Mega Salons, Franchises and Chains:

Mega Salons, Franchises and Chains:
The Future of Tanning is Here

by Nancy A. Foster

Individual tanning salons have come a long way since their predecessors first began tanning customers in the late '70s. Although four- to eight-bed salons still exist, predictions from more than a decade ago are becoming a reality with the advent of indoor tanning mega salons, franchises and chains.

At one time the indoor tanning industry consisted of hundreds of "mom-and-pop" salons located in tiny strip malls throughout the country. To be honest, at that time, it seemed as if no one took this "little" industry very seriously--even the people in it. Some speculate that the smaller salons viewed their businesses as a hobbies rather than careers. Fortunately, that was then.

As an industry, we've come a long way. Today, indoor tanning is a growing, sophisticated entity that includes conventional salons (formerly known as "mom-and-pop" salons), mega salons (also known as "super stores"), franchises and chains. The industry also consists of enterprising entrepreneurs, serious business people and savvy investors who know a good thing when they see it.

In other words, move over Blockbuster ... there's a new kid in town.

Over the next two months, LOOKING FIT will explore the world of mega salons, franchises and chains. This month's segment focuses on the new terms redefining the industry, as well as mega salons.

Decisions, Options and Terms

Salon owners and prospective salon owners are faced with a multitude of decisions that will affect the futures of their businesses. Truthfully, the options salon owners have today can be overwhelming. For example, is it better to open a 10-bed salon or a 30-bed mega salon; is it better to expand from one salon to two--thereby becoming a chain; and, of course, is investing in a franchise a wise business decision?

In order to answer these questions, it might be helpful to define the terms in layman's language.

Conventional Salon: Typically, a conventional salon has one or two owners and offers six to 10 beds.

Chain Store: A chain is created when the successful owner(s) of a conventional salon decides to open an additional store in a complementary area. Simply put, a chain consists of two or more stores.

Franchise: A franchise is an organized business entity (also known as the franchisor) that gives the purchaser (also known as the franchisee) the right to buy or sell a product or service.

Mega Salon (or "super store"): A mega salon consists of 20 or more beds in one location. For the most part, no appointments are required.

However, it is important to note that a chain store can consist of conventional-sized salons, as well as mega salons or both. In addition, franchises can include conventional salons or mega salons--but, a franchise also is a chain. Then, of course, there are express stores, which can be a franchise or a chain, but not a mega salon. (Express salons will be discussed in a future issue.) The good news is it sounds a lot more complicated than it actually is.

Mega Salons

No one should be surprised at the growing number of mega salons sprouting up throughout the country.

"If you look around today and see who's doing the business in computers, videos or office supplies, it's super stores," says Troy Cooper, president and CEO of Dallas-based mega chain Palm Beach Tan. "There's always been a trend for things to get larger. In other words, as an industry begins to develop and mature, offering more selection and more upgrades entices more customers into stores and generates more business opportunities."

Palm Beach Tan is doing just that. In fact, Cooper's company is trying to target building its stores at between 20 to 30 beds each.

"When you increase availability to the consumer, what happens is it becomes more convenient for them to do business with you," he says.

Ed Chaney, owner of the metropolitan Phoenix-based chain and franchise SUNCHAIN, agrees that mega salons try to achieve quantity.

"It's quantity over quality, and customer service tends not to be as detailed," he adds. "It's a matter of processing the service. At a mega salon 10 customers easily could show up in two or three minutes. They have an expectation when they walk in that they will get right in. Without a doubt, mega salons should be quick, easy and convenient."

Which brings us to the three most important features of a mega salon--location, location, location. Not only is location important, it is critical.

According to Keith Lipman and Randy Eddlemon, co-owners of the Phoenix-based chain Energy Tanning, finding the right location for a mega salon is all about demographics.

"A mega salon's success really depends on the area it is located," says Eddlemon. "The location has to be able to support a mega salon."

Chaney agrees: "Mega salons are expensive to operate, and if they are not set up in a demographically correct area, failure is imminent. There is no room for error in finding an appropriate location."

Before it opens one of its super stores, Palm Beach Tan examines the general demographics of an area, as well as specific types of shopping centers.

"We look at Class 'A' shopping centers, as well as good street visibility--people need to be able to see a store and its sign from the street," says Cooper. "As far as demographics, we try to get a good mix of multi-unit housing including apartment complexes."

Expense is another factor to consider when deciding whether to open a mega salon. The bottom line is opening a mega salon is not an inexpensive proposition--in fact, the initial investment could be anywhere from $250,000 to $350,000.

"That's a fact," says Henry Turner, owner of Premiere Tans, a chain of tanning/video stores located in Jonesboro, Ark. "To do it right, you also need to invest in a quality electrical plan which can cost between $30,000 to $35,000. It takes a lot of air conditioning to keep a mega salon cool."

Other expenses include large monthly electric bills, the maintenance and repair on many more beds, lamps, acrylics, towels, not to mention that more employees are required. Basically, a mega salon has all of the expenses of a conventional salon, only with a mega salon the costs are doubled and, in some cases, tripled.

"However, if you're generating the revenue, the higher overhead is not a problem," Palm Beach Tan's Cooper adds.

Turner advises salon owners exploring opening a mega salon not to jump into the venture lightly.

"To do it right, you have to spend money," he says. "For example, I'm also in the video business and the businesses that have succeeded--Blockbuster and Hollywood Video--spent the money necessary to make their businesses look great. Many others tried to do it on a shoestring budget and did not succeed."

Todd Beckman, owner of the St. Louis, Mo.,-based mega chain and franchise St. Louis Tan Co., says that it requires a lot of money to put a mega salon together.

