A Professional Approach To Salon Ownership

For years, industry insiders have made predictions about the future of the indoor tanning industry. However, Palm Beach Tan’s exciting new salon conversion program may be the signal that it’s time to seriously look at the benefits of branding and franchising.

Founded in 1990, Palm Beach Tan, Inc. has become an industry leader in indoor tanning. Operating its brand of tanning superstores successfully for 15 years, Palm Beach Tan opened its first franchised location in 2003 and now operates 110 locations in 18 markets nationwide. The company’s new salon conversion program is key to its growth strategy to eventually have approximately 800 Palm Beach Tan locations in the United States.

“There is a phenomenal consolidation opportunity in the indoor tanning segment, and we are prepared to do whatever it takes to make that happen,” Palm Beach Tan’s Vice President of Franchise Services Steve Berkman says.

The current indoor tanning industry is comparable to the independently run, single-unit video rental stores of two decades ago, and it’s no coincidence that the company’s aggressive expansion strategy to dominate the $6 billion a year indoor tanning industry is modeled after the successful growth of Blockbuster Video in the 1980s and 1990s, he says.

“The tanning business is dominated by independent salons, and many of them are run by single-store owners,” Berkman says. “Many are not in prime locations, and some don’t have access to cutting-edge marketing tools. We know there’s an opportunity here for a great franchise brand, as with the video industry in the ’80s. In fact, branding is going to change the face of the tanning industry.”

Franchising is a way for potential business owners to benefit from becoming part of a strong, pre-existing brand.

“Look at companies like Blockbuster Video, Home Depot and Barnes & Noble,” says Janie Robins, a Harrisburg, Pa.-based Palm Beach Tan salon owner. “They lead their retail segments and project a very professional image. The Palm Beach Tan brand has the clean, professional image with which we want to be associated.”

Berkman, himself a former Blockbuster executive, along with several Blockbuster franchisee owners, helped develop the company’s ambitious concept. To successfully implement the superstore model in the tanning industry, the company knew it was crucial to attract talented and driven salon owners to join as franchisee business partners.

“We work every day to earn the business of those we serve, and that includes our tanning customers and our franchisee partners,” Berkman says. “To make Palm Beach Tan the best investment for salons, we’ve assembled a team of executives, franchisees and preferred vendors with literally hundreds of years of experience building national brands. We continually work to improve our system to become the best option for the tanning customer.”

Palm Beach Tan’s salons are constructed with 3,000 square feet of space and contain 20 to 22 tanning beds. Special attention is made to have a uniform, clean, inviting store environment and offer convenience and several choices of the highest-quality tanning equipment. Extra care is given to ensure staff members are well-trained, professional and dedicated to helping customers attain their desired look.

“The way in which our salons look and operate are not a matter of chance,” he says. “We’ve done extensive customer research and asked tanners and non-tanners alike across the country, ‘what would the ideal tanning salon look like, and how would it operate?’ We then built our salons and systems in response to those answers. These conversations led to our policy of not requiring our members to sign contracts or make appointments.”

Dedicated to giving customers what they want, the company offers its members the option to tan in any Palm Beach Tan location.

“Franchisees are attracted to our system because we’re committed to our tanning customers and to our franchisee partners,” he adds.

The company knows that it’s not enough to just enter a lot of markets; it must achieve maximum market penetration. Therefore, it has a plan and a schedule to become one of the primary tanning providers in every one of those markets.

“This market-by-market strategy will build our market presence and ultimately will lead to the success of Palm Beach Tan,” Berkman says.

The current focus of the company’s expansion plan is on developing franchise business partners with independent tanning salon owners through its salon conversion program. To do this the company knew it would have to appeal to top salon owners and make Palm Beach Tan the best company with which to partner.

“We asked independent salon owners what it would take to get them interested in converting to the Palm Beach Tan brand,” Berkman says. “We didn’t just listen to their concerns; we implemented their advice to create our new salon conversion program.”

According to the company, salon owners said they wanted to have access to the benefits of the system and of the company’s branding, but many simply couldn’t afford to completely remodel their businesses in the image of a Palm Beach Tan salon.

“To reduce the cost of conversion, we determined what branding elements were most critical and reduced the requirements for a Palm Beach Tan franchisee salon,” he says. “However, we still require that franchisee salons offer three levels of UV tanning, a sunless spray tan system and adhere to Palm Beach Tan operating standards.”

The company also implemented an innovative royalty structure. Salons converting to a franchise bring a loyal customer base to the table, and they want this to be recognized, Berkman says. Therefore, the company instituted a program where royalties are earned only on revenues above the amount the salon was bringing in prior to conversion for the first two years that a new franchisee is in business.

“This revolutionary approach puts us in a similar position with our franchisees as we are with our store level customers,” he says. “If we want to make money from them, we’ve got to earn it. In the long run, we believe that is the best way to do business.”

With the salon conversion franchise fee of $15,000, Palm Beach Tan provides franchisees with a comprehensive support program that includes training, initial marketing and ongoing operational support. A strong relationship with Ergoline and Australian Gold gives Palm Beach Tan purchasing power that they pass through to their franchisees.

“We made a conscious decision to give the savings to our franchisees to help strengthen their bottom line,” he says.

In keeping with the cost-saving theme, the company developed its own in-house EFT processing system to eliminate third-party providers. “The average Palm Beach Tan salon generates 60 percent of its revenue from EFT membership billing,” Berkman says.

“While there are many independent tanning salons that are very competitive, Palm Beach Tan salons definitely have a ‘wow effect’ that is difficult for an independent to emulate,” Robins says.“ The company takes a serious approach to professionally training managers and staff to maximize the customer’s tanning experience.”

Robins already operated several video stores and four independent tanning salons when she decided to partner with Palm Beach Tan. She says being a franchisee stretches her advertising budget because the company helps design and test promotions.

The future of Palm Beach Tan is bright. It has a leadership team with proven track record of success and an already successful growth strategy that includes new salon development, acquisitions and conversions. Additionally, its clean, professional image has a positive impact on the industry.

“We are reaching out to growth-oriented salon owners around the country who want to benefit from our brand, our purchasing power and our proven systems, and who are willing to join the Palm Beach Tan team,” Berkman says.

“We can be confident in our brand because whenever you develop branding standards and ensure that they are executed consistently in every location, you are providing something that customers will continue to want.”