THE IN­TERN-BASED FRAN­CHISE MODEL

NZ Business - - CONTENTS - BY A NNIE G R AY AN­NIE GRAY IS EDI­TOR OF MAN­AGE­MENT..

Bar­ber Shop Com­pany is a busi­ness that of­fers a unique fran­chise model based on in­tern­ships.

BAR­BER SHOP COM­PANY IS A BUSI­NESS THAT OF­FERS A UNIQUE FRAN­CHISE MODEL BASED ON IN­TERN­SHIPS. IT'S A FOR­MULA THAT'S PROV­ING SUC­CESS­FUL.

Adam Jo­han­son, the CEO at Bar­ber Shop Com­pany, has am­bi­tious plans for his four-year- old com­pany. Those plans cen­tre around what he calls a vir­tu­ous cir­cle which can see high-per­form­ing team lead­ers be­come ‘ in­tern own­ers’ who then are helped to be­come store own­ers of one of the es­tab­lished stores.

The com­pany says it’s New Zealand’s largest and fastest grow­ing bar­ber com­pany. It cur­rently has 15 out­lets, 12 of which are fran­chises.

That seems pretty strong progress for just four years, but Adam says it’s “an okay start” and that they have a long way to go yet. He would like to have at least 100 shops in New Zealand in the next three to four years, which would give them a 14 to 15 per­cent share of the New Zealand men’s groom­ing mar­ket.

A big part of the busi­ness plan is its in­tern pro­gramme. Peo­ple who are al­ready fully trained as barbers come into the net­work of stores as barbers or team lead­ers. As they learn the Bar­ber Shop Com­pany’s pro­cesses and pro­to­cols, they grad­u­ate to team lead­ers and then ap­ply to be­come an ‘in­tern owner’ where they are trained to be­come store owner.

Within six months they are 100 per­cent funded into a store as a go­ing con­cern.

Be­cause the com­pany has built the store to a prof­itable level, this means the new fran­chisee has the cash­flow to pay down the debt and is able to own the store out­right within five years. The typ­i­cal value of a Bar­berShopCo store is $300,000 to $400,000.

The com­pany would like to place in­terns into as many of its shops as pos­si­ble.

“It pro­vides bet­ter per­for­mance which means a bet­ter client

ex­pe­ri­ence and great out­comes for them and for us,” says Adam. “We are call­ing it a vir­tu­ous cir­cle where ev­ery­one is win­ning out of what we are do­ing.”

Es­sen­tially, he says, they are work­ing hard to try to cre­ate some­thing good for ev­ery­one.

And the world of bar­ber­shops ap­pears to be a boom­ing mar­ket with an ob­vi­ous pro­lif­er­a­tion of bar­ber­shops in re­cent years. Adam says that when the com­pany opened its first store in Jan­uary 2015 there weren’t that many shops around the coun­try and of those, many were tra­di­tional bar­ber­shops, with a good num­ber of men still choos­ing to use women’s hair­dressers. He says it is a far big­ger mar­ket in places like the United King­dom.

The premise for the com­pany is based on stylish, mas­cu­line-fo­cused stores of­fer­ing great cus­tomer ser­vice, con­sul­ta­tion, in­no­va­tive styling and prod­uct rec­om­men­da­tions in an en­vi­ron­ment ded­i­cated to men.

“It made no sense to me to be in an en­vi­ron­ment cre­ated for women – we have cre­ated an en­vi­ron­ment for men, with men’s mag­a­zines, a dé­cor that ap­peals to men and a playlist for men,” ex­plains Adam.

It also pro­vides a range of men’s hair­care prod­ucts in­clud­ing their own Bar­berShopCo branded prod­ucts.

Adam says it is a very process-driven com­pany and they want to cre­ate a world-class en­vi­ron­ment, right down to hav­ing a hand basin in front of ev­ery mirror so the barbers can wash their hands be­tween clients.

“It is im­por­tant we are cred­i­ble with clients. As they sit in the chair they know we care about hy­giene and they trust us to make good rec­om­men­da­tions.”

To date they haven’t done any ad­ver­tis­ing and have built the busi­ness through re­fer­rals.

The busi­ness came about be­cause Adam, who is 36 and comes from a sales back­ground, saw a gap in the mar­ket to pro­vide whole­sale hair­care prod­uct into bar­ber­shops with their high client turnover. He felt many barbers did not seem to be up­selling hair prod­uct to their cus­tomers, partly be­cause the hair prod­uct might cost $40 to $50 while the hair­cut it­self was $20. So he sourced a value prod­uct barbers could sell at the more af­ford­able price of $20.

Ini­tially he was trav­el­ling around the coun­try, sell­ing the hair­care prod­ucts from the back of his car.

“I did that for a num­ber of months and even though we were sug­gest­ing the barbers fin­ish the cut with a prod­uct and on-sell it, I re­alised with­out chang­ing the en­vi­ron­ment of the bar­ber shops it was hard to cross sell.”

And that is what he is do­ing with Bar­ber Shop Com­pany. They are stylish, well-de­signed stores where each com­po­nent of the ser­vice and its de­liv­ery is very process driven and where they “com­bine tech­ni­cal ex­per­tise and client ser­vice ex­cel­lence to ed­u­cate, en­gage and add value so our clients look and feel in­cred­i­ble”, ac­cord­ing to the com­pany’s web­site.

Adam’s busi­ness part­ner is the founder of NZ Home Loans, John Erkkila, and Adam says he has bought a lot of IP into the busi­ness.

As to chal­lenges, he says they have had many, cit­ing ev­ery day as a new chal­lenge. “Busi­ness is buoy­ant at the mo­ment but find­ing enough peo­ple to come work with us is hard.”

They are 20 peo­ple short at the mo­ment, both in­terns and em­ploy­ees. Ap­proach­ing each day as a new chal­lenge is ac­tu­ally a modus

operandi for Bar­berShopCo. “Very lit­tle re­mains static for very long and so we need to be pre­pared, ac­tu­ally ex­cited to ques­tion our­selves each and ev­ery day,” ex­plains Adam. “Are we do­ing ev­ery­thing we pos­si­bly can to im­prove our client ex­pe­ri­ence and team out­comes?”

A solid path­way

To be­come an in­tern peo­ple have to choose the lead­er­ship path and learn all the in­ter­nal man­age­ment sys­tems and the pro­cesses in­volved in run­ning each busi­ness; so they need to be ex­pe­ri­enced barbers first.

Adam ex­plains the fund­ing to buy a fran­chise comes from us­ing the cash­flow in that par­tic­u­lar busi­ness unit to se­cure the debt from the bank and fran­chisor.

“We lend them our as­set, so they can bor­row the money. Be­cause cash­flow is strong, the bank will of­ten lend 75 per­cent of the pur­chase price while the fran­chisor tips in the re­main­ing bal­ance as a loan. Both loans are paid down within five years.”

An am­bi­tious fran­chisee could be think­ing about suc­ces­sion and how to bring on their own in­terns who can help fa­cil­i­tate a joint ven­ture for net­work ex­pan­sion or a cap­i­tal out­come.

As to what he has learnt in build­ing the busi­ness, Adam says learn­ing not to take no for an an­swer has been one as­pect and hav­ing the strength to find tal­ented peo­ple to join the busi­ness.

The com­pany re­cently ex­hib­ited at a trade show in the UK to ac­tively re­cruit trained barbers and from 46 ap­pli­cants they have placed more than a dozen.

The first re­cruit was just ar­riv­ing when NZBusi­ness spoke to Adam.

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