COVID19LeadershipOperations

From a Distance: Planning and Profit Margins

With social distancing and other state-by-state mandates for reopening in place or still evolving, one looming question is how and when can multi-location salon, spa and barbershops (typically the gold standard in efficiency and profitability) expect to hit or even reach for the same revenue per-square-foot metrics upon which they have traditionally  built business strategies and success.

During a recent Zoom conversation, leaders from five ISBN members at different stages of reopening talked through this and other reopening-related challenges and opportunities.

Key takeaway? While there are systems, efficiencies and goals that ISBN member businesses can work toward, some previous operational strengths, like planning and forecasting months, quarters, even years ahead, must be adjusted and exchanged for a more nimble mindset.

Still, there are some silver linings, if you know where to look for and act on them. Meet the group and share in what they have discovered, discussed and are anticipating. Participants included:

  • Scott Missad, Gene Juarez Salons and Spas in Seattle, Washington, with 10 locations and state-mandated salon closures still in effect.
  • Rhoda Olsen, Great Clips, with more than 4,400 franchisee locations across North America; about half open at the time of the informal ISBN forum.
  • Debra and Chuck Penzone, PENZONE Salon+Spa, with six locations in the Columbus, Ohio area; state reopened for salons effective May 15, 2020 and PENZONE opened May 17.
  • Emily Brown, V’s Barbershops, with 47 franchise locations across 17 states, about 50% open.
  • Larry and Graham Walt, Design1 Salon Spa, 5 locations in Grand Rapids, Michigan, area. State had not yet set date for salon and spa reopening.

ISBN: Once enhanced salon safety, sanitation and social distance protocols have been established for guests and staff, what are the primary strategies or areas of business you are focusing on to recapture or realign profitability?

SCOTT MISSAD, Gene Juarez Salons and Spas: There are so many variables, so we are planning for every single thing possible. We have mall locations, for instance. What will that look like? Will some malls only be open for 5 hours a day? For now, until the governor can tell us how and when we do get to open, we are planning on 50 percent capacity to accommodate distancing and will use a new shift model for our team and to book appointments.

We will probably not do blow drying at the beginning but will review that closely. We doubt our spas will open anytime soon. In Washington, we are dealing with a tremendous amount of fear from people, given that we were the first hot spot in the country and have been in this situation the longest.

How do we forecast for months ahead? We really can’t. But we still have to do our best to prepare and adapt. Because I do believe the front end of reopening is going to be the best news for all of us. Pent up demand is strong, and we’re seeing it play out in the states and salons that have been able to open.

But clients and competitors have learned new behaviors, too, and we have to respond and know that we are going to be in comparison mode for the next round of appointments and consumer spending.

Like it or not, as much as our guests love us and miss us, they have also learned to live without us. Online retail and hair color sales are up a mile. With our downtime, we’ve had to think about how we will compete moving forward.

Most of all, we are thinking about and what it means to deliver a great in-salon experience despite all of the restrictions.  (Note: Tune in to an ISBN Webinar on June 17 from design expert Joey Coleman on exactly this topic: the Post-COVID Salon Experience.) We have to reinvent how to maximize the experience in new ways to protect business and profit. I’m optimistic our team can do it, but it’s hard to be on point when you’re literally at half of your staff, not blow drying, not having the time or the ability to do the extra touches for which you and your team are known.

EMILY BROWN, V’s Barbershop: I can empathize, as we have a franchisee in Washington, as well as Arizona, Georgia, Texas and more than a dozen other states. Every single state and geographical area in the country is affected differently and reacting differently. Governors haven’t been cohesive, and we find ourselves having to react state by state, market by market. Some of the more aggressive controls make sense and some make zero sense.

In our world, which is predominantly men, but also a lot of moms bringing in their kids, and very influential to our business, we have a 50-50 divide. We have patrons and barbers who are gung-ho, just happy to be back in the shop, and others who are very cautious and concerned.

