Kurt Sayce Ventures

Many of the people I meet concerning  buying a Franchise are still asking for a UFOC.  Uniform Franchise Offering Circular.  That is being scraped by the FTC and is being replaced by a FDD.  Full Disclosure Document.

The industry is going through some changes.  The FDD spells out everything about the structure of the franchise, the typical investment required, the way the franchisee will comply with the franchise system and any penalties if there is a noncompliance issue.  Also, the scope of training should be covered and the investment in advertising that is required if any is spelled out.  If there is a dispute between the two parties how will that be handled.  A list of all the franchises with contact information should be in the FDD.  It should be a fairly complete picture of what you are buying into with the franchisor.
According to the new ruling, the new format of the franchise disclosure is supposed to be implemented from July of this year onwards.

Now lets look at the differences between old and new:

• The name has changed from UFOC to FDD

• Previously the Franchisee had to meet the Franchisor face to face to get a copy of the UFOC.  That has been scrapped.

• The new FDD requires 14 calendar days to pass before any deal could be closed and money exchanged.  The old UFOC required 10 business days.

• If the franchisor is not going to provide any exclusive territory in the franchise agreement, then a warning notice has to be given in the FDD.

So there are you basic differences.  Too Hotties switched to the FDD over a year ago.  Each year the franchisor has to update his FDD with current information.  Too Hotties Haircuts has just done this so our FDD is now ready to go.  If you are interested in learning more about our Franchise go to my main page on my web site, www.KurtSayce.com and click on the “request for consideration” button.  Good luck in all you do!

Many people have asked me why did the founders name the franchise Too Hotties haircuts?  The Too Hotties name was not created on a whim.  Gregg, Chad and Bill, the three founders did not just come up with this over a case of beer.  There were five primary criteria that they set for the name of the franchise.

First, the name had to be easily remembered and consequently would make it easier to brand.  They initially came up with five names.  Groomplex, Barber Girls, Hotties, Too Hotties and one other I can’t remember.  Going to the local malls they set off to find out which name was the most memorable by doing some real world research.  They hired a professional polling company to do the survey.  They surveyed about 1000 people. The result was the Too Hotties Haircuts was the name that people could remember the most.

The second reason for the name Too Hotties was about merchandising.  The founders wanted to be able to build the brand by selling hats and t-shirts.  No other hair cut chain has a name with the potential that Too Hotties does for this type of merchandising.  Who is going to wear a Great Clips or Supercuts t-shirt unless they have to?  They will however where a Too Hotties t-shirt with our name on it because the name is fun and who wouldn’t want to be referred to as a Hottie?

The third reason for the name was curiosity.  We wanted to create a name that would cause people to be curious and want to check it out.  The Too Hotties name does that with men.  They are drawn to it like a bug to a light at night.

The fourth reason for the name was based on Internet searches.  They wanted a unique name that would pop up on page one of an Internet search.  When you do a web search for the three words Too, Hotties, and Haircuts the main corporate web site pops up on page one of all the search engines.

The fifth reason for the name Too Hotties Haircuts was based on the research results that they had gathered from the surveys.   They found out that 93 out of 100 men would rather have their hair shampooed by a woman than a man.  Consequently, the name needed to communicate that when you went to get your hair cut, you were going to get it cut and shampooed by a woman.  The last time I checked, Floyd the barber from Mayberry, was never referred to as a Hottie.  The name communicates that you will be getting your hair cut by a woman not a man.

So that is how the name came about.  It was the only one of the original five names that met all five criteria.  Branding, merchandizing, Curiosity, Internet Search, and communicate female stylists would be cutting your hair.

Pay and compensation plans are a tricky area for most business owners.  It is like the tax code, complex and ever changing.  Taxes laws are frequently changed to influence the behavior of taxpayers.  The home mortgage interest deduction is one of them.  How many people would rent instead of own their homes or even afford to own if it wasn’t for the interest tax deduction on mortgages.  So it is with pay plans.  The pay plan should be designed to compensate fairly and motivate the person to do more of what you want them to do.

In the hair industry there are three major ways that people get paid.  Each one works and has its benefits.  Each one has a weakness that sometimes may not be apparent.  Here I will break them down for you and you can decide what works best for you.

The first way that stylists are paid is hourly.  This is simple straight forward and a very common way to pay staff in all professions.  There are two inherent problems with hourly pay. One is that your staff is not going to be motivated to do more than the minimum to keep their job.  If I do 3 cuts and hour or one cut and hour I get paid the same thing.  The only motivation to do more is from tip income.  The upside is that the salon owner knows what his pay will be each week.  It’s predicable and simple to implement.  The other problem with this type of pay is that salon owners will frequently under staff the salon because of the expense associated with bringing on new stylists.  Each new person hired is another 30 hours plus per week of expense plus FICA and other benefits whether they do 10 cuts or 50.  Recruiting talent is also another problem with hourly pay.  Salon owners with hourly pay will have turnover and replace them with less experienced people.  More experienced stylists will opt for a pay plan that doesn’t cap their income.

