Proposals · Part IV · Succession and legacy economics

The Succession Mortgage

The incoming cook pays the retiring hawker for the stall's goodwill out of future takings, through escrow, with a first-loss guarantee.

SELF-FINANCING · ESCROW-ADMINISTERED, FIRST-LOSS GUARANTEED

Goodwill is set at 12–18 months of verified net profit, verified from the hawker's own records and invoices, never from mandated data feeds. The successor pays the lesser of 8% of gross monthly takings or 30% of verified net profit (floor $600, cap $2,200) until the goodwill sum is retired, typically four to six years. The payment never takes the successor's own monthly profit below $1,500, judged on the lower of the last three and the last twelve months. In a lean quarter it shrinks or pauses, the $600 floor yields and the term lengthens, and any balance still owed after ten years is written off. A ring-fenced escrow administers payments for a 1.5% fee, and a first-loss guarantee covers up to 24 monthly payments if the successor fails through no fault of their own. It runs on the extended HSS scheme for tendered and subsidised stalls, pricing goodwill on the profit the successor can expect, and with landlord consent in coffeeshops.

Who pays

SELF-FINANCING

What it costs

≈ $3,200 / mortgage SGD · per mortgage (expected programme cost)

Expected first-loss cost, simulated (Succession Economics, E.1.4)

Budget lines from the ledgers
Year	Line	Amount	Section
Yr 1	Escrow set-up and first-loss reserve – $15,000 for each of 10 Fellowships: the escrow holds the successor's payments, and the reserve covers the ones he misses	$150,000	the Budget Book, B.3
Yr 2	First-loss reserve and escrow – $15,000 for each of 16 Fellowships	$240,000	the Budget Book, B.4
Yr 3	First-loss reserve and escrow – $15,000 for each of 18 Fellowships	$270,000	the Budget Book, B.5

What it builds on

Informal 'coffee money' already changes hands in transfers; coffeeshop goodwill changes hands as takeover fees (§4.3, Succession Economics, E.2.1).

Who gains

Diners: Your bowl funds a retirement – and the retirement funded your bowl (§4.3).
Hawkers: A funded retirement paid by the business they built; for the young cook, a mortgage paid to the master who earned it (§1.4).

Where the library discusses it

§4.3 · Succession Economics, E.2.1 · §the-plan · §2.3 · §2.4 · §6.5 · §6.6 · the Budget Book, B.3 · the Budget Book, B.4 · the Budget Book, B.5 · Hawkers and Social Protection, C.7 · Follow the Plate, D.1 · Succession Economics, E.1 · Succession Economics, E.1.4 · Succession Economics, E.1.5 · Method, Levers and Data, F.2.3

Note: Cost is from the §4.3 worked example (laksa stall, Class B centre, tendered tenure): payment $1,260 a month, 50 months, Seed Bank max first-loss exposure of 24 payments $30,240. The protected income does not bind there, since the successor keeps $2,940. Averaged across every tendered stall with goodwill worth selling, weaker stalls included, the expected cost is about $6,500 a mortgage. Reserve policy is proposed in Follow the Plate, not stated in the plan: Succession Economics, E.1.5 and Method, Levers and Data, F.2.3 propose that the first-loss reserve be a revolving lump sum, never an annual spend, kept at or above the P95 payout of the open book. The Part VII lines ($410,000 over Years 1–3) safely carry about 35 mortgages at P95 and about 14 through a 2020-style crisis, enough for a pilot of 5–20; a book of 20 needs $192,000 at P95.