Standing in the kitchen of her Toronto home on July 22, 2004, Margot Franssen got the news that would change her life. After hanging up the phone, her husband turned to her, saying, “Okay, the deal’s done.” She burst into tears.
After spending 24 years building The Body Shop Canada Ltd. from a single store into an ubiquitous retail chain known as much for its approach to business as for its products, Franssen had just learned the company had been sold. “It just hit me,” she says. “What have I done? My identity was tied up in ‘Hi, I’m Margot Franssen from The Body Shop.’ Now who am I going to be?”
Franssen and her business partners, husband Quig Tingley and sister Betty-Ann Franssen, had been negotiating the sale of Body Shop Canada for the past year. Unlike many entrepreneurs who outgrow their businesses-or whose businesses outgrow them-Margot Franssen had seen early on it was time to let go: the work just wasn’t challenging or interesting anymore, and her enthusiasm was all but gone. But as her story shows, leaving a business behind entails much more than navigating the complexities of dressing up a company for successors or acquirers and negotiating a profitable exit. The good news: the same traits that help entrepreneurs at startup-vision, risk, flexibility and confidence-can also help them at the end.
Franssen was a 27-year-old philosophy grad with no business experience when, in 1980, she signed a franchise agreement with The Body Shop International PLC (BSI) to bring the bath- and beauty-products retailer to Canada. Her first store, located in Toronto, was just the seventh Body Shop outlet in the world. Franssen says she and her two equal partners joyfully worked long hours to grow the business: “It was so much fun that there was no thought of retiring.”
The Body Shop’s concept of beauty with a conscience took off, as consumers embraced the firm’s philosophies of fair trade, eco-friendliness and no animal testing. The company became a leader in corporate social responsibility, all the while selling truckloads of banana shampoo and tea tree oil.
The trio first received unsolicited offers for the firm in the early ’90s. “Forget it!” says Franssen. “We were still so emotionally attached to it that we laughed.” But by 1998 their first inkling of selling took hold. With a store occupying prime real estate in every major mall in Canada, Franssen’s role began to change from builder to supervisor.
What’s more, BSI was homogenizing its operations worldwide and Franssen feared damage to the Canadian brand, which she’d worked hard to develop. “We felt very strongly that we couldn’t put our prices up. They felt very strongly that we could,” says Franssen. “We had to abide by the franchise agreement, but that didn’t appeal to me because I’m more of an entrepreneur than a franchisee. I needed to call the shots.”
Franssen’s husband concurs. “She hates the operational side of it, like warehousing and number crunching,” says Tingley. Moreover, he says, Franssen thrives on challenges, opportunities and the “theatre side” of retailing. But after more than two decades in the business, each new challenge and opportunity seemed stale. “I had outgrown the company,” says Franssen.
Still, deciding to sell didn’t happen overnight. “It took an inordinate amount of thinking,” says Franssen. “You’re always second-guessing yourself. Am I doing the right thing at the right time? What if I’m not happy? This was my baby, and everybody knows me because of this. Who will I be? That, for me, was such a hard thing.” A year passed before the three partners agreed that selling was the right option.
BSI had the right of first refusal on the business, but initial discussions were nothing more than informal chats, recalls Tingley. Other parties showed some interest, including a group of Canadian franchisees, but most of the sales effort focused on BSI. It lasted for four years. “There was a lot of hemming and hawing,” says Franssen.
Meantime, Franssen and company prepared themselves and the firm for sale. They obtained a business valuation, tidied up the books and ensured that the firm’s business plan and infrastructure policies were in shape.
Removing herself from the business proved much harder. In 1999, a CEO was hired to handle operations, and Franssen began to move from day-to-day management to handling strategy, culture and values. “It’s like getting rid of a drug in your system,” she says. “You’re absolutely addicted to running something.”
To cope with the stress and withdrawal, Franssen developed new friendships and rekindled old ones with people outside the business, something she rarely had time for before. She also made time for other interests, including tennis: “We started to teach ourselves to let the business drip off of us.”
Uncertain how long it would take to close a deal, the team dared to invest in the company, refurbishing older stores and upgrading IT systems. “We didn’t try to save a lot of costs. That’s not the way to have a really great company,” says Franssen. “People are buying the potential of a business. So if you’ve cut yourself to the bone and not allowed for potential, that’s not a good company to buy.” Talks got serious in early 2004 when BSI made a formal offer for The Body Shop Canada, which then comprised 69 franchised and 42 corporate stores, employed 1,000 and generated system-wide sales of $130 million.
“It was better than selling to a stranger,” says Franssen. But it didn’t guarantee a carefree sale. Due diligence took almost eight months, each of them nerve-wracking. Since the Canadian operation was an independent unit, BSI had been privy to little more than sales and wholesale purchase figures. Whereas BSI had about 15 lawyers on the case, the Canadians had just one.
Franssen’s other advisors included an outside accounting firm and her CEO, who possessed an MBA and a law degree. Franssen credits her lawyer for helping the sellers view the negotiations more objectively, particularly for calming their tempers. “You want people beside you who understand the passion and the emotion,” she advises, “but who can bring you back down to level.”
Luckily for Franssen, whose husband and sister were equally involved in the deal, the turmoil didn’t cause friction at home. “All three of us helped each other through,” she says, adding that they largely agreed on the major issues. “We’d take turns going a little bit crazy.” Video games provided an unexpected coping mechanism for Franssen. She played them so much in the two weeks prior to closing the sale that she needed physiotherapy.
The final sale price: $26 million in cash and BSI shares. “Everybody,” says Franssen, “walked away satisfied.”
One week later, she began working to establish the Canadian retail arm of another successful international brand. Monsoon, a U.K.-based clothing retailer, had in 2003 asked Franssen to launch its Accessorize brand of fashion accessories in Canada. The plan had been to piggyback on The Body Shop Canada, but selling the company meant starting from scratch. Today, four Accessorize outlets are open, and Franssen’s long-term goal is 50 stores. “What took much of the sting out of the sale for me,” notes Franssen, “is that I walked right into a new venture.”
In hindsight, Franssen thinks she should have sold sooner, perhaps in the mid-’90s. “There’s a window of opportunity on the way up before it’s not completely tied up in your soul,” she says. “I don’t think it would have been so emotionally draining. They should have marriage counsellors for entrepreneurs and their businesses.”
© 2005 Susanne Ruder