5 Keys To Avoiding Disaster When Opening Multiple Salon Locations – Part 1 of 5

May 28, 2016

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Read this first!  You should only consider a second location if: 

  1. Your business is profitable.
  2. Strong operational systems are in place, marking clearly defined expectations, creating consistency and predictability in overall business outcomes.
  3. All salon stations and/or treatment rooms should be fully utilized and preferably the salon/spa should be on a split-shifting schedule.

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Minimize Disruption At Your Existing Location(s)

It sounds counterintuitive doesn’t it, minimize disruption? I mean, you’re gonna need to move some stylists from an existing location to the new location.  It will help introduce existing clients to the new location so they can start telling everyone they know about the expansion. After all, you need to move some experienced stylists over to “establish the culture” anyway.  So, it only makes sense to move some of your best people into the new location to “get it going’”, right?  WRONG!  This is probably the #1 mistake salon owners make when opening a new location and it’s the mistake that no one talks about because no one wants to admit when they make mistakes.
How do I know this is the wrong thing to do?  I learned this the hard way back in 2007 when we opened our second location of three.   I plucked six of my top stylists and moved them to the new location.  Here’s what happened (and what we learned):
1) By moving existing stylists to the new location, we virtually diluted the clientele from our existing location by steering a good amount (not all) of them into the new location.  It was like we had one location now split between two locations.   Now our existing location’s performance was in decline and its KPI’s (Key Performance Indicators) were tanking.   This is how you spell T-R-O-U-B-L-E for your business people in every possible way, financially and culturally.
2) At the same time, there was the percentage of clients that didn’t like that “their stylist” moved to a location that was inconvenient for them to visit.  So, what did they do?  They moved on and found another stylist, and in many cases at a different salon.  Combine that with your top performing stylists sitting around at a new location growing resentful because their otherwise stable productivity levels were now all over the place.
3) My own confidence as a leader took a beating.   Imagine what it felt like watching my business go into a tailspin!  Total loss of control.   It was like I was walking down a very steep slope,  tripping and falling, then rolling downhill faster and faster, getting bruised and scraped up as I  gained momentum the further I fell.   I had literally doubled my overhead (double rent, double utility bills, double inventory orders, double everything) while total sales between both locations were the same before the expansion.  We found ourselves experiencing the mother of all cash crunches, every month for a long while.   I began to question everything I was doing, to the point that sometimes I couldn’t even make a decision.   It was huge mess.
Fortunately, we survived everything, but it took a couple of years to bounce back.  We hired Strategies, learned to get real intimate with our financial statements, developed our leadership team, and most importantly learned from our mistakes.   If you’re planning on opening additional locations, allow me to save you some time by making some very basic recommendations.

Recommendations

It only took experiencing that hellish nightmare once to learn our lesson.   When we acquired our third location (and I wouldn’t recommend buying a salon from another owner, but I’ll save that for another blog post), we weathered the adjustment period going from two locations to three much more easily than going from one to two by following my recommendations below.

Recommendation #1 – Move administrative staff, not service providers.   For obvious reasons, if you feel the need to move experienced team members into the new space to establish a culture, move guest care team members and/or team members on your leadership team, but keep the disruption of service providers to a minimum.   You’re better off hiring three to four new stylists before opening. Put them through your onboarding and training process. Then open your new salon with those stylists along with one experienced stylist, at the maximum, from the original location.  If you feel like you need to move multiple service providers, be careful.  Only move one at a time.  Allow enough time for sales to recover at the existing location.  After that, then consider moving another stylist over.   Repeat the process, allowing sales to recover before moving another stylist and so on.
Recommendation #2 – Don’t Overhire.  The last thing you want is a ton of new stylists sitting around in a brand new beautiful space with nothing to do.   a) It’s a morale-killer and b) It’s expensive.   Unless you are “the salon” in town with such a strong reputation that you have a flood of people pouring in on day one, (which is rarely the case) there will be a ramping up period.  If you have a 10-12 station salon to fill, I would start with no more than four stylists.  Your cash flow/budget plan will help you determine what you can afford.   Get them to a collective 72-75% productivity and then start looking at bringing in more stylists.   If you’re worried that the new salon won’t look busy or clients are going to wonder why there aren’t many stylists working, don’t be.   First, clients understand that when a location is new,  the business most likely won’t have a full staff.  Second, a BUSY team, even though they may be small, is a HAPPY team.   Your job is to keep the doors open.  It would be fiscally irresponsible to put the company at risk with unnecessary payroll, especially during a vulnerable period.
Recommendation #3 – Limit The Hours Of Operation.  Start with one shift for everybody and then gradually move into two shifts, an early shift and a late shift, and then ultimately into a split schedule.   In the beginning, when you have a smaller team, you won’t have enough team members to justify multiple shifts.  It just doesn’t make sense and it adds an additional payroll expense on the administrative side because you’ll require more guest care/reception coverage with a wider schedule.  Consider a 10am to 7pm, an 11am-8am or even a 9am-6pm schedule for everyone during the first six months and then evaluate your productivity and staffing levels before making any changes.
Recommendation #4 – Protect your existing location(s) from as much disruption as possible.   Opening a second, third, or fourth location is enough disruption as it is.   You’re going to need as much stability as you can get in order to weather the expansion.  There are so many costs and risks associated with expanding your business, especially during the first year.   The financial strain of adding a location is more than most people realize.   Why mess up the success that got you to the point of expanding?   In most cases, the profit from the existing location(s) will often carry the new location the first three to six months before it can sustain itself profitably.    Your business and your sanity will require as much predictability as you enter a universe of unpredictability.    The only way to minimize disruption at your existing location is to leave it alone, as much as you possibly can.    Some owners think they can be clever and have a few stylists float between both locations.   Don’t even go there.  That’s the worst thing you can do.  It only confuses clients, is a payroll nightmare and becomes practically impossible to measure performance because “floaters” are moving around so much.    Keep things simple.   The work of getting an additional location off the ground is hard enough.
Up Next: Part 2 – Training And Education, Creating Consistency In A Multi-Location Salon Operation
How about you?  Do you have a second or third location?   What challenges did you face when going from one to two?

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  1. Oscar

    June 14th, 2018 at 8:51 am

    Hi,
    I loved your input about how to avoid mistakes while trying to expand. We have a seasonal shop by the beach. It is very busy during the winter time however, the business goes down in summer by %50.
    I was thinking of opening another location 2 miles west, on a major street but scared of failing it with new stylist and i dont know what to do with me behind the chair. Would it be better if i worked at the other location 2 days a week? Thank you

  2. Chris Murphy

    June 15th, 2018 at 11:06 am

    Hi Oscar, thanks for the question. You could certainly work at the other location one or two days a week, but before you even do that, I wouldn’t do anything unless your existing location is profitable and productivity is healthy. I’m not sure if that answers your question. Let me know.

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Chris Murphy