The Aquino Group:

Business Plan: Regis Hair Salons

Prepared by: Scott Aquino, December 2009

The Aquino Group

Business Plan
Regis Hair Salons: Super Cuts

Executive Summary

The Aquino Group (AG) is an Oklahoma based company with management having

extensive experience in the service industry, customer service and training. AG was formed as a

result of extensive research into nationally based franchise opportunities. After careful review

the Regis Hair Salon’s Corporate family was determined to be the first priority for solicitation.

This determination was based on several factors.

First, Regis has a history of success in the industry. Regis is nearly ten times larger than

its’ competitors; as a result, Regis is the market leader in the hair salon industry. Second, Regis

has a successful brand image that welcomes a customer base from across the nation. Having a

nationally known, accepted and trusted brand image provides AG with increased factors for

success; resulting in faster start-up, smoother cash flow and ease of recruitment for staff. Third,

this branding allows for quality nationally based marketing programs that cater to the local

markets. This factor alone would be cost prohibitive for any small operator breaking into a local

market. Staff Training is the fourth factor. Regis hosts the industry's best stylist education and

training - including educational videos, nationwide seminars and experienced artistic directors.

Again this would not be possible for any small start-up. And finally the product Regis delivers is

high quality!

The Aquino Group is in the process of identifying locations in Kansas City for as many

as 5 new Super Cuts Hair Salons. The Super Cuts concept of entering the male hairstyling

market and allowing a standard salon to more than double its sources of revenue is by far the

most appealing feature of Super Cuts and AG sees this as an opportunity to develop further.

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The Aquino Group:
Business Plan: Regis Hair Salons
Prepared by: Scott Aquino, December 2009

Organizational Structure
The proposed remote operation of multiple salons in the Kansas City area from

Oklahoma City is possible today due to the use of technology as well as on-site senior

management. The Managing Partner and Marketing Manager will travel to Kansas City on a

regular basis. The initial set up of new salons will require weekly travel. This will be the norm

until operations are up and running, staff hired and an Area-Wide Manager is trained and secure

in his/her position. Aside from recruiting staff the Managing Partner in conjunction with Regis

Corporate Offices will identify multiple locations for Phase I and Phase II of operations build-

out. Phase I include the opening of four salons under the supervision of one General Manager

and the Area Wide Manager. Phase II will begin once the initial salons are open and operating at

a successful level Phase II which includes the identification of another possible four salon

locations and the build-out and staffing of those salons. In each instance the direct “hands-on”

participation of the Managing Partner will be readily seen. Initially staff will travel to Kansas

City and stay in area hotels. Once locations are determined it may be possible for AG to either

purchase or lease a condo in the area which will provide Oklahoma City staff with easy access to

the salons.

A major priority will be the hiring of the Area-Wide Manager. This person will be local

and once trained will be directly responsible for the on-going operations of the AG Kansas City

Salons. AG understand the value of personal “BUY-IN” and will develop a salary, bonus and

ownership package that will be very appealing to possible candidates. The current thought is to

provide profit sharing bonuses for the first three years of operation followed by ownership of 5%

in year four and 7.5% in year six. This will be developed with opportunity to “buy-back” shares

if the staff person decides to leave AG.

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The Aquino Group:
Business Plan: Regis Hair Salons
Prepared by: Scott Aquino, December 2009

The following is a proposed Organizational Chart for AG Super Cut Salons in Kansas

City.

REGIS
Salon
Corporate Offices

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The Aquino Group:
Business Plan: Regis Hair Salons
Prepared by: Scott Aquino, December 2009

General Industry Analysis

In the US, about 80,000 hair care salons (75,000 beauty salons; 5,000 barber shops)

generate combined annual sales of $16 billion. Large companies include Regis Corporation and

Ratner Companies. The industry is highly fragmented: the 50 largest companies hold just 15

percent of the market. The large majority of salons are independently owned. A large salon has

annual revenue of about $300,000 and 10 employees. Demand is partly driven by demographics

and partly by population growth. The profitability of individual companies depends on technical

expertise and marketing skills. Big companies have few advantages over small ones, which is

why the industry remains fragmented. Small companies can compete successfully through

technical superiority or favorable location. The industry is highly labor-intensive: average annual

revenue per employee is just $35,000. Regis holds over 12,000 salons with Super Cuts holding

approximately 2,000.

