Silver Linings Walkouts

In early 2011, Jon Snetman, co-owner of Jon Alan Salon in Nashville, Tennessee, was in growth mode. She and her partner, husband Alan Snetman, had opened a third location a couple of years earlier, right around the time the economy was bottoming out. Fortunately, the new salon thrived in a hot area of town, boosting the other two locations, which were experiencing flat sales due to the economy.

So when more than a dozen stylists, who represented close to a million dollars in revenue, began to leave in February 2011. Snetman was blindsided. One group left in early February, the next in late May, leaving a huge gap in the business.

“The majority were 10- to 15-year employees,” says Snetman. “And obviously, they’d built long-term relationships with clients.”

The stylists left to branch out on their own with Sola Salon Studios, a new concept in chair/suite rental in select states (see page 33), leaving Snetman to pick up the pieces.

“The best wisdom that was shared with me was, ‘The reality is, everyone leaves,’” says Snetman. “Once I accepted that, I was able to deal with it better.”

“When people initially come to the salon, they do everything you tell them, follow the system and become successful,” she adds. But she found after a period of time, some of the same stylists who were excited to learn new things became complacent and unwilling to evolve.

Bryan Nunes, owner of Blo in Raleigh, North Carolina, also found that a lack of commitment to the salon’s culture led some of his stylists straight out of the salon. He lost six people in about four months—five to chair/suite rental, and one who was terminated. Five out of the six were successful behind the chair and four of them started their careers at Blo.

“One characteristic they all shared was that their attitudes went south in the business.” says Nunes “With the exception of one they had all always struggled with their attitudes.”

Although these stylists succeeded at Blo, it was a constant battle for Nunes to keep their egos in check. He even warned them early on in their careers that the more successful they became, the harder it would be for them to reign in a bad attitude.

The six employees represented about a half million in revenue in gross sales, but ultimately their leaving has allowed Nunes to move forward and continue to grow new stylists who are on board and excited about the Blo culture.

“A lot of people came to me after they left and said they were really excited about the new team and moving forward,” he adds.

For Arsalan Hafezi, co-owner (with wife Arezo) of live Modern Salon and Spa locations in the Charlotte, North Carolina, area, the economy played a major role in the walkout he experienced. Over a span of four years, he lost more than 40 employees who represented almost $4 million in revenue.

“Many local businesses disappeared during a difficult economic time,” he says. Unfortunately, so did many of his stylists. Like Snetman and Nunes, very few of his stylists went to other independent salons; they went to rental concepts or opened their own businesses instead.

 Refocusing Priorities

Keeping a salon profitable, let alone thriving and growing, can be a challenge in the best of times. When faced with a disastrous economy and employees who represent millions of dollars walking out the door, it can feel impossible.

But according to these three owners—it’s not impossible—it’s just another obstacle to overcome, and the process itself can better your business.

Hafezi started to lose clients when the local banking industry laid off masses of employees. His stylists reported their clients couldn’t afford Modern Salon and Spa anymore or were moving away from the area.

“In order to keep up with the cost of doing business, we had to cut some of our own employee benefits.” says Hafezi. “I used to pay for everyone’s health insurance, but I couldn’t afford that anymore. I figured it was better to have a job than insurance.”

The infrastructure at Modern Salon and Spa had a lot of extra costs, so when the recession happened, Hafezi decided this was the fastest way to stop the bleeding.

When his stylists began leaving, too, and he had to make another decision. After a few years hiatus from being behind the chair himself, Hafezi returned to cutting hair.

“In 2010 I went to one of our locations to do a mass training program,” he says. “I realized how me being in the salon makes a big impact—the stylists like me to be there.”

 Silver Linings Walkouts

 With a strong management team taking care of the business end of things, Hafezi was able to go back behind the chair and reconnect with his staff. Now he’s in the salon four days a week, splitting his time between the five locations.

Snetman also found herself back behind the chair to support her business during tough times. After five years away due to a shoulder problem, she stepped back into the day-to-day action from March 2011 to March 2012.

“Our business soared when I gave up my clients to focus on it,” says Snetman of her original decision to leave the floor. “But I was the most experienced person on staff after the others left, so I went back.”

Working with two or three assistants at a time, she was able to train and develop them, which ended up being the best result she could ask for.

“I still haven’t found an educator who can instill what I can,” she says “You get a strong sense of what’s really going on in your business when you go on the salon floor.”

 Talent Development

Nunes, who was already working regularly on clients, focused on what he always had: growing people. “The foundation of our business is growing people, and it’s letting clients know we’re doing it,” he says.