The second way that stylist get paid is straight commission.  Commissions will vary but the range is between 40-50% of cost of the service.  Most salon owners will back out the back bar expenses (cost of shampoos, color, supplies, etc.)  and FICA (Employers portion of Social Security) from commission so the actual pay is often 15 to 20% less.  This is a very simple and cost effective way to pay stylists.  The more they do, the more money they make for them selves and the salon.  The problem with this system is that salon owners will often over staff their salon with stylists because there is no fixed payroll costs associated with more staff.  This shortens wait times for customers but can lead to a very competitive and tense environment to work in.

The third major way to pay stylists is with booth rent.  Booth rent is where the stylist pay the salon owner a fixed fee each month for a space to work in his salon plus the cost of the back bar.  They are independent contractors.   This is much like ReMax Realty does in the real estate field.  This works well with more seasoned stylists who have developed a loyal following.  The salon owner usually gets all new walk in clients if he or she is not busy.  The stylist has to be pro active in order to make this work. Most stylists don’t realize that when they leave one salon and go to another not all their clients will go with them.  The former salon will do what is can to keep those clients coming to them.  Most stylist over estimate the revenue from their loyal clients when they jump ship and go to a booth rent situation.  The danger zone is the first six months.  This is where the turnover is in booth rent salons.

At Too Hotties Haircuts we use a hybrid pay plan. At Too Hotties Haircuts we pay our stylists a base pay plus a bonus based on the number of cuts per pay period.  (Two weeks.)  With this plan there is no limit on your income.

The average tip in a barbershop or quick cut chain is $4-$5.  At Too Hotties your average tip is $8 -$9.  An $8-9 avg tip for a cut in the $20 range is a 40%+ tip!!

We allow our stylists to build their clientele by giving free and discounted cuts and keeping the entire tip.

We pay commission on product sales up to 21%.

You can earn commission selling our VIP Monday Men’s club (MMC) and help build your clientele at the same time.

A stylist at Too Hotties can earn a good income. Also, there is not limit to their income potential. Most of the stylist in our system start out making $600-800/ week and soon they are making over a $1000 per week and more!  Here is a link to another article that describes in more detail about tips and our unique marketing plan.

Too Hotties Haircuts: New Thinking = More Opportunity$$$

Thanks for reading and please leave a comment.

Buying a franchise is a little bit different from buying a business.  When you buy a business from someone you are buying and entity that is being passed to you for an agreed on dollar figure and the former owner steps away and you take over.  It is much like buying a house.  You look around and find what you want, you negotiate a price, you go to closing, you move in and the former owner moves out.

A franchise is a totally different situation.  You are buying into a proven system, with methods, coaching, local training and support, and accountability for staying on message and building the brand.  An independent business has none of that which is why franchises, as a business model, succeed at five times the rate of sole proprietorships.

Hence the sales process is a little different.  Each franchisor has a typical sales process and here is ours:

Step one:
Future Franchise gathers information about franchises he is interested in.  The franchisor and future franchisee start communicating.

Step two:
Future franchisee like what he sees and hears about franchisor and fills out an application with his financial information on it.

Step three:
If franchisor likes what he sees on paper, he sets up a time to have a sr. exec with the franchisor communicate directly with the future franchisee to see if they are compatible and can work together effectively.

Step four:
Franchisor send out their FDD (Full Disclosure Document, formerly referred to as a UFOC) to future franchisee and franchisee starts to get pre qualified for financing if needed.

Step five:
Future Franchisee starts communicating with other Franchisees in the system and starts working on the numbers for a pro forma (projection of revenue and expenses) and a business plan.

Step six:
Franchisor and Future Franchisee continue a thorough question and answer period, and expectations are clearly laid down for both parties in regards to support, training, site selection, marketing etc. to help the franchise succeed.

Step seven:
Attend a discovery day to see the franchise in action.  At this point in the process, the Future Franchisee should know everything he needs to know before coming to discovery day.  Nothing should actually be discovered at discovery day other than does the Franchisors walk and talk match.  If it does the Future Franchisee writes a check for a deposit on the franchise fee and officially moves from Future Franchisee to Current Franchisee.  Congratulations!

I had the privilege today to speak to a group of business brokers out in Sterling.  Their company is FNBC Mid Atlantic.  We went through the Too Hotties opportunity and discussed the type of individual who would make a good franchisee.  I thought that might be a good topic for my blog.