"It takes hard work, good planning and good credit to put one of these stores together," he notes. "Do it properly, be sure to do your homework. And, if you have the right backing, you'll never look back."

Scott and Bobbie Jo Lungren, co-owners of the Advantage Tan chain in Rapid City, S.D., agree that doing your homework is critical in opening any type of salon.

"You have to research what you are getting into," says Scott. "Know what other salons in the area are doing. Also, be sure to do your homework on beds, parts and lotions. Check everything out."

Mega Service or Minimal Service

Without question, running a mega salon or mega salons has its advantages and disadvantages--especially in the area of customer service.

"With a mega salon, your goal is to service the public in a large quantities," says SUNCHAIN's Chaney. "It should be convenient for customers and not require them to make an appointment because they need to get in and out quickly. It's also generally less expensive, but, again, mega salons should be very accessible to the public."

Basically, this leaves very little room for customer service. Or does it?

According to Liz and Stan Olszewski, owners of the Dayton, Ohio-based mega salon chain Copper Tan, despite the size of their salons they still strive to offer top-notch customer service.

"One of the things we do at our salons is take our new customers on a complete tour and explain the advantages and benefits of each level of bed we offer," says Liz. "We do our best to be very thorough with our customers. If they need help or have a question, someone will be there to help them."

Which means education for their employees, as well as their clients.

"Younger customers really aren't interested in education like our older clients are," notes Stan. "Therefore, salon owners must educate their employees well so they have the ability to properly educate all of their customers, no matter what level of service they prefer."

Perhaps the best advice for potential mega salon owners is to be able to cater to both their younger clientele, who might need little, if any attention, and their older clients, who want to keep abreast of the latest educational information, as well as get a healthy dose of "tender loving care."

"That's why I believe there will always be room for both professionally run conventional salons and mega salons," Chaney adds. "Different clients want different types of experiences."

And, most industry insiders agree, many clients are willing to pay conventional salon prices for the added attention.

Mega Employees

In exploring mega salons, a repeated concern seems to be the difficult task of finding good employees. Yes, mega salons need more employees; however, that is not the problem. The problem is that because of their size, mega salons also need different levels of management skills.

"Currently, one of our biggest challenges is getting good help," says Copper Tan's Stan Olszewski. "I'm not sure money is the answer. It seems people just don't see working in or managing a tanning salon as a long-term career choice."

However, like the indoor tanning industry, employment attitudes seem to be changing. Currently, the Olszewski's employ a district manager, an operations manager, as well as store managers--and they make excellent salaries with some added perks and benefits.

"Our management team has company cars, cellular phones and pagers," says Liz. "We pay for everything and we also provide health insurance. It is an excellent career for somebody who has a lot of energy and is willing to diversify every day."

According to St. Louis Tan Co.'s Beckman, everyone in the industry has to work hard to get good employees.

"More importantly, when we get good employees we also work really hard to keep them," he adds. "Our system works around commissions and bonuses on what their stores do."

In addition, in 1999, St. Louis Tan Co. will be offering its employees a 401k plan.

"The challenge of a mega salon or chain store is being able to hire and keep good people working for you," he says. "We're really focused on our employees and the bottom line is, employees have to be able to grow with you. We're not afraid of spending money on good people. That's what has made us so successful."

That is what makes any professionally run company--from Fortune 500 organizations to indoor tanning salons--successful. And, today's successful salon owners must do everything they can to entice good employees and keep them.

Mega Money

For mega salon owners, it won't be hard to pay your valued employees good money. Why? Because, apparently, the No. 1 reason for owning a mega salon is there will be mega money rolling in.

"Our stores generate 20 percent to 30 percent more gross revenue than the average salon owner," says Palm Beach Tan's Cooper. "So, yes, mega salons are more profitable and do, in fact, generate more dollars."

Ed Chaney agrees: "Mega salons are a high growth ticket. For someone who owns one, we are talking double or even greater amounts of revenue than a conventional salon."

However, Chaney once again cautions interested parties that everything involved in a mega salon is large.

"Mega salons generally are forced into large marketing programs," he notes. "Gross receipts are a lot larger and mega salons do not have the 'grace period' that individual salons have. After all, mega salons have large leases on equipment, large leases on property, large payrolls for employees--everything is large. So, mega salon owners can not sit around and wait for business to come to them."

Cooper suggests some tried and true marketing methods.

"We get our best results by doing direct mail with Advo and Val-Pak in the areas surrounding the store," he says. "However, quite frankly, the largest single thing that brings business into our stores is the visibility of signage on the building. Just seeing the sign is probably as effective and productive as anything else."

Premiere Tans' Turner also says a mega salon must be run properly in order to make money.

"Just remember, there is a lot of responsibility that goes along with the job," he says. "If a mega salon is not done properly from the start, there will be a whole lot to take care of later."

Coming Attractions

In the next issue of LOOKING FIT, we will explore the advantages and disadvantages of chains and franchises including the financial and marketing aspects.

Additionally, we will discuss the specific challenges of owning these types of business establishments with the very people who do it on a day-to-day basis. These savvy business people offer excellent advice and insights that are beneficial to potential salon owners who may be exploring getting into the indoor tanning industry or salon owners who are looking to expand their piece of the indoor tanning pie.

The Advantages and Disadvantages of Owning a Mega Salon

Advantages

• Money
• Money
• Money
• As easy to run as a conventional salon
• More beds available to customers
• No appointments necessary

Disadvantages

• Money (initial investment is extremely high)
• Money (monthly expenses are high)
• No room for error on location
• Less time to interact with customers
• Finding excellent employees