It’s not going to be “normal” for a long time, so we hesitate to make any predictions about how our numbers are going to change. We are 50% open now, starting in Atlanta. We have a fairly small footprint at 1,200 square feet, so our situation and challenges are different than those with huge locations and different types of services.

We are focusing on managing our turnaround time by having patrons wait outside and utilizing technology. It is a big blessing from a design standpoint that all V’s Barbershops have a sink at every station, so that helps with some of the sanitation protocols. But as standardized as we are, it’s still a different game across the country for our franchisees and our brand. There are cultural shifts and other positives and negatives all of us are dealing with to survive through this phase and keep our brand strong into the next one.

DEBRA PENZONE, PENZONE Salon + Spa:  Ohio is one of the first states to shut down and we made the decision to close March 16, before mandated. We also opened purposefully, taking the first two days that Ohio salons were allowed to be open to focus on our team and get them comfortable and ready. We opened May 17, wearing our PENZONE Strong shirts and masks.

We are also doing a shift model to separate our staff and create distance. We expanded our hours and have 23 more hours per week or 92 more hours per month that we are booking. This first week, we have been solidly booked. We open at 7 a.m. and find that people really love that option.

We are taking advantage and utilizing our patios and outdoor spaces for both our team and our customers. Staff need to take breaks to get outside and breathe after working in their masks. With weather cooperating, we set a timer for a half hour and encourage hair color guests to go for a walk outside while processing.

It’s early to crunch numbers or forecast ahead, but so far our retail and service data is blowing us away. We booked 5,000 customers in one day after we opened our booking lines back up.

Overall, we are getting a positive, confident and safe feeling from guests and our team, and that is translating to a lot of people reaching out and wanting to come work with us. We can also tell that guests are coming to us because of how we have promoted our safety measures and what they are hearing from friends. Client count for new guests is up.

EMILY BROWN: I agree that we are seeing early recruitment opportunities. Before, finding barbers was tough. Now a lot are coming out of the woodwork, especially when they see how focused we are on living our new tagline of “Licensed, Clean and  Pristine.”

We are also encouraging or franchise owners to do the same thing that Debra mentioned, to take a day to have the team come in and practice all the new sanitation techniques, and to to do a test run on each other, family or friends, to figure out things like how to shave behind the ears or navigate around the mask. It’s important for the barbers’ comfort and helps the day go well with patrons.

As far as scheduling, we found some stores wanted to extend service times, others have kept the same hours. It often comes down to who they have behind the chair and how adept they are at speeding up their cutting and getting comfortable with the sanitation steps. It’s a lot of change to navigate.

CHUCK PENZONE: The question of who is coming back to work, who is afraid to come back and who wants to leave their current situation and come work for us all comes back to how we have communicated and managed mindset. When we closed voluntarily, our credibility with our team went through the roof. Our team and our guests feel extremely comfortable and trusted and that is gold for reopening and for future business.

EMILY BROWN:  That dynamic of looking toward trusted brands is so powerful. The Penzone name has been out there for 50 years, it means something. With V’s, we have 20 years of heritage in Arizona, and we are focusing really hard to prioritize and preserve our brand integrity.

Yes, we are seeing immediate upticks in business In the largest percentage of our stores that have opened up, we are seeing holiday-level numbers. But we expect we will fall back into a cycle of cuts, and it remains to be seen the impact COVID will have on the barbershop business over summer and into fall.

That’s why we have to continue to uphold the value of our choices, our protocols and standards. We believe this will have such an impact on our future. It’s time to do the right thing. We are not raising pricing or instituting COVID fees. We all need to sit back and evaluate how this plays out.

LARRY WALT, Design1 SalonSpa: In Michigan, we are still closed. There are rumblings and rumors salons may open May 29th, but I think it won’t happen until June 15 at the earliest. On the positive side, of the 100 stylists we have called, only two are hesitating about returning on day one.

