Expanding Your Salon Empire: How to know when you're ready for second location & beyond.

So if you are interested in that topic , stick around . We've got some amazing information for you today .

So we really want to dive in is why are some businesses able to duplicate and do a second location and other businesses just don't quite have that right foundation in the first location to duplicate and succeed with the second one ?

So that stands for capacity , productivity and your retention rate , and those are going to be some of the key components to a healthy salon company . And when we talk about CPR inside of the PhD program , we really are looking at it like this is filtering through your heart . This is the heartbeats of your salon company .

Of course , you're going to have some values and stuff that tie in with that as well , but what did those elements look like ? And so the first one I want to talk to you today about is capacity . And so how do we measure capacity ? You know , I think there are several different ways .

If you want a free resource , you can hop onto our website , the phdprogramcom , and get a CPR report for your business specifically to see what your CPR is like . But when we're talking about capacity today , you know we really want to look into how many . You know if you have a salon , how many chairs do you have available , how many treatment rooms , what ?

What is that number ? And then we want to take that and think about how many service providers do you have working at each station . Are you split shifting ? What are your hours , that you have available for sale for the week and that you're open , you know , because some people , you know , might think , gosh , we're really busy .

But if you're only open , you know , 52 hours a week , you have a lot of opportunity to expand your capacity , which in turn can expand , you know , your stylist growth and your , your profitability .

There's all different kinds of things to think about when we're thinking about our capacity that really we need to have dialed in and make sure that we are at that 85% . You know we'll start looking around you know 70 to 75% to see , you know what could be next for our business .

But once you hit that 85% , that's when you know , okay , we are ready , we are at that sweet spot .

That would be a new one for our industry . So you really got to . I love that . You said that lens , because you really got to look at . Do I have every hour utilized possible , because I feel like that's sometimes where , as owners , we can get into trouble .

We see a really new , bright , shiny building that's offering us a great incentive to move to , and our foundation is just not strong enough in that first location and so we're going to actually create more chaos if we uproot or not , if we uproot but if we open a second location in that big shiny object that we're seeing .

And so , gosh , we used to joke around on Saturdays because that seemed like the day that was the most popular for people to bring in friends and family . We're like we have no room for anyone's friends or family if they come into this 1200 square foot space .

We had a couple of treatment rooms as well , and so really just paying attention to that is key , you know . And then that next element really dives into the productivity , because if you have all of these service providers , you know , and they aren't at the max productivity , you know , because technically we're selling time inside of our business .

You want to make sure that they're selling . We're selling all the hours that we have available . So you really want that productivity to be between that 80 to 85% , because if your stylus are only 50% productive and you are looking to , you know , duplicate and open up a second location or purchase an existing business .

You know that really could kind of dilute that number even more potentially , if you haven't created that demand for time , if people don't know hey , this business is so amazing , I'm going to go there and I know they're hard to get into because they're 85% productive . Of course the consumer wouldn't know that but they would say gosh , you're harder to get into .

You know , because you are at that rate . You know you really want to focus on that and really be elevating those stylists who are below that mark so that they can get to that place as well .

So you want to really make sure that you're measuring , like when a guest , a new guest , returns within a three month period , because to me there's only 12 months in a year , so that means they're coming four times a year . We technically want to see someone four times a year at least . So what is that ? New guest retention ?

And I like to strive and our industry average is runs at like 25% , but I like to strive at like 35% and above , even if I'm going to be looking at a second location because what that tells me as an owner is our hospitality is where it needs to be , our guest experience is where it needs to be , and I'm going to be able to duplicate that in a second

location . So I think that's super important and you know , numbers tell you a beautiful story and that story will tell you everything you need to know about where the areas of improvement in the guest experience .

Maybe our team needs more support on haircutting , or maybe they need more support on consultations or more support on , you know , facials , or whatever it may be is like we just really got to look at that retention number .

So do you have an operational team that's helping you know to run the salon , the daily operations ? Because having that management team is really key to be able to scale and move to another location , take on a second location maybe it's your third , whatever this could be really paying attention to that operational team , you know .

Do you have housed your inventory systems ? How are all of the systems inside of your salon working ? And is that operational team really connecting with your team and making sure that the daily needs of the company are getting met ?

And that's the people that you want to make sure are on our , on this operational team .

I love that and you know , once you have that amazing Operational team that is looking , you know , to move the company forward and has , you know it's a part of that bigger vision the company you want to make sure that you have all of your systems Documented and so you want them to be clear systems and and I'm not talking about broken systems I know we all

have one or two , maybe you have a lot more than one or two that could use a little revamping or upgrading here and there , but really having those strong , documented systems that can be duplicated into a new location , man , that is key to to really having success in that next spot .

Promise is what we call it at the PhD program , or your hospitality Promise , whatever it may be . For you it's like going to Chick-fil-A . You know they have that branded language . You've got to make sure that that branded language can transfer .