Hair Salon Products

Major products are hair cutting, hair coloring, nail care, skin care, and merchandise sales.

A typical salon offers haircutting and styling, coloring, shampooing, and permanents. Some

salons also offer nail care, facial treatments, makeup, bikini waxing, massage, tanning, and other

types of spa treatments, but the lower volume of demand for such specialty services often makes

them uneconomical. Sales of hair care products are an important revenue source for many salons,

providing from 5 to 40 percent of revenue. Gross margins are higher for hair care products than

for services. The average salon occupies about 1,500 square feet and is located in a mall.

Beauty salons are personal services businesses which provide cosmetic or other treatments for

men and women. A significant percentage of workers work out of their homes or rent space

from salons. Employee turnover in the industry can be as high as 40%.

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The Aquino Group:
Business Plan: Regis Hair Salons
Prepared by: Scott Aquino, December 2009

Favorable Demographics
The large Baby Boom generation is now at the age when income is highest and hair is

graying. Older women and men, who drive most of the demand for higher-end hair care services,

are increasing their use of color to hide gray hair and also have the means to pay for it.

Male Salon Format

Men's attitudes toward grooming have been changing gradually: they now represent

about a quarter of the clientèle at unisex salons. The differences between a salon and a

barbershop are many: for barbers, no appointments are needed, and they're generally cheaper

with fewer value-added services like styling and salon-style products. A new salon format for an

upscale men-only club-style salon is taking hold in New York, complete with leather chairs,

TVs, cigars, pool tables, and a bar. SuperCuts has developed a model that provides a gender

neutral atmosphere that attracts male customer base as well as female.

Salon Success
Once firmly established with good stylists and loyal clients, many salons seem to have a better

long-term survival rate than the average business. More than half of salon owners surveyed say

they have owned their current business for 10 years or more. According to the Small Business

Administration (SBA), more than half of all new businesses fail within four years. The industry

has seen steady growth since 2000:

 Salons average about 150 weekly visits

 Since 2000, the # of salon workers rose 26%
 Since 2000, the total # of salons is up about 6%
 Almost 600,000 positions were filled in 2002 with experienced workers comprising 75%
of new employment hires and those with less than one year’s experience comprising 25%
of new hires.

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The Aquino Group:
Business Plan: Regis Hair Salons
Prepared by: Scott Aquino, December 2009

Marketing

Market Definition
According to the Occupational Outlook Quarterly, published by the U.S. Department of

Labor, it shows cosmetology as a steadily growing occupation in the U.S. through 2005.

However, the Department of Labor also shows cosmetologists as number 37 fastest growing

occupations in the U.S. This is because Baby Boomers are youth oriented and will be the driving

force for our industry for the next 20 years. Generation X is the target we are going after but the

Baby Boomers will be paying the way. Wellness, relaxation, and nurturing the soul will

supersede "beauty services."

Cosmetology is as large an industry as the tobacco industry. Big businesses are

recognizing the billions of dollars consumers spend each year in our industry and they are buying

up the major manufacturers. Redken was bought by Cosimar, Matrix by Proctor and Gamble to

use as two examples.

Locally, consumers demand pampering treatments while on vacation. Today's stress-

relieving treatments replace the 1980s party scene and corporate rewards are given with "Day of

Beauty" packages. The overall market demands quality service at a fair price.

Future Opportunities
As our client base builds in the local market, targeting marketing to the tourism trade will

bring new opportunities. This could be carried through with lodging businesses. Still another

opportunity involves providing custom packages for special groups. "Sweet Sixteen" parties,

stress-relieving treatments that travel to corporations or participate with the American Cancer

Society program "Look Good, Feel Good," teaching cancer victims how to address hair loss.