We’ve used the downtime to focus on reinvention, technology and efficiency. We jumped on adding the Tippy app to get rid of cash tips and will have that that set up before we’re open. We also are planning to run shifts and will be open from 7 a.m. to 10 p.m. We are ready to roll with a 1% increase in prices, but that is something we were already instituting on an annual basis. We are working on everything we can to get ready, with Graham, the leadership team and I putting in 60-hour weeks while simultaneously feeling like we are sitting on our hands, wanting to get started. .

SCOTT MISSAD: While the waiting is super frustrating, the truth is it has given us all a great opportunity to make radical change. We are launching a new POS and back end, making a lot of major improvements. We are adding an app for guests to use to check in and check out, and to buy product and have it waiting for them in front desk, ready to go. I’d love to see the day when we get to be deskless. For Gene Juarez, we are talking about 400 employees who are support people.

RHODA OLSEN, Great Clips: Our franchisees are all individuals with different challenges and situations. Some locations are able to only get 42% of staff at reopening, others have 99 percent coming back. With 2,200 locations open, about half, it has been like managing 70 grand openings a day.

As far as forecasting, it seems counter-productive, but we aren’t planning more than 30 days at a time. Two weeks ago, we were only planning two weeks at a time.

One of the metrics we’ve been looking at closely per franchisee location is customer count as a percent of 2019 average. For instance, if they were seeing 500 customers per week in 2019, we do a rolling 7-day comparison, and we look at daily data, too. Overall, for the salons that have opened, Week one looks like 140-150 percent of the base, week two is coming in at about 115 percent over the rolling 7-day average. Then week three goes down to 90 percent and week four looks like another 15-20 percent decrease in customers per week. This shows the damage to the hair cut rotation. We are serving more guests in a short time, then it will take at least 6-8 weeks to get back to where we were.

To cope with the bursts of traffic and to help customers navigate new protocols, Great Clips added a new position. Now, our Chair Traffic Controllers, are stationed outside to help manage traffic both outside and inside the salon.

We have also ramped up recognition, to celebrate all our team members who are doing things right, and we are celebrating and blowing up all the great customer stories, the ones who are so happy to be back. Our stylists are seeing incredible money on tips.

SCOTT MISSAD: On the subject of tips, when we do get to open, Gene Juarez will shift from being historically cash-only for tips to everything going on the credit card.

One of the few silver linings of this crisis is that it gives us an excuse to make monster changes in behaviors that we haven’t been able to address or would have been more disruptive in “normal” times.

In addition to being safer and contact-less, this no-cash policy will save us money. In our organization, we didn’t generate enough cash in the day-to-day business and had to invest $100,000 annually for an armored car service to bring in cash to our 10 locations.

We also believe this will help with retention. For the first time, our staff will see in their paychecks how much money they actually make. They no longer will walk out with cash and blow tip money “that doesn’t really count.”

DEBRA PENZONE: Saving on expenses and resources will be important to rebuilding our profit margins. We see streamlining happening in the hiring process, education and training. With stylists and guests embracing Zoom and other technologies, we really see that we can save. We are also moving towards a mobile corporate office and planning overall to find smart ways to work harder and leaner. We are seriously exploring new work-from-home options, especially for client booking and other non-service roles.

EMILY BROWN: V’s is also exploring moving away from cash habits, such as pre-pay options, logging credit card info on the patron’s file, adding text-to-tip after the service. We are collecting data to see if that raises or lowers tips.

GRAHAM WALT, Design1 SalonSpa: We have all worked hard to have strong brands and successful businesses and by tapping into ISBN and other networks to share ideas, we are doing all we can to protect them. It’s difficult to imagine, but we’ll likely be seeing a lot of small businesses close in the months ahead, and we will probably even see some influx of guests and stylists from salons who didn’t take the same serious precautions or make the hard adjustments.

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