June 25, 2019 2
Suites and suite franchises are promising a whole lot that they can’t deliver.
Suites are twisting a lot of facts and data with one intent … to get leases signed.
Suites use the terms “Revenue,” “Profit” and “Income” to say the same thing. These terms are NOT the same thing. Suites say, “You can keep 100% of the profit,” but they never define “profit.” Profit is what’s left after all expenses are paid. For an independent suite tenant, that’s called “Net Income.” The suites never explain that profit can be negative and that a suite tenant can keep all of that negative profit.
Suites blur the term “Income.” Are they talking “Gross Revenue” or “Net Income”? A claim that “income” went up 40% to 60% is easy to make when that “Income” really means “Gross Revenue” from service and retail sales – not net personal income.
One suite franchise spotlights one hairstylist that said he wasn’t looking to be self-employed, but when his salon owner presented him with a 150-mile radius non-compete, it left him no option. REALLY? A 150-mile non-compete for a stylist is a ridiculous statement. 15-mile? Yes. 150-mile radius? No. It would never hold up in court. It’s another bashing of a very common practice at employee-based salons.
Another suite franchise spotlights a stylist that went right from cosmetology school into a suite. She says, “Last year I made just over $100,000.” My rent is about $12,000 a year.” Wow! Sounds like a no brainer. But, “I made just over $100,000” means Gross Revenue … not Net Income. Factor in all of the other costs of doing business and self-employment taxes … and that $100,000 looks more like Net Income of $30,000 to $40,000 after taxes. Without a following, or one hell of a gift for networking and social media, making a living in a suite is a tough and lonely career path.
The suite companies and franchises are doing everything they can to roll out the red carpet to secure tenants. From custom-designed suite decor, business software and apps … to months of free rent so tenants can take a “vacation” … suites are going after established salons’ employees.
For an independent service provider, signing a multi-year lease is risky when the entire business depends on one pair of hands.
For suite owners and franchises … those multi-year leases are only as good as the ability to pay by the people that sign them. Leasing to a half-booked stylist with little to no business experience is seriously risky.
A prediction on Suites
Many predict that the suites’ promises of gold and “build your own business – not someone else’s” is going to peak and then recede. The signs are already there. Suite stylists are going to see working for a salon as the best career and income security move.
Here’s our challenge to todays Salon/Spa Owners … It’s time to rethink everything about your business. The days of building a salon/spa one column at a time are over. Today, you must grow a company … and a unique brand.
Employee-based salons/spas must become everything booth rental and suites are not. Team service must replace “I/me/mine” service. Career paths must be real and deliverable … not “some day promises.” True employee benefits like paid vacations, paid holidays, company paid advanced education, team bonus plans and more, must fill the benefit void that has existed too long.
Salon/spa compensation must evolve beyond commission, sliding scales, service charges and product-cost deductions … all of which feed independent booth rental and suite thinking and behavior.
It’s time to play a very different and more sophisticated game than the traditional salon/spa model. It’s definitely time to play a better game than the suites are playing. It’s time.
At My Hair Trip, The #1 rated organic salon in Denver we too have had our share of stylists who have had their appointment books filled by us only to try to take our clients and leave to rent suites on their own because of all of these promises the suite industry has made to them. Luckily, because of our world class service and genuine care for our clients typically not many choose to leave and it is unfortunate for the stylists who do leave. We root for our stylists while they are members of our team and we continue to root for them if they leave.Show Comments (2)