That’s what they told you is it? 
The management books I read in my youth told me it was to limit employee theft.
It’s certainly changing the value of the company: the owner is sacrificing a certain amount of dollars, in the form of return for the most qualified candidate, in exchange for a more nebulous return on employing the less qualified family member. Perhaps the owner thinks that family members won’t leave the business for better pay when they get experience under their belt. Maybe family members won’t take as many fake-sick days off if they think that the family grape-vine will get back to the Owner that they didn’t have the flu, but were going to Splash Mountain. Or perhaps they just don’t want to hear Aunt Jane complain about how her kid can’t find a job every Sunday at family dinner. These are value additions for the company from the owner’s perspective that are separate from having “the best” employees.
Well, whatever other reasons they had, as someone who was at one point responsible for scheduling, that one was legit. I’ve seen it happen.
There was a guy running another store who decided to buck corporate policy and transfer all of his cousins and other relatives from other stores to his. Then one day the family matriarch dies, and he spends the next week trying manage the store over the phone to the 4 employees who weren’t related to him who showed up and had to somehow run the entire store themselves. He was demoted, severely, not long after that.
If a family owned business is going to remain in the family, its important that the next generation takes an active role in the business. And as an employee, you want that, because if a smooth transition to the next generation doesn’t happen, you’ll retire when the owner does, whether you are ready to or not. The other options are less good for the employees - the owner could sell the company - which is not a situation that tends to result in a lot of job security for existing employees. The owner’s relatives could take over the company without a clue, which is likely to put it out of business.
Now, some of that family is going to sort of wash out at the running the business part - but they will probably still inherit some of the ownership, so at very least you want them to understand it.