Canadian Franchise

The Business of Beauty

Woman relaxing in beauty spa franchise
from Lori Karpman, President, Lori Karpman & Associates Ltd.

This summer edition of Canadian Franchise Magazine is dedicated to the health and beauty industry and I could not be more excited about writing this article.

With over 25 years of professional, and over 40 years of personal, experience in the industry, beauty is my true passion. Over the course of my career I have worked with many of Canada’s largest and most successful beauty concepts as well as many smaller emerging brands and independents. Mandates have ranged from complete A-Z franchise development to turnaround mandates for individual locations. Personally, I’ve been an uber-beauty junkie since the age of 11.

As a self-taught cosmeceutical–chemist, I also follow the industry through its various organizations, trade newsletters, and magazines. Suffice it to say, I think I am uniquely placed to discuss the “Business of Beauty”.

The beauty industry has grown over the years and there is now a large selection of concepts and formats in all price ranges. There are full retail stores that carry only one brand of product, there are also retail stores that sell a variety of products in the beauty category, with or without some small array of services. Although nail bars are nothing new, the branded franchise concepts are. Additionally there are (almost) purely service-based offerings that offer massages and other treatments like facials or tanning salons. The newest kid on the block is a franchise chain of laser services and treatments. They offer numerous services such as laser hair removal and IPL face treatments, and they are vertically integrated as the product manufacturer.

Like all franchises, franchisees do have to come to the table with a certain skill set to be a successful in this business. This is one sector where experience in the industry is required. There are a lot of rules, especially with respect to hygiene that must be complied with. The franchisor’s training will cover the franchise policies and procedures, but not how to run a business or provide specifics on the beauty industry per se. The majority of the skills needed do not come from franchise training; they are accumulated over time spent in the beauty industry. Prospects must have superb organizational skills and have managed staff. They also need to provide positive leadership and motivation to employees, have completed administrative duties (or are willing to pay to delegate this work), and, most importantly, have customer service and sales skills. This means not being shy about addressing a customer, selling and upselling products and services, and providing each customer with the most amazing experience they have ever had. This creates loyalty. Do this and your clients will reward you with referrals, which are the number ONE best method of building a long term business and they’re fast and free!

The time commitment involved amongst the beauty franchises is more dependent on the location than on the service. The outlets in mall locations will be guided by the mall’s hours and must operate within set parameters. Street front or office building locations allow for more flexibility to operate before/after business hours and on weekends. This does result in a much longer work day and time commitment than a mall unit and is something to consider when buying a franchise. A young family would not likely manage well with this kind of time commitment. Be clear about the time you are willing to invest in the business because there are not only business hours to commit to, but additional hours for administration need to be considered also.

Every business should have more than one source of income and in the beauty industry it is product sales. This is an essential revenue stream needed to supplement income because of its high margin and low cost to sell Retail allows the owner to generate high margin product sales out of a small portion of space in the location. There is an income limitation on services as there are only so many hours in the day. The income limit is maxed out by the number of hours, service providers, and treatment rooms. In order to make the “big” money, products, ancillary items to the services, and accessories must generate a fairly substantial portion of the annual revenues.

Ideally, in a perfect world, the percentage of gross sales from products would be between 50 percent-70 percent of gross sales (of course this is a large generalization).

Getting and Keeping Customers

Beauty customers are of their own ilk. It does not matter who they are outside the “salon” (for sake of ease, includes all forms) because once she arrives at the front door and goes through it, she is a Queen. If ever there were a people’s business, this would be it.

From the minute she enters the salon personalized attention should be paid to her. Here she is going to get the kind of treatment she does not get at home. It’s this “making her feel special and understanding how hard life is and that everyone counts on her and that this is her ‘ME’ time…..” that’s important. She needs to be taken away from the stresses of life for the amount of time she is in the salon. If a salon can create the experience of a one hour getaway or stress-free zone, you will be building a loyal following in no time.

Clients can be ignored at home, so the client is Queen for an hour, and you are her servant. What I coach is that “It’s not about you”. It’s ALL about HER. Use that as the company mantra and see what happens.

