Booster juice - big shoes to fill Andrew Fergus and Tony Bell Andrew Fergus is an Associate Due diligence had been completed, the purchase agreement had been drafted, and although Professor at the Department of an Henson was certain that this was a risk worth taking, he also knew that signing the contract in Management, Thompson front of him would be the biggest financial decision of his life. Rivers University, Kamloops, Canada. For over a year, Henson had been in negotiations with Natalie Peace to purchase and take over Tony Bell is a Senior Lecturer at management of three Booster Juice franchise locations in Kamloops, British Columbia, Canada. the Department of Accounting, The franchises had a proven track record of success in the Kamloops market; they had the Thompson Rivers University, reputation of being well run, and had a history of sales and profit growth. But he saw several Kamloops, Canada. major problems ahead. This purchase would represent a major leadership change at the company. Henson knew that for any company, a change at the top would bring risk, but there were a few wrinkles to this deal that made it unusually challenging. The first issue was demographic in nature. The median age of the employee group at Booster Juice Kamloops was 18, and over 70 percent of the employees were female. For the majority of employees the position at Booster Juice had been their first job, and most had only known one boss: Natalie Peac ace. Henson knew that the employees were particularly devoted to Peace, who in her late 20s was over ten years his junior, and represented an aspirational figure to many of the company's workers. He was aware that his personality and leadership style would represent a major change to the employee group; he wondered what leadership traits would be most helpful in managing this transition. Adding to the stress of the purchase was Henson's financing. Where Peace had financed her purchase and expansion with equity and company profits, Henson would be financing his purchase almost exclusively through debt - both borrowing from friends and relatives, and securing a business loan through a local bank. As he stated "I went to 5 banks and asked several investors. Investors wanted too high a percentage in return, and BDC [Business Development Bank of Canada] wanted to charge too much interest." "Other banks said no, and a government guaranteed loan was only available on an asset purchase and we did a share purchase. CWB [Canadian Western Bank] was the only one that This case was previously made it work, then Natalie did vendor financing to assist in making the final deal work along with presented at NACRA, 2014 Austin Texas. CWB." Henson would be fully leveraged when the deal went through, and cost cutting would need to be an immediate priority. T CASE lan Henson had big shoes to fill. He was replacing a charismatic and well-respected leader and due to his financing arrangements, he had a mandate to cut costs. Despite the potential pitfalls, Henson was optimistic - he felt lucky to be in the position to take over a thriving business - but he Disclaimer. This case is written solely for educational purposes knew the way the transition was managed would be crucial to his success. and is not intended to represent successful or unsuccessful managerial decision making. The author/s may have disgu lan Henson names; financial, and other recognizable information to protect lan Henson had a passion for golf, and after attending Simon Fraser University he was able confidentiality. to turn his passion into a career. Henson was a Professional Golfer and had worked for over DOI 10.1 108/TCJ-01-2015-0003 VOL. 12 NO. 3 2016, pp. 449-470, @ Emerald Group Publishing Limited, ISSN 1544-9106 THE CASE JOURNAL PAGE 449a decade as Head Professional at several golf courses in British Columbia. His most recent As Peace grew more experienced, not only did revenues and profits increase, so too did her posting was as head professional at Sun Rivers Golf Course in Kamloops. confidence and business acumen (Exhibit 1 describes Natalie's leadership approach and Henson was a married father of two young children, one son and one daughter. While their children strengths). She credited much of her stores' growth and success to a having good product in a were still infants, Henson's wife, Lisa, opened a beauty boutique. The boutique was an immediate growing market as well as a few key policies. success, and while he was observing and assisting with Lisa's entrepreneurial endeavor, Henson found himself wanting to grow more in his own career. He attempted to expand his role at the golf Peace's policies course, and eventually, while maintaining his duties as head golf professional, Henson also took Acts of Kindness. Perhaps Peace's most visible and expensive policy was her "Acts of Kindness" over management of the golf club's four-star restaurant: Hoodoos. campaign. Each