And then everybody is Consistent in playing that game of using the branded language that would be able to transfer to a second location , because with Chick-fil-A , doesn't matter if you go to Chick-fil-A in North Carolina or Chick-fil-A in California , I think they have them there . You know it's gonna be my pleasure .

So you got to have something that can be duplicated at any place that you go to .

Another element to making sure that your operation is in that key spot to be ready Is really looking at your vendor relationships , making sure that you have those strong relationships with your suppliers so that they can help you to support that next location .

You know , because you will be doubling all of your inventory and so your needs will be expanding and growing .

You'll be , you know , potentially supporting double the team Pretty quickly , and so you want to make sure that you have a key partner that can can really be enrolled in your vision for your future , that is willing and able and excited to help you in that .

Starbucks does this really well . It's cannibalization study and what they take into consideration is they're gonna calculate , like they would calculate , whether a new Starbucks is gonna take away Sales from an existing Starbucks .

So you would do the same thing in the salon , like if you're gonna put a salon one mile down the road from your current salon , more than likely not always , but more than likely it's gonna it's gonna take away sales from your existing salon .

So you would have to take that into account and to factor to say , okay , like Do a lot of market research , like where , if we set up shop , could really serve this community in a big way . That's not being served right now . Mm-hmm .

You know , I Burger King is probably not as popular as it was , you know , years ago , but one of Burger King's strategies was to look to see where McDonald's was at and then they would just get as close to McDonald's as possible because they knew that McDonald's was spending all the money on traffic Studies and knew what was going on inside of the community .

And so I think having a key partner in some sort of a real estate Agent like looking for that commercial real estate agent that can really give you , you know , just a great idea of what the market conditions are , as well as key , you know , because , gosh , you know you may think , oh , this side of town .

You know , maybe in your town it's the east side , maybe it's the west side whatever is growing in in popularity . But when you look at the , the Market studies of the area , you look at the traffic studies , you might be surprised to learn about an area that you didn't know about that .

Maybe the average household incomes are higher or there's a higher population Per square mile . Whatever that might be , having that key partner In a real estate agent that is dedicated specifically to commercial spaces is key to to really fully understanding you know what that Market condition is for you .

So it'll tell you right away by count , when a traffic study has been done , how many cars are going by a day , how many cars are going in and out of an area , and to me that paints a picture of hey , am I gonna be able to pull from this traffic to create another successful salon or spa space ?

I think that there is a salon on every corner , probably inside of every town , so we're not saying , is there a salon that exists there , but is there a luxury beauty business ?

And is your goal promise so exceptional that you know that the affluent market inside of that particular city or zip code or surrounding area is looking for services to be provided by exceptional service providers

? And knowing , kind of , what that landscape looks like really is key to knowing that that's , hey , a great market that you could consider . For sure I love that .

And I know in our industry it's talked about a lot as shareholders or , you know , franchising some . So let's dive into , like what are the opportunities and possibilities when it comes to either acquiring a new location or starting brand new ?

You know , business models that we see in our industry are either a shareholder or that franchise model and or , you know , just having a sole owner , of course , as well . But if you're considering adding some shareholders or franchising , you know let's talk about what are some of the key things that we wanna look for .

You know , I think , when people talk about or think about adding on a shareholder , just really getting clear on what that means to each person involved .

You know , cause I think sometimes I've , you know , coached we've coached several salon owners over the years where I think the original salon owner thinks that they are gonna get someone who is super excited and ready to take on 50% of everything and do all these things or whatever the percentage could be , and sometimes the shareholder purchasing in thinks that now

they get a kickback and go on vacation and you know , that's , I know , right . Wouldn't that be amazing ? Just hey , let me buy in and kick back and go on vacation . You know , and really , truly , you just wanna make sure . Is this from a servant leader spotlight or is this based on ego ?

You know , cause I think a lot of people might say they want to be a salon owner but then when it actually gets down to it , like hey , you know , if something goes haywire , we're both on the line for this . You know , this isn't just one person . You know COVID happened and none of us saw that happening .

And as a salon owner , you had to make a lot of moves during that stage , no matter what size of game you were playing inside of the salon business at the time . You know there was some financial repercussions and , just you know , some different things that you had to look at to support your team and all of this .

So you really wanna make sure that somebody is there you know to serve , and so how do you uncover that ? You know , I think some of the ways that you can look at that are you know , is that person coming to you saying I wanna own the salon , or is or a salon , or whatever that might be ? Or are they coming and saying how can I help the company grow ?

You know how can I help each person on the team grow ? They are noticing things like when people aren't showing up and they're helping enroll them and upgrade different areas of their life .

You know , they really are enrolled in that bigger vision for the company and they care about it as much as you do , and that would be one of the ways that you could look at to see . You know , is somebody ready to become a shareholder ?

They have a beautiful business model when it comes to Having as many stores as they do . So like wow , I think about sometimes , like how can we make that possible for our salon world ? And you know , if you've watched the movie the founder , that's the McDonald's movie and there's not a movie about Chick-fil-A yet that I know of .