A good franchisee is someone who I would describe as semi-entrepreneurial.  A true entrepreneur is many times not a good fit for a franchise because he or she is motivated to create something new rather than working within a proven existing system.  Right from the beginning, entrepreneurs start to tinker with the franchise system and can become a thorn in the side of the franchisor.

A good franchisee is someone who has self-discipline, focus and a track record of being a team player.  They are someone who is coach able.  Franchisees who focus on getting the existing system down before trying to improve it are the ones who will succeed at the fastest pace.

An executive in the corporate world often times makes a great franchisee, because they have proven people skills if they have navigated the waters of a typical corporation.  They know how to follow a system and they have ambition or they would not have moved up the corporate ladder.

Discipline, character, talent, ambition and coach ability are what I would use to describe a good franchisee.  Anyone with these characteristics would make a great Franchisee.  Industry experience is usually not a big factor in the decision to bring someone into your franchise system.  If someone is coach able, they can be taught the system and don’t have any bad habits to undo.

Finally, they have to have a good financial picture to go along with everything else.  I asked a banker (BB&T) to give me a profile of the minimum standards to finance a typical Too Hotties location.

Here is what they sent me:

The following are guidelines only. Meeting the guidelines does not guarantee obtaining financing:

Capital Injection: 15-25% of total cost
Liquid assets: >$150,000 (not counting retirement accounts)
Beacon score: > 690
Collateral: Real estate is preferred
Total debt to income: 40%
Lease:  7 years or more (to match the term of the loan)

Other considerations will be taken into account during the application process.

DOCUMENTATION REQUIRED:
• Last 3 years of personal tax returns
• Personal financial statement
• 1st year monthly projections. Year 2 and 3 annual projections.
• Business plan

BB&T:

• SBA preferred lender
• All business services: Business insurance, merchant services, payroll, BB&T @ work
• One point of contact for all business needs
• Branches in VA, DC and MD (1400 branches in 11 states)

Craig Sharpe, one of the managing partners at FNBC mentioned another avenue for funding.  Leasing companies.  He indicated that leasing companies are doing 5 and 6 years leases on all the operating expenses of a business.  That may be an interesting alternative to traditional bank financing of a business.

Thank you FNBC and Bob Ensley, the other managing partner, for putting this together!

I had the opportunity to give a presentation to a group of students at the Paul Mitchell School in Tyson’s Corner Virginia.  Christine Weise, the admissions director, extended the invitation.  The class had about 60 students.  The students were focused and attentive.  This was a great bunch of future stylists.  They all have great potential!

I wanted to give them information that could help them in their future endeavors.  Since I am not a stylist myself, my focus was on success principles that could help build a happy and loyal clientele.

Putting first things first, you must have goals.  We went over the success pyramid in detail from vision to self-image.  If you want more specifics go back to my previous blogs and you can get the details.  A good basic understanding of goal setting is essential for long-term success.  Anyone can do well for a while, but those that do well over a sustained period of time are usually people that have an organized goal setting system.

Next, we went over a basic strategy to help build your personal clientele at a salon.  In order to get one new customer a day and keep him you must attract five new customers.  That assumes a 20% retention rate.  One out of five, which is the industry average.  A simple but effective strategy to get 5 new customers in the door is to hand out 20 discounted or free hair cut coupons, face to face, during your normal daily routine.  If you do this consistently you will build a nice book of business.

1 new customer a day X 250 working days = 250 new customers per year
250 customers X 9 hair cuts a year x $30 average hair cut  = $67,500 in revenue or sales

The additional 4 new customers who don’t come back add:
4 new customers X 250 working days X $30 average hair cut = $30,000 in revenue

You now have created a business that generates $97,5000 it first year.  If you handed out 20 cards every working day (250) you would give away 5000 cards.  Each card you handed out is worth $19.50 in business to you.

Hear are some of the comments from the students:

“I found your presentation to be full of insight.  I enjoyed your way of presenting the information… “

“ I liked the fact that you pushed having goals and writing them down”

“You pictured all (the) small details who most hairdressers do not like to share!  Many of your tips match those of (the) ones in “Success” Magazine.”

“I like the results pyramid and I completely agree with the fact that you are the same as the people you surround yourself with, and that you need to change in order to succeed.”

“Self-image is the sum total of all the beliefs we hold about ourselves.”

“Don’t think of it as a broad overview of yourself, but rather specific, yet varied opinions you have about yourself.” – Lou Tice

Your self-image is built from our “self talk”.  Self-talk is the constant conversation that you have with yourself as you constantly judge and interpret your own experience.

Our self-image is simply the totality of how we see ourselves.  This could be labeled positive or negative.