shift, Peace assigned certain staff members to do a random act of kindness for Henson initially loved the new responsibility he found in his dual role and was effective both as a Golf neighboring businesses, community groups, or customers - the staff rs could use up to one Professional and as a Resta eing substantial growth over the two sides of hour of company time to do a good deed of their ranging from handing out flowers to the business. Despite his success in "wearing two hats," his motivation was waning. With growing customers to washing the windows of nearby businesses (with permission). Staff members enjoyed children, he had less time, energy, and desire to be at Sun Rivers Golf Course for long hours during being given the opportunity to engage in positive in ers and community the summer. He wanted to pursue a new career path that had the potential to offer more balance. while being paid to do it), the recipients of the good ways receptive. These acts Finding inspiration from Lisa's entrepreneurial success, Henson decided he wanted to make a big reflected well on Peace's stores and the Booster Juice brand as a whole. Although the Acts of career move; he wanted to be his own boss; he wanted to run h in business. Kindness campaign was successful in generating goodwill with staff, customers and the community Henson believed he had acquired the skills and experience necessary to run a restaurant in his at large, it was extremely expensive, costing Peace approximately $ year in extra staffing time managing Hoodoos. These abilities combined with his personal interest in fitness and sport, costs. Undeterred by the expense, Peace made Acts of Kindness a cornerstone of her leadership led him to consider opening a healthy, quick-service franchise - and he set to work researching vision - even encouraging customers to sign a pledge to do more ss in their own lives[2]. which franchise would be the best fit for him. Monthly manager development meetings. Each month, Peace would hold an all-day meeting for managers and senior staff. While improving store performance was a major goal, these meetings often focused more on personal development among the senior ranks than on any specific store Booster Juice promotion or goal. Each meeting, the managers would discuss issues at their Booster Juice store Booster Juice was founded in 1999 when Canadian entrepreneur Dale Wishewan was traveling in and share suggestions for improvement. The "shop talk" was very limited; the majority of the the USA. He noticed a trend of fruit smoothie bars, such as Jamba Juice, springing up all over the ull-day meeting was devoted to personal improvement. For example, each meeting, one country. He believed that Canadians would respond well to a similar offering; it was from this manager would be assigned to read and summarize a book on management, leadership or observation that Booster Juice was born. The name Booster Juice derives from the fact that personal development, and share at the meeting what they felt were the most important and when a customer orders a fruit smoothie they also can choose a nutritional "booster" such as impactful messages. It was these types of agenda items that took the lion's share of the time and Ginko Biloba, Ginseng or Echinacea to be added to their beverage. Dale's first store was such a focus during managers meetings. These gatherings were paid and managers were provided a sensation that within his first year he had franchised 15 more locations. By 2014 the company catered lunch. Each meeting cost well over $1,000 ($12,000 per year) between the direct costs o had become Canada's largest chain of fruit juice and smoothie bars, it had expanded to include catering and indirect costs of managerial wages. Peace felt the expense was worthwhile and over 300 locations - most of which were in Canada, but the company also had locations in the accepted that this additional training was not only costly, but would also lead many managers to USA, Mexico, the Netherlands, India, and Brazil. eventually leave with higher career aspirations than she could offer. In 2004, Booster Juice arrived in Kamloops with one kiosk location in Aberdeen Mall. Under its Extremely flexible scheduling. Because the majority of Booster Juice employees were high school or first owners, the franchise found moderate success, but the Booster Juice brand did not take off university-aged, many participated in extra-curricular school and sport activities which impacted in Kamloops until Natalie Peace took control. Booster Juice's scheduling. Peace could simply not rely on most employees to be available on a consistent timetable, which made scheduling a major challenge. Peace prided herself on keeping Natalie Peace extremely flexible scheduling options and allowing her employees freedom to enjoy their chosen activities guilt-free. She was determined never to give ultimatums or