Nunes has found his clients aren’t getting upset when they learn their stylist has left Blo because they are attached to the stylist. It’s the unpredictability of the situation that sends his busy clients over the edge.

“When the control is taken from the client she is going to react,” says Nunes. “If you don’t react but just empathize, she can give you a chance.” And when the opportunity is there, Nunes is ready with another stylist eager to take her on as a client.

“We always have new, eager people in the pipeline,” he says.

And fear, says Nunes, is not an option when it comes to his long-time stylists leaving.

“I don’t thank the stylists who stay with me,” he says. Instead, he steadily continues to build his reputation as the salon that grows talent and is always ready with an eager new stylist.

Because Blo has such an outstanding reputation, local beauty schools send their best to Nunes on a regular basis.

“There are only three salons that get the local cosmetology students and we’re one of them,” he says. “I’m not afraid of staffers leaving—it’s going to happen. But the way to fix the problem is by staying committed to growing hairdressers.”

Hafezi also focuses heavily on new talent and growth at Modern Salon and Spa, and part of his cost-cutting was to make his program more efficient.

“I shortened our training program from two years to eight months, but made sure the quality stayed the same,” he says. “We have trained 30 stylists in the last 12 months and gained 80 percent of the staff we lost in one year.”

But it’s not exactly tit for tat. The newly trained stylists are at a junior level, which means they charge less.

“It takes time for them to get to the senior level,” says Hafezi. “However, some of our senior stylists who are more expensive aren’t as busy as the juniors.”

For Snetman, the education she set in place was actually the cause of losing some of her stylists. The year before her employees left, she had observed a lot of chemical work being done improperly.

“I’m sort of a nut about healthy, shiny, beautiful hair,” she says. “I had a specific protocol about handling chemical services, and tried for a year to get everyone on board by educating and encouraging.”

But after getting nowhere with some of her staff, she was forced to give an ultimatum. She told employees, “This is how we do it at Jon Alan. If you don’t want to do it our way, you probably shouldn’t be here.” As a result, she saw profitable stylists leave her business.

“It was hard, because as a business owner, I’m going to conferences and learning to evolve, and then I go back to the salon and encounter resistance.” But Snetman also feels pragmatic about what happened. “I think they just reached a point where they wanted control of their lives,” she says. “They get tired of someone telling them they have to come to a class or wear black. And to some degree, some of them don’t need that control.” After her walkout, Snetman began focusing on goals and benchmarks, and started having video chats with all three locations every morning where she emphasized what needed to be done to keep numbers up.

“Sometimes a regroup and refocus is good,” she says. “We realized we had compromised a lot. I would classify the group who left as ego stylists, and we pride ourselves on not being an ego salon.”

By the end of 2011, Snetman was only down $14,000 of the $1 million that had been lost to the walkout.

 Client Control

When it comes to a walkout, the math is simple. Lost stylists plus lost clients equal lost revenue.

Controlling the client list so stylists cannot easily access it when they leave the salon has never been easy. Anytime a stylist goes elsewhere, clients find her one way or another. But now, in the age of social media, it’s impossible to control. Stylists communicate directly with their clients via Facebook on a regular basis, which has its benefits. But in a walkout situation, it can be disastrous.

Hafezi’s strategy for retaining clients was to focus on the experience they had at Modern Salon and Spa, including technical work, customer service, etc. The salon put a renewed focus on overall experience rather than just a cut or color.

“Add-on services like make-up touch-ups and hand massages were complimentary, and we sent thank-you cards and follow-up cards,” says Hafezi. “We went back to basics, and about 30 percent of clients who left came back because they liked the quality of our work and the customer service after experiencing another salon.” To attract new clients, the marketing department at Modern Salon and Spa printed cards for a referral program (also for existing clients), and the salon did events with local businesses where they invited people in to receive mini services. Working with local charities and doing fashion shows also went a long way to reaching out to potential new clients.

Hafezi also tried Living Social, a discount program similar to Groupon, with mixed results.

 The Chair/Suite Rental  Phenomenon

 AS THE SALON SUITE rental operations are popping up in towns across the country, independent salon owners are shocked when a percentage of their staff migrates to what they perceive is a more lucrative lifestyle SALON TODAY checked in with Cyrus Bulsara, president of Professional Consultants and Resources, a leading salon industry strategic consultants and data source, to find out more about this trend.

“Chair/suite rentals now constitute around 15% to 37% of all U S salons,” says Bulsara “They are offering a pleasant, individualized ambiance at competitive prices, plus personalized, one-on-one services that draw and retain clients.”

