Editor’s Note: We recently had a chance to sit down with franchisees Jay and Madhu Nawani in the Cincinnati market to learn more about how they built their Great Clips business through salon acquisitions. Being a more than 30-year-old company can present the opportunity to purchase salons from franchisees that may be looking to downsize or transition into retirement. Great Clips franchisees, in general, tend to prefer selling their salons to other franchisees within the system, so, growing via acquisitions is oftentimes only possible after becoming a franchisee by purchasing a new agreement and then networking throughout the market. Jay and Madhu’s story is just one example of a tactic that can be used to build a Great Clips business.
Franchisees Jay and Madhu Nawani own 10 Great Clips salons—eight in the Cincinnati market and two in the Miami-Ft. Lauderdale market. When they opened their first salon in 2002, they knew Cincinnati was a market with a lot of existing salons owned by several franchisees. Finding good new locations would be challenging, so, after opening two new salons, the Nawanis took a different approach: acquiring existing salons.
Jay believes acquisitions are a great way to grow your business. Right now, out of the 10 salons he owns in two markets, three were new openings and seven were acquired.
We asked him to share more about his strategy, and some of his secrets for successfully acquiring salons.
Jay, how did you get started with acquiring salons?
Cincinnati is a really good market but when we wanted to grow, there wasn’t a lot of opportunity to open new salons in areas that would fit our needs. We networked with other franchisees and a few of them let us know that they were thinking of downsizing their businesses, which gave us the chance to buy their salons. That led us to one deal to buy a salon that was about to close, and another deal with a franchisee who wanted to downsize. Eventually, we purchased all of that franchisee’s salons.
What attracted you to these salons?
These salons were attractive because they were located in good neighborhoods, and we saw the potential in how the salon operated. You can tell when you walk into a salon whether there’s potential or not. Is there a good feeling among the staff and the customers? Is the salon operating under the high standards that Great Clips sets? Even if you don’t see all of that, you can get a pretty good feeling whether, under your management, the salon could perform better.
And, of course, you have to look closely at the numbers and figure out if this is a good opportunity or not.
What are the challenges of purchasing and opening a salon under new management?
It really depends on the condition of the salon when you acquire it. If the salon is operating well, then your biggest challenge is your financial investment. And, even in a successful salon, it will take some time as the staff learns to adapt to a new operating style.
When you acquire a struggling salon, your biggest challenge is having a staff that is used to working in a way hasn’t been good for business. Their reaction to the new franchisee may be positive, or it may be resistant—and I’ve seen both of those things happen. You have to face the fact that you will probably have high turnover. The staff you inherit will either quit because they don’t like the new expectations, or you will let them go because they don’t have good work habits and they aren’t willing to change.
Our policy is that on day one of ownership, everyone currently on staff has to reapply for their job. That may feel hardcore, but what you’re doing is forcing them to make a decision about whether or not they want to work for you.
What advice do you have for other franchisees considering acquiring as a strategy for growth?
1. Make sure you pay a lot of attention to the team you’re hiring, and make any changes on day one. You will be tempted to hope that those employees with a bad attitude or work habits will change. I can tell you: They won’t change.
2. It helps if you already have a base number of salons when you acquire a salon so you can pull your current team to work in the new site. It allows you to backfill for some time and your experienced management team can help you out in staffing the new salon.
3. Make sure you keep your company culture. Our culture is to follow all of the Great Clips policies and procedures; we give a lot of authority to managers and avoid micromanaging the salon teams; and, we hire people we respect and then we treat them fairly. That’s the culture that works in our current salons and that’s the culture we bring to our new salons.
What is the biggest positive and the biggest negative to acquiring?
There aren’t really negatives—they are more like challenges: You have to make the tough decisions and remember that a struggling salon was struggling for a reason. And you have to anticipate that you will see dips in the salon’s performance for a while, but if you implement what’s working in your other salons, the performance will bounce back, and it will be sustainable because it’s based on your successful business practices.
The biggest positive? Growth. In newer markets, your business should certainly grow by opening new salons; in existing and mature markets, you can also grow by acquisitions. And, sometimes you just have to take a chance because there is no other way to expand in a mature market. Acquisitions are a great way to grow your business in nearly any market—it’s a great strategy for growth.