to force her employees to Natalie Peace grew up in Kelowna, British Columbia, before moving to the nearby city of choose between work and their personal life, all they needed to do was provide her sufficient lead Kamloops to pursue her post-secondary education. By the time she graduated with a Bachelor's time and she would promise to honor their outside commitments. Employees appreciated this in Business Administration from Thompson Rivers University in 2007, she was already the owner flexibility. To accommodate this policy, Peace needed to recruit and hire extra employees to cover all and operator of a Booster Juice franchise, and had been for nearly a year. of the gaps in the schedule, and she also cover many open shifts at the stores herself. While this When Peace discovered the opportunity to purchase a Booster Juice franchise, she was just 25, was not a significant financial burden, it was both an opera d a personal sacrifice and had very little management experience. Despite her lack of seasoning, Peace was able to Peace believed that these policies were among the keys to her company's success. Her initial convince a group of seven investors to take a chance on her: they believed that she had the right goals were both for business and personal growth, and she believed that both of those goals had personality and that her youthful energy would be a perfect fit to manage the juice franchise. She been met. Despite her passion for Booster Juice, Peace felt that her talents were best used in the also brought with her a conservative business plan that impressed shareholders. For those who early growth and development stages of a business, and her focus moved toward developing chose to invest, their bet on Peace pr be a risk worth taking. She opened a new store and in exit strategy. her first year was profitable. Having proven the model, she opened a second new store, and with her continued success, eventually purchased the Aberdeen Mall kiosk location from its original owners. As of 2008, Peace was the owner and general manager of all three Booster Juice The Deal locations in Kamloops[1]. Peace's early success earned her the award for Booster Juice Rookie Henson was ready for a new opportunity, and decided to attend a leadership development of the Year. At the same time, her profile in Kamloops was growing, and she won the Young course - Natalie Peace was one of the speakers - she talked about her experience and Entrepreneur Award from the Kamloops Chamber of Commerce. eadership style at Booster Juice. Henson was impressed by Peace and was interested in PAGE 450 THE CASE JOURNAL VOL 12 NO. 3 2016 VOL. 12 NO. 3 2016 THE CASE JOURNAL PAGE 451learning more about her story and about Booster Juice. Henson invited Peace to lunch, and it 4. One of which had the best sales numbers of any Booster Juice store in British Columbia, an impressive was during this meeting that the two connected. Peace felt an immediate trust in Henson, and the feat given Kamloops' relatively small population. two learned that they had very similar values. These shared values included integrity in conducting 5. Henson had noticed that many staff members were wasteful with gloves when cleaning up and was business, honesty, a desire to be authentic as leaders, and a real concern for employees. What certain this would be an uncontroversial area to save money. happened next would change both of their lives. As the conversation shifted to Henson's interest in Booster Juice, he talked about opening a franchise in the nearby city of Merritt(3] (100 kilometers south of Kamloops). As Peace was Exhibit 1. Natalie peace as a leader discussing how he might pursue this opportunity, it dawned on her; Henson would be great in this Developed from interviews with Natalie Peace and lan Henson: role. She saw he was genuinely caring, and felt he had the right blend of work ethic and personality to make a success of a Booster Juice franchise. What happened next was a surprise to Henson Natalie's thoughts on her own leadership style Peace asked if he would be interested in purchasing her three Kamloops Booster Juice stores[4] I like to have fun. When endorphins are released it brings out great work in the team. I believe people do Over the coming months Henson and Peace entered into intense negotiations over the purchase their best work when they are happy, and I do my best to ensure this happens by being present when interacting with team members. I have a clear vision for the culture I want to create, as well as a vision A characteristic of the negotiations was that the two parties negotiated directly with each other for the future of the business. I focus on using my business as a tool to make a positive contribution to seldom involving intermediaries such as lawyers or accountants. Peace's lawyer noted that "I've the world. I measure the organization's s bottom-lines never been so out of the