But you know the McDonald's movie the founder is they actually are their biggest , their biggest assets are actually the real estate . So they will purchase the real estate and then franchise out the actual business side of it where they still on the real estate .

So I just like to look at all verticals and think about all the possibilities and what's going to create a win-win for your company and also for you in the long run .

But their values are one of the most important things and having their , you know , they , the people don't actually own the spot , that they are the operational leader and they are just that , the operate . How do they ? How do they word that ? It's like the managing partner . The operational managing partner , I think , is maybe how they worded .

I could be off a little bit , but basically what they're saying is this is an operational position , you know . And McDonald's you can be an owner and not be in the operational position , you know . But Chick-fil-A is saying , hey , you know , we , their profitability is quite a bit higher .

They're , you know , they've got some if you Compare them inside of the market . They've , they've got some advantage with some profitability and stuff . And and they're saying , hey , the , the reason why we have this is because our key partners Are operating the business and they care about moving it forward .

And so , really , you know , when you are thinking about franchising of you know if that's on your plate , you know , think about what it is that you're trying to create . You know , is it just to ?

Hey , you want you know because sometimes that can come from a place of ego to like , I want you know 50 of my stores across the US and and you don't really care what they look like or what they do or how they're doing it , or you could still want to have 50 stores across the US , but but you want them to have those key values , you want them to have

great CPR , you want to know that when someone walks inside of that salon or spa company , that they are going to have an experience .

It's so exceptional , they leave feeling beautiful inside and out , and so really it just comes down to weighing what it is that you are trying to create , what's your personal mission , what's your vision for the future , and then who are some of those key partners that share the same values and vision that really can help make it come alive ? Yes , I love that .

Then , when you've really explored those three areas of your business , then you start to look at that operational readiness you know is do you have that key operational team ? Do you have documented systems ? Have you cleaned up those broken systems and reimagined them ? What are your vendor relationships like ?

And then when you get into those market conditions , that's when you kind of have that like Jen called it , the cannibalization study , tongue twister today , like Starbucks , does you know , have you checked out that competitive landscape ? Do you have that key partner as far as a commercial real estate goes ? You know , and then , how do you ?

What do you want that model to look like ? Are you ? Are you , is it just going to be you ? Are you looking to bring on shareholders ? Do you want to create a franchise ? You know , and then also deciding , hey , do you want to develop this yourself ? Do you want to own the real estate ?

Are you trying to acquire an existing business and revamp and revamp their structure ? Those are some key things to look at when you are considering a second location .

You've been offered to purchase locations before and you know you always want to really do a deep dive , a really deep analysis of what's happening in those locations and really take the emotion out of it and see if that location that you would be purchasing has a solid foundation as well , because if it doesn't , you're going to it's .

It can be a lot of extra chaos or extra confusion for you , and so you just want to make sure that you do your research when it comes to looking at purchasing other locations , and if the salon owner or spot owner is very productive behind the chair , you want to make sure that you truly see the numbers that they do as well , because that in itself will

paint you a picture of is this company really profitable or not ?

But then also , when you're looking at somebody else's business , just really evaluating it from the place of , okay , what is the potential for the future ?

You know , I think one of the the key things that most real estate brokers , or your accountant or whoever you would look to for that business valuation , look at is just the EBI DTA , which is your earnings before interest , taxes and depreciation .

And when you get that number calculated , then at that point you know usually a business valuation is between two and three times what that number is . You know , of course you've got some , some , you know , equipment and different things like that , some retail inventory , whatever that could be .

That also goes in there as well , and and so just that can really give you an idea of what that business valuation is . And , like Jen said , taking out some of those people like if the existing owner is the one that is the producer behind the chair , knowing hey , that's not going to be there anymore .

So let's really see what is this business actually worth ? Because I think when you own it , you think it's worth a million bazillion dollars and when you're the one who is trying to look at purchasing it , you really do have to remove that emotion , like Jen said , and see does this make sense ?

And and take away that emotion , take away the ego , all of that good stuff , and just really see can I create something amazing out of this ? Can we duplicate our existing systems and root structure into this new space ? And then what's the sale of this going to be ? Is this a stock sale ? Is this an asset purchase ?

What is it exactly that you're purchasing out of the deal ? Because sometimes , hey , the real estate might make it worth it , but the business isn't where it's at . And if you've got that strong root system and operational readiness for the second location , it could be a great fit .

Those are some good commercial resources to look at just to see , to see what's out there and just to imagine what could be if , if all your assets are lining up and in the and going in the right direction .

I always like to take at least once a month just check those out , because it gives you valuable information about what's happening outside around you and that is a great call , Jen .

We are pumped to be bringing you team meetings reimagined . So if you have ever not wanted to go to your own team meeting , this is going to be a you're not going to want to miss this . Check it out next week and see all the fun hot tips and team meetings reimagined that we have in store Love .