I’ve been involved over last 20 years with partnerships and franchising. When Contemporary Salons started to expand, we opened six company-owned salons, but we found this a difficult business model to manage.
As a manager, it takes a tremendous amount of time and energy and sheer determination to succeed. Our salon managers were also working on the salon floor looking after clients and managing the team, which is the model many hairdressing salons use.
Our salons were successful, but I knew they could have been more so if we used a more efficient business model.
Initially, we moved to a system where the salon mangers bought into the business, either a 25% or 50% share, and then retained a split on net profit based on their buy-in arrangement, plus a stylist’s salary. This proved an effective model to use to grow the business and over time the managers gained more experience with the systems and procedures and the brand ethos.
Our journey into franchising started in 1999 when we spent two years getting everything set up and working very closely with the Franchise Development Company and the Franchise Company in Darlington. There was a lot to do to in order to convert to a franchise business.
Firstly, we did a viability study of the seven salons that we had at the time. We wanted to know, if all were franchised, what income would there be. We also needed to decide what services, marketing and branding and training we would offer to our franchisees and at what costs, including head office premises and management team.
We found we needed 10 salons before we could offer all that was needed as a franchisor. We realised we would not get enough income from the existing base unless they were all high turnover salons.
I would also say to anyone considering taking the franchise route, make sure you have your brand names and logos protected by registering them as trademarks so you have ownership of both.
You will also need a very comprehensive operations manual for the salons and head office. This should include everything on how you operate your salon, and all your policies and procedures, plus your management and marketing systems. Also include details of your staff training and recruitment procedures.
Creating a franchise agreement which sets out the terms of the franchise for both the franchisee and the franchisor is also essential. You’ll need to employ the services of a specialist franchise lawyer, who understands how to protect your franchise model as there may be times when you will need to rely on your franchise agreement.
Investment will pay off
For us, the costs of setting up the franchise was around £35,000, so it’s an expensive endeavour, but something this important needs to be well thought out and researched so that you can be confident your franchise model will be successful.
If you make the necessary investment, it will pay off. A lot of salons don’t survive more than five years, but within franchising the success rates are far higher as the franchisor and franchise have a vested interest in the salon succeeding, with the business acumen and systems from the franchise as back-up.
Perhaps most importantly, you need to recruit franchisees that totally believe in the brand. A franchise is a partnership and a franchisee must want the same success and be willing to take on and maintain the ethos of the brand. It can be very damaging to a brand if a franchisee wants to do things differently, straying from your brand ethos. Imagine a McDonalds restaurants serving a different version of the Big-Mac in every location! You need to ensure both the franchisor and franchisee totally respect the brand and the way the business operates.
A support network
Being a franchisor differs from being a business partner in that the franchisee does own their salon. As a franchisor it is your job to use your knowledge, experience and expertise alongside the branding, systems, training, efficiency and savings your group can offer, to help make the franchise salon successful. Franchisees do, however, have to understand that opening a salon is a huge rollercoaster ride, and many can find it very difficult with all that needs to done to get the salon off the ground. But within the franchise model, it’s in everyone interests the business is a huge success.
Financially it’s very important that franchisees make money. At Contemporary Salons we offer a fair package to our salons and our fees are very low against other franchise companies. We also introduce a cap on fees over a certain turnover level.
It’s a model that has certainly worked for us and one we hope will lead to further growth and success for Contemporary Salons.
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