loop on such a big deal." Although negotiations were tense at times, Peace and Henson agreed that the deal would not have been possible without mutual respect. When challenging situations arise, I do my best to keep them in perspective and lead myself through my own emotions without being reactive. As I'm dealing with an issue with an employee I don't harp on With the principles of the deal in place, Henson pursued the necessary financing. He had the them or hold grudges, always praising in public and reprimanding one-on-one in private. I make an financial capacity to purchase one new franchise store in Merritt, but purchasing three booming effort to be fair and respectful, and I do my best to be clear when communicating my expectations with stores in Kamloops would be a stretch. Five local banks rejected him before he finally obtained the intention of setting my employees up with everything they need to succeed. Even in difficult bank financing; he also went into personal debt borrowing from family and friends. Eventually, moments, I consciously speak in a way that preserves the integrity of the relationship, and never in a Henson was able to put tog ancing to pres it an acceptable offer. way that undermines my team or team members. Peace and Henson agreed to the sale, and while Peace was pleased to be free to explore new My goal is to teach my employees to think like an owner, so they understand How and Why decisions opportunities, she was also sad to be closing an important chapter of her life. Booster Juice had are made. I believe I have developed a relationship of trust between myself and my employees, which not only been profitable and exciting for her, it had also become a part of her identity; however, means I do not need to micromanage them, I give them autonomy and trust them to use their own discretion, do great work and make great choices she believed Henson would be able to bring the stores to new heights. Natalie's thoughts on great leadershi Thinking about the transition Great leadership, in my opinion, provokes the absolute best out of the team. It leaves each individual feeling respected and appreciated, but most notably changed for life because truly great leadership is Henson knew that a smooth transition would be a key to his long-term success. He was replacing transformational. a popular leader who was well-liked by her staff, customer-base and community. Henson had a tough act to follow, and he needed to formulate a strategy for making this leadership transition lan's thoughts on Natalie's leadership with both employees and the community. He wondered what leadership traits would serve him I believe Natalie to be a very intelligent, charismatic figure that is an inspirational and visionary leader well in managing this change. that tries to inspire her employees to be everything they can, while also displaying the characteristics hard work, kindness, fairness and sincerity necessary to be a great leader. Her energy and ability to Compounding his challenge was the fact that a part of his plan would require that costs be cut think well before she speaks is very impressive. I believe everything she does is well thought out ahead Henson had seen Peace's operation and spotted some areas of potential savings that would of time. She really believes good will come when good deeds are done. She understands what is likely be uncontroversial with staff[5], but he also knew that some of Peace's popular (but needed to be successful and is very capable of holding others to those standards expensive) policies would need to be cut or changed to save on costs. He wondered which should be cut, which should be changed, and which, if any, were "sacred cows" that ought not to be altered. Henson knew that the way in which any major change was announced and framed would be nearly as important as the change itself. He needed to make sure that any changes and Corresponding author the messaging around those changes were executed properly, especially if they involved cuts. Andrew Fergus can be contacted at: afergus@tru.ca As lan Henson prepared to sign the purchase agreement, he was excited to start a new chapter in his professional life. Student, golf professional, restaurant manager, and now entrepreneur, he was confident he would continue the success of Booster Juice in Kamloops, but he had big shoes to fill, and he had only one chance to get the transition right Notes 1. Google Maps is a useful tool in providing locational context. 2. Peace appeared on local news programs to promote her Acts of Kindness policy. Full video can be found here: http://bit.ly/NataliePeace 3. Booster Juice Franchise Fees were $20,000 and all prospective franchisees needed to have a Net Worth of over $350,000 - http://boosterjuice.com/join-our-team/franchise/franchise-info/costs-qualifications PAGE 452 THE CASE JOURNAL VOL 12 NO. 3 2016 VOL. 12 NO. 3 2016 THE CASE JOU