Salon doing poorly-best turnaround strategy?

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salonnewb

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My family owns a small strip mall and one of the tenants is a beauty salon. The tenant has a hard time keeping current on the rent, even though we have been renting it to her for a very low rent (30% below market). She is a long time tenant and I would like to have her stay, but it really doesn't make financial sense (I doubt she will be able to pay a rate closer to market).

Her salon specializes in African American hair. This is fine, however the building is located in a community that is only 2% African American, with the remainder being hispanic. The salon occupies a 2,000 square foot space and a family-oriented salon (e.g. Supercuts), would have great potential (the adjacent area in back is all residential). But the demographics just don't support a specialized AA salon like her's. I've suggested to her that repositioning the salon as a general family salon that caters to customers of all races might improve business significantly, but she seemed resistant to the idea, and I'm not sure it work work anyway. It's her business however and all I care about is whether she can pay the rent.

Options I'm considering:

- Asking her to leave while offering to buy her business assets (salon equipment, fixtures, etc.), then reopening the (2,000 sq ft) salon under a new brand with management that I hire, or putting the business on the market after a facelift. I'm thinking that this would probably be the best option.

- Proposing that she downsize her space to 1,000 sq ft and opening a new general salon in the other 1,000 sq ft, under new management that I hire. Probably not ideal, as her space might still be underutilized.

- Asking her to leave and starting a Supercuts, Fantastic Sams, etc. in the space. Also probably not ideal, due to franchise fees and the customer base would be surrounding residents, with growth coming from word of mouth rather than drive-by business, which diminishes the value of the franchise name.

Questions:

Would 1,000 sq ft be large enough for a salon?

How difficult would it be to find a good, hard working and above all, trustworthy manager to run the new salon?

How much equity would I need to offer to interest qualified candidates?

Considering that this is mostly a cash business, is it even possible to run a salon effectively without the owner or his/her family members present?

I have my own career and would not be able to spend a lot of time there, after setting up the business, nor would any immediate family members.

What are the best ways to estimate number of customers per day for a proposed salon? Just sitting in front of nearby salons with a counter for a week?

Any good sources of average operating expenses, equipment/buildout costs for a salon and other relevant statistics/info?

Thanks for reading and sorry if I'm asking any stupid questions. I know very little about this business right now (I'm an accountant), but would like to learn.
 
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That is a lot of information you're asking for. Can you give them notice? What sort of terms are on their lease?

One of the biggest problems in this industry is finding excellent staff. I think that you have a slightly simplistic view of running a salon I'm afraid. Do you have a shed load of money? To establish a hairdressing business can take a long time. You would need to find and pay for a good manager who you pay well, week in week out whether they're busy or not. All those people who aren't coming to your current hair dresser are going somewhere. What will you be doing differently to make them come to you?

I'm afraid I often think outsiders look and think "I can do that" but the reality of running a hair - or in my case beauty salon is very different.

You are an accountant and I am a beauty therapist. The advantage of knowing my trade, whether I work in the business or just run it, is that I know the difference between a good treatment and a poor one. I have a strong vision of how I want my business to be and built up my clientele over many long years.

I'm not saying it's not possible but I think it may cost you a hell of a lot more than the loss of the rent in the long run.

Vic x



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Thanks for responding. I'm definitely aware that starting or taking over a salon business should only be undertaken by someone with years of experience in the industry. Sorry if I sounded arrogant, as if anyone could do it.

If I were involved, it would only be on the financial side of things - providing the facilities, accounting and reservation systems, assisting in marketing, etc. We would need a great manager, perhaps a stylist who's good at management and wanting to break out on her/his own. If we found the right person, we would make them a part owner. But most of the people who are qualified would probably prefer to just start something on their own, or would eventually leave to start their own salon.

Maybe setting it up as an "independent contractor" facility, where individual stylists could rent a station by the week or month, would work.
 
I don't thinks there's any reason why you wouldn't be able to find and hold onto an excellent salon manager, but it might take time to find the right person.

Not everyone who has the requisite skills and experience to run a successful salon actually wants to be a salon owner with the full financial risks that that entails. Some people prefer the security of a salaried position if it's reasonably generous and includes bonuses based on turnover.

I think you need to have a frank discussion with the current lessee and see where you can go from there.
 
