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The Bitter Side of Salon & Spa Suites

January 16, 2017 | By Neil Ducoff | No Comments

Bitter Side of Salon Suites MMWU 1.16.17

The suite phenomenon is the equivalent of a modern day gold rush. More and more suite franchises are popping up everywhere. All the suite franchises are advertising heavily to acquire both new franchisees and service provider tenants.

NOTE: This MMWU is about the recruitment tactics of suites companies and franchises.

The suite pitch to salon/spa service providers is quite simple, and easily hits all the hot buttons:

  • Grow your “own” business … not someone else’s
  • Make more money … a lot more
  • Freedom over your own schedule
  • Escape the drama
  • Use the products you want
  • Make your own rules
  • No more non-compete contracts

In reality, the suite pitch is an attack on anything and everything about employee-based salons/spas. It’s like every day is a “lets beat up on owners” day.

A suite’s best tenant is a “stylist with following” … and that’s who they’re going after.

Salons have been “pirating stylists with followings” forever. It’s an underhanded and unethical practice that suites owners have taken to new heights.

For a suite company to succeed, it needs busy stylists and technicians with large followings … and your best and busiest service providers are a fertile feeding ground.

Like anyone trying to recruit your best and most productive talent … suites don’t care about…

  • The years of hard work it took develop these great employees
  • Your business
  • Your cash flow
  • Your bank loans
  • Your family

They just want service providers with big followings. They want YOUR best service providers.

Now that the cream is skimmed off …

The rapid growth of suites, especially suite franchises, is unlike anything ever seen in this industry. But the suite business has a fatal flaw. Suites are expanding so rapidly that it’s getting increasingly harder to lease all those suites.

  • They’ve skimmed off the busiest service providers that stand the best chance of making it as an independent.
  • Now they’re leasing suites to stylists and other service providers that don’t have the business to cover expenses and make a living.
  • Sitting in a suite without any customers is a lonely existence. Many are resorting to Groupon … which is the kiss of death in business.

Suites and suite franchises are promising a whole lot that they can’t deliver.

Suites are twisting a lot of facts and data with one intent … to get leases signed.

  • Suites use the terms “Revenue,” “Profit” and “Income” to say the same thing. These terms are NOT the same thing. Suites say, “You can keep 100% of the profit,” but they never define “profit.” Profit is what’s left after all expenses are paid. For an independent suite tenant, that’s called “Net Income.” The suites never explain that profit can be negative and that a suite tenant can keep all of that negative profit.
  • Suites blur the term “Income.” Are they talking “Gross Revenue” or “Net Income”? A claim that “income” went up 40% to 60% is easy to make when that “Income” really means “Gross Revenue” from service and retail sales – not net personal income.
  • One suite franchise spotlights one hairstylist that said he wasn’t looking to be self-employed, but when his salon owner presented him with a 150-mile radius non-compete, it left him no option. REALLY? A 150-mile non-compete for a stylist is a ridiculous statement. 15-mile? Yes. 150-mile radius? No. It would never hold up in court. It’s another bashing of a very common practice at employee-based salons.
  • Another suite franchise spotlights a stylist that went right from cosmetology school into a suite. She says, “Last year I made just over $100,000.” My rent is about $12,000 a year.” Wow! Sounds like a no brainer. But, “I made just over $100,000” means Gross Revenue … not Net Income. Factor in all of the other costs of doing business and self-employment taxes … and that $100,000 looks more like Net Income of $30,000 to $40,000 after taxes. Without a following, or one hell of a gift for networking and social media, making a living in a suite is a tough and lonely career path.
  • The suite companies and franchises are doing everything they can to roll out the red carpet to secure tenants. From custom-designed suite decor, business software and apps … to months of free rent so tenants can take a “vacation” … suites are going after your employees.
  • For an independent service provider, signing a multi-year lease is risky when the entire business depends on one pair of hands.
  • For suite owners and franchises … those multi-year leases are only as good as the ability to pay by the people that sign them. Leasing to a half-booked stylist with little to no business experience is seriously risky.

A prediction on Suites

I predict that the suites’ promises of gold and “build your own business – not someone else’s” is going to peak and then recede. The signs are already there.  Suite stylists are going to see working for a salon as the best career and income security move.

Here’s my challenge to you: Employee-Based Salon/Spa Owners … It’s time to rethink everything about your business. The days of building a salon/spa one column at a time are over. Today, you must grow a company … and a unique brand.

  • Employee-based salons/spas must become everything booth rental and suites are not. Team service must replace “I/me/mine” service. Career paths must be real and deliverable … not “some day promises.” True employee benefits like paid vacations, paid holidays, company paid advanced education, team bonus plans and more, must fill the benefit void that has existed too long.
  • Salon/spa compensation must evolve beyond commission, sliding scales, service charges and product-cost deductions … all of which feed independent booth rental and suite thinking and behavior.

It’s time to play a very different and more sophisticated game than the traditional salon/spa model. It’s definitely time to play a better game than the suites are playing. It’s time.

Categories: Monday Morning Wake-Up

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