Positives                                              Negatives
I’m smart                                                I’m dumb
I can                                                         I can’t
I see my self as a high achiever        I can’t see my self as a high achiever
I am a leader                                          I am not a leader
I stay calm                                              I get nervous
I am articulate                                       I can’t express myself well
I reach out to people                            I am shy
I am creative                                          I am not
I tend to be lucky                                  I am unlucky
I am strong                                            I am weak
I can change                                         This is just the way I am

In order to change your self-image you must affirm yourself and affirm others.  One way to change your self-image is to put your goals in affirmation form.  Make your affirmations personal, positive, present tense, indicate achievement, use action words, and use emotion words.

Your constant repetition of your self-talk creates a self-image in your subconscious.  The subconscious does not know the difference between something real or something imagined.   Below is a formula that is as reliable as any algebraic equation.

I X V = R

Imagination X Vividness = Reality (in the subconscious).

The result is that what we imagine with vividness becomes recorded as reality in our subconscious and shapes our self-image.  It stays there and influences our behavior until we displace it.   All meaningful and lasting change starts on the inside (our imagination) and works its way out into reality.

Since your self-image is the sum total of your beliefs, it influences everything you do.  If your self-image is positive you will get positive results and vice versa.

The way you think and feel about any problem or situation, determines the outcome, before you start.  With a positive attitude, you succeed, and with a negative attitude, since doubt and fear neutralizes all energy, you fail.

Our attitude is not determined by circumstances, but by how we respond to circumstances.  Our minds determine our attitude.  We have a choice.  When something happens we have a choice in how we respond.  It’s how we react to events, not the events themselves that determines our attitude.

There are a lot of platitudes about having a positive mental attitude (PMA) and how important it is toward your personal success.  However, PMA is not a guarantee of success.  You have to have character, ambition and talent along with a Positive Mental Attitude to be successful.  If you have character, ambition and talent but a gloomy outlook on life you will never have the life you desire.  How many people do you know that are people of good character, have an abundance of talent and want more for themselves, but never seem to take the steps necessary to rise above the crowd?  The brooding artist or musician with amazing talent goes nowhere because his talent is masked by a pessimistic view of life.  The engineer who has wonderful ideas for inventions who never takes a risk because he believes it is “not the right time”.  You all know someone who has a negative outlook on life and who constantly has bad things happen to him or her.  There is a life principle called:

The Law of Attraction:

You are a living Magnet.  You attract into your life the people, situations, and circumstances that are in harmony with your dominant thoughts.

If your dominant attitude is positive you will have good things happen to you.  If you dominant thoughts are negative you will have bad things happen to you.  Take full credit for all the good and the bad.  You made it happen, you are the architect of your own life.

Attitude is a critical element of the results pyramid.  A negative attitude is like a cork in the bottle.  It doesn’t matter how good the wine is because you can’t taste it if the bottle is shut tight with a cork.  You must remove the cork to open the bottle to enjoy the wine.  What changes do you need to make to your thinking in order to improve some aspect of your life?

The next level of the resutls pyramid is skills.

A skill is an acquired or learned ability to do something well.  Skill is developed through study, practice and application.

Skills are necessary for you to get results.  You have to be better than you competition in order to attract their business, solve their problem, or win the game etc..   Good intentions do not equal results.  Skill and habit need each other to be effective.  You must have good practice habits in order to develop a skill.  You must practice and repeat the skill in order to form the habit of doing something successfully.

The biggest impediment to skill development is poor practice habits.  The old adage that practice makes perfect is incorrect.  Perfect practice makes perfect.  If you practice a musical instrument consistently but incorrectly, you will never be rise to the top.  Their will come a point where you poor technique cannot be overcome by constant practice not matter how diligent you are.

So, look at your profession and seek out those individuals who have demonstrated consistent success at teaching others to be successful.  Just because someone is good at something does not mean that they can teach someone else how to do it.  There are phases that people go through in developing a skill:

Unconscious incompetent -  I don’t known that I don’t know.  Totally unaware
Conscious incompetent – I know that I don’t know
Conscious competent – I know that I know
Unconscious competent – I don’t know that I know – skill is so developed that they don’t have to think about it anymore they just do it.  People would call this person a “Natural”
Conscious Unconscious Competent – someone who is so skilled that they can do the skill unconsciously but can teach it step by step.  They are still aware of how they are doing the skill.  This is the highest level of skill development.  This is someone who can teach you how to hone your skill.

Many top performers are poor instructors because their skill came to them “naturally”.  They cannot explain to someone how they do what they do.

Always be working on:

People skills
Skills in your profession
Hobbies to keep you sane and have balance in your life.