Marketing Plan
The Marketing program will operate from Oklahoma City utilizing Kansas City area

advertisement outlets such as radio, television and print. The Marketing Manager will work as a

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The Aquino Group:
Business Plan: Regis Hair Salons
Prepared by: Scott Aquino, December 2009

team member with Regis corporate staff, the Area wide Manager and General Mangers

identifying opportunities to promote the Regis brand and improve overall knowledge and

understanding of the products and services available through Regis Salons. AG will work

closely with Regis Corporate Marketing to develop a plan to reach new clients and provide

quality services. As in any venture Location Location Location is paramount. AG will research

areas for development of the salons. Once developed the specific demographics of those areas

will be incorporated into the Strategic Marketing Plan. The following is a map of Regis Salons

and Super Cuts Salons in Kansas City.

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The Aquino Group:
Business Plan: Regis Hair Salons
Prepared by: Scott Aquino, December 2009

Measurable results include:

 increased sales
 increased market share
 improved image
 increased knowledge of business
 identified competitive advantage
 created improved climate for future sales

Market Environment
"With high-tech there must be high touch," says John Nesbitt, Mega Trends 2000. Our

society is stressed out and salons are convenient retreats. A relaxing environment, with customer

service providing preventative services and products at a good price is key to salon success in the

new century. Many women enjoy a relaxing facial for skin maintenance benefits, however, with

an average household income of $26,949.00, it is a luxury. The development of a service

connected to a purchase of $50.00 of can create an affordable value-added service that

consumers in today’s economic climate are searching for. Marketing is key. Know the clients,

their habits, likes, and dislikes. To do this, the salon must be automated.

How the Salon Industry is Responding to the Recession

PBA Reports on Changing Consumer Trends and How Salons Remain as Vital Job &
Revenue Sources for Communities Nationwide
Phoenix, AZ (March 09, 2009) –

As a part of most cities in America, hair salons play an integral role of the economic

fabric of our nation. Salons provide both employment and tax revenues and contribute

substantially to the economic vitality and social well-being of a community. As the recession

continues to cut deeper into everyday necessities, the salon industry, while often resilient in

times of economic uncertainty, is now feeling the downward pressures of changes in the

economy. “Member salons are reporting various trends developing as their clients make changes

in their spending habits, however many consumers continue to view their professional hairstylist

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The Aquino Group:
Business Plan: Regis Hair Salons
Prepared by: Scott Aquino, December 2009

and the services they provide as a necessity that they do not want to forgo,” said Marissa

Porcaro, marketing and communications manager for the Professional Beauty Association.

Emerging trends salons are reporting include:

 Longer periods between hair cuts and coloring appointments.
 Non-core luxuries like facials and massages are seeing the greatest drop in demand.
 Consumers are more open to trying a beauty school to have their hair cut. (While beauty
schools are an option, a professional stylist with training, education, and multiple years of
hands-on experience is something that must be considered.)
 Consumers coloring their own hair, but returning to their regular professional stylist for
hair cuts.
 More consumers opting to do their own nails or alternating at-home and professional
manicures/pedicures.
 With the trust and loyalty factor, stylists with a strong client base are fortunately NOT
losing their clients in large part to discount chains.

To adapt to consumers’ changing spending habits, salons are adjusting to meet the needs of their

clients. “PBA is seeing a greater demand for the services we offer our salon members on

everything from business management and marketing assistance to mentor programs and a

multitude of educational classes. These classes are designed to help salons get through this

period and ideally emerge stronger in the future,” Porcaro said. Trends salons are

implementing to combat the recession include:

 Providing classes which teach women how to blow dry and style their own hair for
special events.
 Greater price promotions on products and a renewed interest in managing the salon’s
retail offerings.
 Working with product manufacturers and distributors to create new incentives on
products.
 Remaining supportive and non-judgmental if clients have tried another stylist or are
visiting less frequently.
 Providing directly or seeking out additional training and education so salons and their
stylists remain on the forefront of trends and styles.
 Re-examining marketing programs and incentives offered to clients.

Businesses such as the local restaurant, market or salon that provide products and services are

essential to the dayto-day lives of Americans. At approximately $56 billion in sales for 2008, the

overall beauty industry in North America is a significant part of our economy. As the economy

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The Aquino Group:
Business Plan: Regis Hair Salons
Prepared by: Scott Aquino, December 2009

continues to waver, it is the education, training, and personal relationships of professional stylists

that help ensure clients continue to return time and time again.

Finance
The Finance Plan is under review. It will be available once it is determined what the total

financial requirement for the project.

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