15 December 2019

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Salons - The Beautifying Franchises

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The hair care and beauty business in India has grown at a phenomenal rate of 35-40% in the past 5 years.

Going for a beauty treatment no longer gets classified under luxury; it has become a day-to-day necessity. Women or men have moved out of the stereotype and are more open towards experimentation to look good or get pampered for pure indulgence. Expenditure on beauty therapies have been on the rise and it is said that average salon experience costs not less that Rs 500. A salon visit today, has no bar; people of all age, gender or economic background are helping salons thrive.



The Beauty Industry

The hair care and beauty business in India has grown at a phenomenal rate of 35-40% in the past 5 years. Pricewaterhouse Coopers expects the beauty industry in India to touch $ 16 billion by 2014. The per capita spend on beauty that currently stands around $ 1.2; is expected to increase to $5 by 2015.

These figures project a rosy picture for the beauty industry. To fuel this kind of growth, the preferred route of expansion for most of the companies, is franchising. Leading domestic players like the Lakme, Jawed Habib, VLCC, Naturals, YLG or the international players like Jean Claude Biguine, Toni and Guy have taken the franchising route. This is an easier way to ramp up business and move beyond major cities. The industry is witnessing a lot of Private Equity investments too, like the $ 1billion capital infusion by Helion and Everstone partners into R&R Salons Pvt., the parent company of YLG salons.

What fuels this growth

Many factors have led to the growth of this sector. Main ones being

  • Growing affluence
  • Changing attitude of people towards the need for looking and feeling good
  • Increased awareness of latest trends
  • High quality and personal attention offered by the new age salons

SEI speaks to Krithikaa, a franchisee of Lakme Salon at ITPL road, Bangalore, operating since 2005. She has won the Lakme Champions League in the year 2011 for surpassing business goals.

SEI: Tell us about your journey running Lakme salon franchise.

I started operations in this salon about 8 years back. This was the first Lakme salon to open in this area of the city. Back then; the area was relatively under developed. However, I saw a potential for growth and I had to convince the company to let me start operations here. The company has supported me during the initial launch of operations with training for staff, assistance in setting up operations and making available standard operating procedures required for operations in a Lakme Salon.

Being associated with brand like Lakme gives you a lot of leverage, at the same time expects you to maintain a standard of operation that befits the brand.

SEI: You started your operations long back. What kind of changes do you see in your operating environment?

Change in any kind of business is inevitable. I see a lot of changes in my clients. The beauty awareness is phenomenal and they are ready to experiment. During my earlier days of operation, normal services like threading or simple clean ups were mostly demanded. However, now high-end facials, hairstyles and hair treatments are the most sought after products in my salon.

At the other end, I also see rising cost in every aspect of the business, right from rentals, employee cost, cost of products etc. The kind of support offered by the company in terms of marketing etc has also changed. We are benefited by the continuous R&D activity of the company, which results in many product launches. As a franchisee, whenever there is a product launch, we get artwork and collaterals that we use for marketing at the local level.

SEI: What do you have to say about the competition faced from specialized skin clinics, spas and unisex salons?

Competition is there at every quarter. However, these clinics cater to a different kind of clientele. Skin clinics are more specialized and have a medical angle to it, with services of a dermatologist etc. Spas again have a different kind of environment; people would like to go there purely for relaxation, while Salons are meant for taking care of day-to-day beauty needs. Like if you want a different hairstyle, a spa or a skin clinic will not offer you that service.

Unisex salons may have an edge but at the same time it has its own disadvantages. I see many women feel that salon time is their own time and may not want to be with a family member at the same time. Also women are more relaxed, getting services in the presence of their same sex. Having men in the same premises often makes them uncomfortable.

SEI: As a franchisee, what is the outgo towards royalty etc? How long does it take to break even and what kind of profitability figures may one expect?

The company takes in a royalty fee of 18% of your sales. Other than that, we pay to the company for the products received through the centralized supply, trainings conducted and the IT infrastructure. Together, it comes up to almost 35% of the sales.

All other expenses like salaries, commissions to my staff, reinvestments towards upkeep, rent etc of the salon are met at the local level. It may take around 3 years to break even; again a lot depends on the location and other costs. The industry profitability figures range from 15-20% onwards. I would like to say that a lot depends on your drive and passion to run the business, at the same time it crowded with competition.

SEI: What are the requirements for opening a Lakme franchise?

The minimum area requirement that company mandates is 800-1000 sqft in a high street or a residential area. The investment would be in the range of Rs 50-60 lakhs. The profile of the potential franchisee is also taken into consideration.


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