I set up my little salon with hardly any budget but i already had a strong client base. I managed it as my partner is a builder and my son a painter and decorator. My nephew is also a trainee sign writer and works for my shop landlord. Good luck for the future :)
 
If you just need the building bringing in a steady income just rent it for a fixed price to a hairdresser and leave them to it and collect the money each month and let them take care of the bills, if your looking to have a profitable business run by other people then your going to have to do a lot of research, and invest a lot more money than you may think, you'd need to pay for the renovation, then staff out of your own pocket untill it's established enough to support the bills and wages. As you are probably aware a LOT of salon owners don't even take a wage for a year or so when they are a one man band owning a salon, so to cover 2 wages minimum (stylist & manager?? I guess?) and all running costs is a big ask. (And that's if profit comes along). I'm not saying it can't be done but it's going to be a heavy financial burden on you, and there's no guarantee that the staff will be right and be able to grow your business for you, so you could pay out for a long time before you realise there are issues within the business that you may not understand because you have no experience in the industry to be able to see it & no time to spend in the business learning about it :/

I'll be honest I'm a hairdresser. I wouldn't open a business of accounting just because I have a spare shop available, i know nothing about accounting so would be completly reliant on the new manager building me a business from scratch. I wouldn't have a clue if they were working their socks off or not? I wouldn't know how to grow the business either or know what's right and wrong with what management can and can't do.

I'd rent the shop to an accountant tho and happily pick up my cheque each month without any risk :)
 
I guess renting it out vs investing in the business depends on the income potential. This would be more of a "mom takes the 3 kids in for their buzz cut every 6 weeks" kind of salon, rather than an upscale, trendy beauty salon that requires staffing with highly skilled stylists, colorists, etc. with years of experience and a large client lists. So margins would likely be low, with higher customer volume. The main advantage of the location is that it fronts a dense residential area with lots of families and it looks like most of the households have multiple kids. There's also an elementary school a block away. It would be one of the only places to get a cut within walking distance for much of the neighborhood.
 
Seeing as you've put thought into those things then you could easily do a business plan from those statements, please don't think tho that a stylist in a high end salon is any less skilled than the one in the housing estate salon..... That's not going to bode well with any managers or staff u hire

The only difference between a high end and low end salon is the amount of money chucked at it and the attitude of the owners :) we all do the same thing for our education
 
Honestly i think your flogging a dead horse. Im gonna be blunt and direct. You are wasting your time. Unfortunately you have no idea of a salon environment and want a quick turnaround. I think your research should support your leaseholder, rather than sweep it underneath the carpet! Watch some tabitha and you might help your tenant get some inspiration for a unique proposal rather than being a bit underhand and sneaky. Rent and valuations do change annually but i can't help but feel this is like the barbarshop films!!! Meh. sorry if my responses are a bit sarcastic but id hate for you to be living in some dreamland that lady opposite in the village strolls in just for a fiver haircut for her three kids, that you've marketed in your free spare time coz it looks adequate. Watch some tabitha then come back to me. Xoxo
 
That's definitely true (I think you meant 'more' not less). I didn't mean to imply there was any difference in abilities. In my experience, the fanciness of a salon or prices charged have no correlation at all to the skill of the stylists.

Seeing as you've put thought into those things then you could easily do a business plan from those statements, please don't think tho that a stylist in a high end salon is any less skilled than the one in the housing estate salon.....
 
I loved that show! When it was on, I actually did suggest to my tenant that she check it out. She sure could've used Tabatha's help.

Watch some tabitha and you might help your tenant get some inspiration
 
Hey, thanks to everyone who posted. I've realized that I'm not the right person to start or run a salon. Not only for lack of time, but also differing skill sets. Kudos to all of you who can do it successfully.

I will try to work with my tenant to improve her business. I've previously offered to help her with marketing (social media campaigns, a few local ads, etc.). If she just found a way to increase her business by 20%, she'd be fine. This seems very do-able, but it's possible that her business has simply reached its potential at this location due to the demographics.
 
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Part of the problem is knowing your market. There is no point promoting her business locally if the local clientele wouldn't be her clientele.

She needs to be the 'go to' salon for African American hair who can also cut every type of hair but African American is their specialism.

People will travel, I have no doubt, but it has to be worth travelling to. Run a critical eye over the premises. We can often overlook things because we see them day in, day out, but if you take a step back and take off the rose coloured glasses, is it somewhere you'd go, regardless of hair type.

I wish you the very best of luck with helping. You sound really kind and I hope there is good karma waiting for you. Imagine if you help her and her business picks up - not only do you get the rent on time, but a real feel good factor thrown in x

Sent from my GT-I9505 using SalonGeek mobile app
 
Good advice and this is what I've been telling her - it's often hard for black women to find places that do the treatments they want and they'll drive a good distance to patronize one. Spreading the word via social media is the key to improving her business (yeah, local ads would be a waste). I think she already has a good rep locally. Getting positive reviews on yelp, doing incentives on groupon and amazon local, setup a FB page, maybe becoming active on beauty forums, etc. Problem is she's not very web savvy. I can help a bit, but she'll need to learn the ropes and continue herself.

The majority of small businesses fail and oftentimes it's just a few changes that can turn things around.
 

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