosemary. If he had followed the rules of primogeniture, his first son would have been the anointed one, but Paul Phelan didn’t trust his son—who struggled with alcohol addiction—enough to run the company. He persuaded his eldest daughter, Gail, to leave academia and work alongside him, but didn’t hand over the reins to her either due to her clunky social skills—which were later diagnosed as autism.

Instead, he left them both hanging, much like in the show. Paul David appeared uninterested in running the company until his sister came in as competition, which kicked off a bitter power struggle that lasted throughout the ‘90s. Eventually Gail and her sister Rosemary wrested the company back from its shareholders, successfully using their 79 per cent of Cara’s voting shares to privatize the company in 2003. 

Why do you think Paul James Phelan failed to lay out a proper succession plan? Was his intention for the siblings to duke it out? Or just a misstep on his part?

I think a lot of his ego was tied up in being the paterfamilias of the family, as well as the head of the company. He would talk about how many thousand people depended on him every two weeks when their paycheques came, which was all true. But once he turned the company over to management and couldn’t get his kids into positions where they could succeed, he created a problem that was not going to solve itself. 

In the book, you say only 30 per cent of family businesses make it through to the second generation, and only 10 per cent make it past the third. Why do you think family businesses are so prone to failure?

We hold family businesses to a higher standard by expecting them to continue in the same family generation after generation. It’s a real accomplishment for most businesses to survive more than a couple of years, so for a family business like this one that has been around and in the family since the 1880s is pretty incredible. It’s more noticeable when a family business fails and they tend to fail more spectacularly because of all the personal stuff that goes along with it. In many cases, it comes down to ego. 

Related: How Sisters are Growing Their Fourth Generation Farm

Learning from the Phelan family’s story, what measures can family businesses take to prevent these issues from happening?

I think you need a founder who understands that family and businesses are not necessarily inextricably linked. Someone can create a business that generates wealth for future generations but the company doesn’t have to remain in the family. You can’t expect your children, grandchildren or great-grandchildren to have the same enthusiasm for the company you do. Somebody might, but not necessarily.

Sean Regan, Gail’s son, saw some of the awful fights and disagreements regarding the company up close during his childhood. He eventually went away and when he came back, he got a job at Cara Operations without telling anyone during the hiring process that he was part of the family. He got in on his own merits, then stayed with the company until it was folded into Recipe Unlimited in 2015. I think he learned a lot of lessons growing up about what he shouldn’t do and couldn’t do inside the company.

Why do you think primogeniture remains so important when it comes to succession?

What’s interesting is that the Phelans kids’ mother, Helen, was considered to be a feminist icon of sorts. A lot of young women outside the family looked up to her as a role model. But inside the family, she was not someone who supported her daughters’ bid to take over the company. She was sympathetic to her son, Paul David, because she didn’t want him to think that his sisters were ganging up on him. Primogeniture has had a long influence on history and it was part of the ethos of where the Phelan family came from. It makes things very difficult when you’ve got a situation where the firstborn does not seem like the appropriate person to be the head of the family business.

What do you think of the way their story ended?

I sometimes joke with people that the Phelans were Succession without a tidy ending. It would have been really nice to have closed off this book in 2003, when the women won control of the company and were able to take it private again, but the reality is, they didn’t manage to do a spectacular job of managing the company. They had their own problems, some of which were totally outside their control, some of which were less so, but the company ended up being bought out by a much bigger company. One could argue that was inevitable, that the world had changed enough they would not have been able to keep growing. The family now controls a much smaller part of a much bigger business, but that’s still a lot of money and inheritance for future generations.

Isabel B. Slone
Isabel B. Slone
Isabel B. Slone is a Toronto-based journalist whose work has appeared in the New York Times, the Wall Street Journal, Financial Times and others.