When brotherly love isn't enough

There are siblings who just can't work together under stress. Then it's a question of how best to part company.

By Gail Buchalter

At age 40, Rick Freeman was in crisis. He had to figure out what he wanted to do with his life. He knew one thing for sure — he was suffocating under the constraints imposed by his older brother Larry. It was time to extricate himself from the family business, where he had found a tolerable, if not fulfilling, home for most of the past 19 years.

That was in 1983, when disaster loomed on all fronts for Freeman Cosmetics Corp., then a $5 million hair- and skin-care manufacturing and distribution company. The Freeman brothers found themselves facing possible bankruptcy as they watched their sales nose-dive over a three year period, with losses reaching the $1 million mark.

That's when they discovered, according to Larry, that success made their family business run smoothly. Rough times led to soul searching, decision making, and "divorce."

"It was all my fault," says Larry, as he walks from his desk to the sitting area in his cavernous office in Los Angeles's posh Century City. "I coerced Rick into coming into business with my father and me."

Not so, says Rick, a smaller, more subdued version of his brother. It's a few days later and he's eating breakfast in a San Fernando Valley coffee shop. He is recalling how his father, Jerry, told him he had to go to work as soon as the National Guard handed him his discharge. On his last weekend leave Larry, already part of his father's company, S. Jerry Freeman, a beauty-products brokerage firm, told Rick there was a job waiting for him in the family business.

Feeling pressured by circumstances, not by Larry, Rick joined the Los Angeles-based business in 1964. When their father died unexpectedly in 1967, the role of patriarch fell on the willing shoulders of Larry, who had always fulfilled more of a parental than sibling role as the boys were growing up. It, seemed like a natural progression, yet while Larry flourished, Rick eventually floundered.

"The usual conflict among siblings often gets worse if they go into a business with their parents," says Will McWhinney, head of Enthusion Inc., a family business consulting firm in Venice, California, and an instructor with the Fielding Institute in Santa Barbara, a leading school for doctoral work in organizational development. "When the older sibling has an entrepreneurial nature, it is often impossible for him to work with anyone else; he must run the company, which makes it very difficult for the younger one."

But to this day Larry argues that each of them had equal impact on the business. Rick, on the other hand, recalls being constantly aware that Larry was the big brother, someone he had to defer to out of filial respect, a situation typical of siblings in business, McWhinney says.

McWhinney suggests several ways to avoid the type of conflicts the Freeman brothers underwent. The parent might set up two unrelated businesses within one company, so that they could share the financing, supporting each other without competing. Alternatively, a parent might allow each child to head a division answerable to the "parent" company a short term solution, since both siblings would be heading toward the presidency.

Despite internal conflicts, the Freemans prospered in the early years. In 1975 they decided to revamp and rename their firm Freeman Cosmetics, appointing themselves vice-presidents. The brothers began manufacturing and selling their own line of hair-care products, which then consisted of only one item, a shampoo Larry developed that contained amino acids extracted from plants. The promotion campaign the company subsequently mounted centered on the shampoo's "natural ingredients" and helped to create the trend toward "natural" products that is still consuming the health-conscious, label reading American public. Larry was the front man selling their expanding product line, while Rick handled administration.

Then disaster struck. Larry decided the best way to promote the company would be through a syndicated, half-hour television show that would make him visible — sort of a cross between Dinah Shore and Vidal Sassoon. The program, called "Larry Freeman's Woman's Page," included 10 segments on topics such as fashion, politics, cooking, and beauty tips.

Larry financed the project with money taken from the company's advertising budget. He produced 50 shows at a cost of $10,000 each, and saw his $500,000 investment go down the tubes, even though the show was picked up by 43 markets in the 1981-82 season. Not only were Freeman's coffers depleted, but sales stagnated since Larry wasn't actively servicing their accounts. Rick was increasingly troubled by what he saw.

"I knew how much this project meant to Larry and because he's my big brother I was supportive," says Rick. "I thought the show would be a disaster but it was even worse. Today I might take a stronger stand and try to talk him out of it."

Instead Rick kept quiet, but realized he had come to a critical juncture in his life. The choices were obvious. He could either dig in and try to resurrect the company with Larry or he could get out. He left in 1985.

Though the company was in financial difficulties, the Freemans were offered $2 million for their business at about that time. Using this price as a fair assessment of the company's value, Larry bought out Rick's stock and Rick's two children's shares, which had been given to them by their grandmother. No money changed hands; there was just a promissory note and good faith. As the company regained its foothold, the debt was paid.

"I didn't want him to leave and continually tried to talk him out of it," Larry says. "I always looked at this operation as being family first and business second. It was like divorce. I found myself moping around the office, filled with self-pity."

Rick was like the ex-wife going out into the world to create a place for herself, to find a new identity, a new life. When Rick brought his dissatisfaction out in the open, Larry had been surprised to find that a problem existed. Yet he accepted Rick's decision, finding it easier to give up a partner than a brother. And, Larry bristles, he never replaced Rick. Instead, many people within the company absorbed his duties.

Today the company has received buyout offers topping $75 million, not, he says, because he has done anything different since Rick's departure; it was simply time for the Freeman name to become a mainstay in the competitive cosmetics field.

Using his talent for promotion, Larry began to focus on the development of his company. He became more aggressive about marketing, introducing three new lines made from fruits, vegetables, and flowers, all of them successful. Still, Larry is not totally happy. He is rueful that Rick left the company too soon, missing out on the more recent financial rewards.

"I've never thought about that before," says Rick. "Larry and I made a deal and kept it. I have no idea how well his business is doing, since I don't look at the books and we never discuss money."

According to McWhinney, there is bound to be a substantial amount of strain, and even suspicion, within Larry and Rick's evolving relationship, but they are both working on it, and that in itself is a testament to their love for each other and the family though each quickly asked what the other had said about him during his interview.

Rick expresses no regrets about leaving. Initially he intended to take off for six months, bumming around the way he wished he had when he was 21. But he received a call from a retiring businessman who offered him his beauty manufacturer's rep business at an excellent price. Rick bought it, changing its name to Rick Freeman and Associates, and now represents 15 beauty aids companies. He has just bought a million dollar home on the Pacific in Long Beach Marina and he will operate his new business from that area.

Larry is living a highly visible life in Beverly Hills, even enjoying a charity tennis tournament he sponsors named FACTT (the Freeman Aces Cancer Tennis Tournament). And his children are working for him. His son, Mark, 27, is head of international sales. His daughter, Jill, 24, came into the fold only a year ago as assistant to the advertising and marketing director. His wife of 29 years, Judy, appears with Larry in commercials and print ads, and books the travel for the company. Sales in 1989 were $26 million, and are projected at $35 million for 1990. Larry is thinking about taking the company public.

Rick's two children, Jason and Nicole, are in college and high school, respectively, and the only future plans he's making with them are ones that would keep them as far away from his business as possible.

"They'll be better individuals if they go out on their own. I've learned from my life," Rick says with a slight smile. "Besides, I'm over-protective and I'd probably smother them."