 Some facts:

• Chair/suite rentals are defined as places where individual stylists rent chairs/suite space from another individual, partners or a company at a fixed cost for use of space, utilities and services within a salon of any size. Joint profit-sharing models also exist.
• In 2012, the total number of licensed salon in the U.S. with hair care as a primary focus was estimated at approximately 175,000. The number of salons is 3% higher than reported in 2011, which is good news for the salon industry Growth had temporarily slowed down, due to tight credit during the 2008-2004 recessions, but has improved strongly, adding completely new genres like Blow-bars and Dry-bars, as the economy improves.
• Chair/suite rentals area burgeoning trend in the western half of the U.S. Nearly 47,000 to 52,000 salons and/or single operators are part of this huge growth phenomenon Chair/ suite rentals salons are omnipresent in the Midwest, West, Northwest, South, Southwest, and Southeast.
• It is estimated that now nearly 37% of all salons in the U.S. are operating some form of chair/suite rentals. They are the fastest-growing salon type in the U.S. These are either under single/joint ownership, entrepreneurial and various profit-sharing models These new location are luxurious with 20-40 operators that offer clients a “one-stop-shop” mix of hail, skin, nail, body and cosmetic services.

 Silver Linings Walkouts

 “Although it created energy in the salon, we realized the people who were coming just weren’t our clientele,” he says. And with less than 10 percent retained and a big dip in employee revenue for those clients, he hasn’t used it again.

The most important thing Hafezi did to revitalize his business was to put the spotlight back on his own employees and their education. “Every quarter they go into an evaluation and are coached on what they have and have not done. If retention is bad, we talk about it. They’re also taught to upsell services and have big incentives to pre-book,” he says.

The front desk at each Modern Salon and Spa location has also been trained in upselling, and an inhouse marketing person sends out e-mail blasts for spa services to fill in any gaps in the schedule.

“We also text clients for confirmation and follow-up, which has led to a better experience,” says Hafezi.

At Blo, a bold, non-traditional plan allowed Nunes to be aggressive in retaining his clients. Simply, if a client’s stylist leaves the salon, Blo offers a free service until that client finds the right hairdresser to suit her.

“I felt if we were that brazen to offer this to clients, they would feel like they should find someone new and not just take advantage of the offer,” says Nunes.

It was a big gamble, but it worked. Nunes says he can count the number of clients who actually took advantage of it on one hand. Part of the plan’s success was due to the coaching and training Nunes did with stylists and the front desk.

“When a client is finished and you ask them if they are happy with their service, there is some pressure to say yes,” he says. “If they are going to say no, they have to say it right away and give us the opportunity to make it right.”

Clients who aren’t happy don’t pay and book an appointment with a different stylist to see if the next person will be a better fit.

But what about the stylists who give these services?

“The stylist doesn’t get paid—it’s like they are giving away a service,” says Nunes. However, Blo hairdressers recognize the opportunity Nunes is giving them—a chance to build a relationship with a new client.

This focus on relationships extends to giving away add-on services to expose clients to different areas of the salon, like waxing and make-up touch-ups, and loyalty programs.

“We are into protecting relationships,” says Nunes. “For example, we do retail specials and some we don’t make money on. We’d rather do it that way because it keeps our clients in the spending habit.” As for bringing new clients in, this is an area where Blo excels. In fact, Nunes has a difficult time keeping enough staff to handle all the new clients (about 180 per month) the salon sees.

“We get our name out there,” says Nunes of his popularity in the community between philanthropic events, local press and advertising, the Raleigh community knows Blo’s reputation as one of the best.

Like Hafezi and Nunes, Snetman focused hard on her staff and growing new talent in order to retain her clientele.

“In the beginning, we knew the relationship with the stylist would take many clients,” she says. “So we let them go and have the experience—or lack of—at the stylist’s new space And now we still have people trickling back to our salon.”

Although clients came back for the Jón Alan experience, they still lost about half of the clients from the walkout. Most of the stylists who walked out were experienced, so Snetman was left with three-year stylists and new talent she was still developing. “We beefed up our training so we could get new hires skilled in supporting, so the more experienced staffers could do more services and generate more income.” she says.

The salon also puts a big emphasis on brow waxing, lash tinting and make-up. “I like to do a full experience.” says Snetman. “Instead of just one service, they get five in one visit. We had been focused on that anyway, but we reinforced it even more.”

