October - Stylist and Salon Newspapers

How to Know When the Time is Right to Grow
By Jayne Morehouse
If you’re a salon or spa owner, have you
considered opening a second location?
If so, perhaps you’ve had questions. How
do you know when the time is right? What are
the reasons to grow into additional locations,
as opposed to adding on to your existing space?
To get some answers from the pros who
have been there and done that, we asked some
of the leaders of the International Salon Spa
Business Network—formerly known as the
International Chain Salon Association—to
share their insights, experience and advice.
“It’s time to consider growing when you’ve
reached a couple of milestones. First, when
you are at maximum capacity at your existing
location and second, when you have the
| OCTOBER 2008 | OHIO STYLIST & SALON
cash flow to support a second unit,” explained
Charles Penzone, chairman of Charles Penzone,
Inc. in Columbus, Ohio, and secretary
for the network. “That means you need to
look carefully at how many hours a
week your chairs are occupied and
producing revenue. Look at the dollars
you are generating per square
foot and how much more you could
generate if you double shifted your
stations. If you’re close to maximum
earning potential and occupancy for
most chairs for most of the hours you
are open, then it might be time to
consider opening another location.”
Added Bob Floreak of Acuity Human
Resources LLC, a company that consults with
members of the network, including Philip
If you’re close to maximum earning potential
and occupancy for most chairs for most of the
hours you are open, then it might be time to
consider opening another location.
Pelusi Salons, “When you’ve decided to grow,
it’s critical to focus on your culture. The biggest
issue that affects growth as salons move
from one or two locations to multiple locations
is that they start to lose the small business
culture. ...What that means is the burden of
more employees creates the increased likelihood
of additional employee relations issues,
turnover and even legal challenges, because
it becomes more difficult to manage a large
number of employees. To improve the potential
for success and to mitigate the possibility
of employee relations and [human resources]
issues, companies need to train their managers
on the basics of performance management and
labor compliance as well as adopt defined [human
resources] policies and procedures.”
Once you do decide to grow, Gordon
Logan, president of the International Salon Spa
Business Network and CEO of Sport Clips, a
Georgetown, Texas-based sports themed company
offering salons for men and boys with
more than 500 units across the country, offers
these steps to success:
1. Develop a thorough business plan.
Excel spreadsheets are great for this, since you
can change the assumptions to see what impact
client counts, average service tickets, retail
sales, etc. have on your bottom line. Factor in
additional costs of two locations: communications,
training, etc. Be realistic about build-out
costs, you don’t want to under-estimate the
cost to open. Improvements to the space,
equipment, store front sign, supplies, inventory
for resale, marketing costs to get the word
out, ... etc. all have to taken into consideration.
“Banks loan to those who have a realistic
business plan that is not overly optimistic.
Develop worst-case best-case scenarios to see
what happens if everything doesn’t go just
like you hope it will. Be prepared for setbacks
by factoring some cushion into your working
capital allowances.”
2. Once you finish your business plan,
talk to your banker. Don’t be discouraged
if he says no. Many times, you have to
talk to several lenders before you find one
who understands our industry and has faith
in your ability to operate multiple locations.
Check into Small Business Administration
loans. They are perfect for owner-operators,
are usually easier to obtain unless you have a
substantial net worth.
3. Make sure you have a management
system in place. Running two or more locations
is more complicated than just one. You
can’t replicate yourself, so you have to have
systems in place and you
need to document them well,
so someone else can do it in
your place.
4. Train your manager
to run the new location.
If you don’t have someone
in your salon that is capable
of running your next salon,
you need to hire someone or
develop someone presently
on your team. Invest in outside seminars on
leadership and management, building a team,
coaching and counseling, etc. Attend workshops
at hair shows on management. Have
your manager-to-be run your existing location
for a few weeks to see if they are capable and
like being in a leadership role, before taking
the reins full time.
5. Join trade associations, like the International
Salon Spa Business Network, where
you can learn from and network with others
who have opened new locations.
6. Have a strong point-of-sale computer
system, so you can monitor performance
and inventory, etc. at any time from
your home office and your new manager can
use the performance reports to coach and
counsel the team.
7. Develop a stylist recruiting program.
You will have more stations to fill with
new locations. Talk to school owners to let
them know you are planning a new location.
8. Organize your training. You can’t do
it all one-on-one by yourself any more. Use
outside resources, like product manufacturers,
distributors, etc., to supplement your in-house
resources.
9. Be prepared to work harder than
ever until you get everything under control
and cash flow positive. Expect it to be harder
than you ever imagined.
Concluded Penzone, “Carefully studying
your numbers will give you the best roadmap.
Putting a location in just so you can grow isn’t
always the best move to make. In fact, sometime
if you already have multiple locations,
you’ll become more efficient and more profitable
by reducing your number of locations.
Growing can be terrific, but downsizing might
be the most prudent decision, depending on
your financial position. Remember, over the
long run, profitability is what matters.”
Jayne Morehouse is public relations director for the International Salon Spa
Business Network. For more information, call 866-444-4272, visit www.
salonspanetwork.org or join the network’s next conference on May 31-June 2,
2009 at The Ritz-Carlton Hotel in Amelia Island, Florida.