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Take a Power Stance on Real Estate

Scott MIssad | January 30, 2019 | 11:13 AM
Scott Missad, president of the International SalonSpa Network
Photo By ISBN

Every beauty business owner, unless they own their property outright, faces the same challenge every few years. It’s one that most approach with dread, but it is rarely avoidable – renegotiating the lease. But, why do we dread it? Especially when the current real estate market has shifted power back to the tenants rather than the landlord.

A scan through the International SalonSpa Business Network (ISBN) membership list reveals companies with excellent track records of opening and sustaining very successful salons, spas or barbershops. They have learned how to exercise their strengths in the real estate market early on, playing their ace as the market shifted to favor businesses with footfall guaranteed, like salons, spas or barbershops. And it’s an expertise we’ve shared through networking at the ISBN annual conference and at other ISBN events.

The decline of bricks and mortar retailing under the onslaught of Amazon has benefited our industry in one way. The beauty business is a destination business. We draw people into a district because we offer them something they can’t buy on the internet: service, expert advice and that ‘feelgood’ factor. Any sensible landlord will recognize that a humming service business is a boon to the area.

So whether you are looking to open or relocate, or your current lease is up for renegotiation, only come to the table when you are confident of your appeal and knowledgeable of your options. Know what is and is not realistic. The power to negotiate favorable terms on that lease belongs to the owner who can show categorically that his or her business is highly beneficial to neighboring businesses.

Always keep a long-term eye on the location timeline, starting to watch the local market two or three years before any deadline for renewal – even if you are happy with the location and intend to renew. As any ISBN member will tell you, it is more difficult to negotiate from a position of power if you’ve put off thinking through your options until just months before negotiations open.

The first step in the review process is to thoroughly understand whether the location is still the right fit for the brand – you might need more or less space, the cost of rent may no longer match your pricing strategy, or the demographic might have altered radically, rendering the brand unsuitable for the area.

Even if the review suggests the property still suits, consider the alternatives even if it’s just to keep an exit plan in your pocket. Other locations should be identified, with cost of build-out and the required marketing campaign to ensure clients follow detailed and taken into consideration. Perhaps this time round, purchasing a property is a realistic option for long-term security.

As you get closer to the deadline, get your strategy in place. The myth that you can avoid rent hikes with bad-luck stories or by suppressing details of success must be dashed. This is simply very bad negotiating. No landlord is going to care that Amazon is negatively affecting retail sales or that you lost your two top earners in six months. The ‘poor me, I’m struggling’ approach will just make landlords nervous you can’t meet your obligations and could even encourage them to look for a new tenant. You must position yourself as a business to KEEP.

Instead, approach the meeting with transparent data of your amazing success and focus on your draw to the area. Landlords want data that shows visitor numbers, client demographic and retention, anything that confirms the business will do more than just pay the rent on time; that it will actively help the area thrive. It could even be the anchor to the entire health of the facility or district. Dig through all the data that has been captured on your point-of-sale system and deliver a clear, concise story of a thriving business that is valuable to the location. Further plans of expansion with projections, marketing campaigns and even team benefits will combine to show the health of a business, and that’s what reassures landlords. It scares them that you could, in fact, expand elsewhere.

Beauty is no longer the Cinderella of retailing, it is a front-runner with a service draw that can’t be replicated digitally and this must be the attitude of any business owner heading into lease negotiations.

 

Scott Missad is president of the International SalonSpa Network, the global voice for the multi-location salon and spa segment of the professional beauty industry. He is also CEO of the Gene Juarez Salons and Spas Group in Seattle.

To join the ISBN or attend its annual conference this May go to https://salonspanetwork.org/.

Follow the network: @InternationalSalonSpaBusinessNetwork.

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