Pre-booking and referrals helped retain and gain clients as well. And, Snetman continues to push her staff to make sure they aren’t getting complacent with then day-to-day work “There’s now a feeling of optimism and excitement since all the negativity is gone,” she says. “We had ego stylists who were making newer stylists feel inadequate—they were the wrong people to be educators.”

Now Snetman sees her stylists asking, “How do we make people feel?” They’ve gone off auto pilot and want to make their clients’ experience a great one.

Online group discounts like Groupon were another avenue Snetman also explored. “We needed to keep new, young hires busy so they could get better at doing hair,” she says. “So a lot of those online deals were geared towards them, and a more experienced person would work with them on consultation and service.”

Ultimately, Snetman found it was easier and more profitable to build her business through her fan base, but she found Groupon served a purpose. “It was great for our esthetics department as well as the new stylists. You want to keep the chairs booked- because trouble brews if they have too much time on their hands,” she says.

 Survive, Then Thrive The new policies and procedures, in addition to strengthening existing programs, made these three owners success stories after a major financial blow. Failure was the last thing on Nunes mind when his stylists left.

“Some owners experience a walkout and it may end up being positive, but they aren’t proactive about what happened,” he says. “I didn’t want to be like that. I wanted to continue to let people know about Blo—we do a lot for our team in a state that has an 11 percent unemployment rate.”

Profit sharing, paid vacation, health care and continuing education are just a few of the benefits Blo stylists receive.

But Nunes also recognizes the need to protect his business from stylists who break their contracts with Blo. “I spent thousands enforcing our non compete in the past year,” says Nunes. His stylists communicated with clients through Facebook to solicit them, violated the radius agreement and one even went so far as to buy “Blo” as a key word search on the internet.

“When you typed in ‘Blo Raleigh’ her link came up” explains Nunes. The link said. “Looking for Heidi [not her real name]?” which was, unfortunately, not against the law. However, the stylist had signed a nonsolicitation agreement with Blo, which she violated. Nunes had to spend thousands to put a stop to it, and eventually came to a settlement months after she left.

As a result, Blo has a new agreement in addition to a non-compete that is a restriction for soliciting clients. “They cannot solicit or do business with anyone who has done business with Blo,” says Nunes. “They are forbidden to serve our customers and my attorney tells me that will hold up better than a non-compete.”

Nunes has had three stylists violate the radius (9 miles) in his non-compete, which he was successful in stopping! But attorney fees add up, so Nunes continues to be diligent in updating his agreements to stop situations like “Heidi’s” in the future.

“It’s very difficult to prove liquidated damage,” he says. “And you can never get attorney fees back.”

Modern Salon and Spa has always had a non-compete, which Hafezi kept in place after the walkout. Most of the stylists who left him had been with the salon for 10-20 years, so he was respectful of their decision to do their own thing.

However, he did change one major item in his contract when he changed his training program to eight months from two years.

“If they leave us within the first year on the floor, they have to pay us back the cost of their training, which is $10,000,” he says. This is a major commitment for a stylist to make, but Hafezi knows his training is valuable and is not willing to risk stylists going through it and immediately taking the knowledge elsewhere.

Snetman found her non-compete agreement at Jón Alan to need some tweaking after her walkout. The radius was only five miles, which was not enough “We went to 10 miles and went from one to two-years,” she says.

She also realized she could not chance a stylist going across the street and opening a salon. Ion Alan also has a training agreement that states the stylist owes 75 percent of training fees back to the salon if they leave within the first year. That percentage goes down in the second and third year.

Now, with a re-energized team and new policies in place, Snetman can look back with a new perspective.

“I encourage others to look at their business as a business—understand the players are going to change, like an NFL team,” she says. “Players come and go every year, but the franchise itself remains strong.” Hafezi also feels he’s back on track and is gearing up for the next 10 years to be even more financially strong.

“The most important factors are customer service and quality of education,” he says. “It starts with the leadership team, directors and management. I’ve come to the conclusion that the life cycle of a stylist is five to seven years. So that’s how well look at our business in the future.”

For Nunes, education and the Blo brand are the keys to success.

“I’m just like everyone else,” he says “I wonder if I’m doing enough. But eventually you see you’re doing a lot for your stylists in terms of benefits and education, and the pie is only so big.”

Recently, Nunes had 30 students volunteer for Blo s annual cut-a-thon. The first question they asked him was, “What -is your commission?”

“I’m coming to realize I want to build a relationship with the type of designer who is Interested in a complete compensation package, not just commission,” he says. Almost 70 percent of the money that comes into Blo goes to compensation, including retirement and vacation. And most importantly, “If you work in this salon, you’re going to get an education.”