Let’s look at 10 ways to generate and “loyalize” beauty clients:

1. Ambiance

You only get one chance to make a first impression so make it a good one. Other than the reception counter, all areas should be open, including the product shelves so that clients can see and touch items for sale. Comfortable seating, relaxing music, and hot/cold beverages are staples that are often ignored. In one spa I visited they would not let me even pour my own glass of water.

2. Attentiveness/Personalization

As soon as a client enters, the person needs to be acknowledged immediately and their appointment confirmed. Once you have a name, it should be used for the rest of their session. It sounds small, but it has a great impact on the overall impression of the personalized service the client has.

3. Cleanliness

I cannot stress this enough. If you have to hire someone to spend the day going around sweeping and wiping, etc., do it. One hundred percent of clients will not return to a place they think is unclean and they will share this information with others, negating any referrals for your business. It has to be immaculate (especially because of the use of certain tools for services that must be disinfected before they can be used again) and the washrooms need to be properly stocked.

4. Products and Accessories

Product and accessory sales are a large part of the overall revenue generated and are high margin. How much is sold in product sales will directly impact your profits and losses as discussed above.

5. Loyalty Programs

Essential for any business not just beauty – it has been proven over and over that loyalty programs WORK! It can be as simple as having a card with boxes on it. Each box can be worth a specified dollar value and once filled up the client can get a free gift, discount, or another reward. There are more sophisticated loyalty programs, but this is really all that is needed to start.

6. Up selling and Packaging

If a client is recommended a face cream by an aesthetician for example, you can try to sell them a complementary product such as an eye cream or face mask. Additionally, you can create your own packages by taking products and bundling them at a discounted price. When a kit is purchased the client gets value and is encouraged to use more products from the line. This is why trial packages and kits are so popular.

7. Local Store Marketing

Franchisees receive local store marketing ideas and templates from the franchisor and their only responsibility is to use it. A franchisor is only responsible for national not local advertising. The franchisee has to draw the clients in and can do so using print (newspaper ads, flyers, coupons), digital (a Facebook page with a contest, interesting content) email marketing, a referral program, and regular monthly specials. The ideas are endless and do not have to cost a lot of money; there are many free options.

8. The “Money is in the List”

If you have not heard of this before, this is the new way to generate revenue in the digital age. Your client list or database is extremely valuable to other companies who share your target market. Since most businesses cannot and do not share/sell their lists, the best way for other companies to reach your clients is by having you send an email on their behalf to YOUR database with a click through URL to their company website. The URL clicks are tracked and you receive fees from the company for each purchase made by leads that came from that URL. This is called “monetizing” your list. You can also do the same thing in reverse with your suppliers or with those whose database is composed of your target clientele.

9. Managing Inventory

As discussed above, improper management can cost thousands of dollars a year and hundreds of thousands over time of a loss of pure profit.

10. Training

Training is a big investment and worth every penny. Employees at all levels must be properly trained in their domains, for example, all sales people and the aestheticians must be trained in all the product lines as should anyone who works reception. Most importantly everyone should have customer service and sales skills. A client may interact with anyone in the salon so these people must be able to provide the personalized customer experience that your salon is known for and to properly address clients with confidence.

Beauty industry opportunities are increasing daily as new concepts pop up across the nation. In fact, it is one of the fastest growing industries in franchising. The keys to success are customer service, managing costs, and product sales. The ability to provide a personalized “Queen for an hour” experience is what will determine if your business will be built by spending time and money on advertising or via fast and free referrals.

In all cases, a properly managed beauty franchise can make for some very pretty financial results.

Lori KarpmanLori Karpman, considered one of Canada’s leading experts on franchising and multi-unit business development models, is also the President/CEO of the multi award winning consulting and legal services firm, Lori Karpman & Company. During her esteemed career, Lori has been a franchisor twice and the Master Franchisee of the Pizza Hut brand for the Province of Quebec. The firm’s clients range from the Fortune 500 brands to the local start ups. Lori is a prolific writer and sought after guest speaker and has been featured on television, YouTube and radio.