Development Plan: Beauty Salon in London - Essay Example

PAGE TABLE OF CONTENTS 2 EXECUTIVE SUMMARY 3 BUSINESS MISSION 8 COMPANY OWNERSHIP/LOCATION 9 EXTERNAL ANALYSIS 10 The Economy and Business Environment Target Customers/Market Dynamics Competition Products and Services to be Offered SWOT ANALYSIS 15 MARKETING STRATEGIES 16 FINANCIALS 18 EXECUTIVE SUMMARY SALON DE PAIX The Salon de Paix offers a hip and cool Morrocan style salon ambience meant for the working moms and university students in the UK. Salon de Paix offers comprehensive hairdressing and spa services for the price of an English football ticket. The main target market of this beauty and spa salon is the middle class market which has the biggest purchasing power in the UK. THE PROJECT The Salon de Paix is a premium beauty and spa salon which offers pampered hair, nails, skin care and spa services for the upwardly mobile working people in the City of London. The salon targets primarily the female clientele (90%), most of whom are professional women, mothers and students. The salon offers various treatment types as: health treatments; pampering; routine grooming and spa services. Health treatments consist of pre-natal and post-natal massage services at competitive costs. The salon offers three kinds of hair and spa service packages for its valued customers: Superior Hair and Spa Package priced at 85 pounds, Indulgence Hair and Spa Package priced 150 pounds and the Premium Hair and Spa Package at 180 pounds. These packages include a combination of hair, nails, skin care and spa services. The hair services consists of haircuts, trims and style; highlights/foils & weaving; hair & scalp treatments; relaxers, perms; colors; shampoo and conditioning; curling, reconstructing, permanent waving. It also includes nail services such as manicures, pedicures, polish, sculptured nails, nail repair, hand conditioning treatments. It includes skin care: facials, body waxing, massage. The Salon de Paix offers a full line of L’Oreal products noted for their quality and client care. The salon is committed to being a strong retail center, inviting shoppers to interact. The target is 45% retail sales to service dollar sales. The salon has a website online and its operations are fully automated. Growth Strategy The salon is building a coherent and homogenous market in the City of London. The goal is to capture 80% of the working class market consisting of working moms and university students. Two growth strategies summarize the salon’s future objectives: a.) Expand salon operations through the addition and development of additional Salon de Paix in four additional locations around the City of London by 2008; the acquisition or development of salons operating in the same geographic areas and improve profitability by continuing to enhance the salon services for our clients and improving operating efficiency of our salon brand; and b.) Enhance efficiency of operations; and, c.) utilizing creative and aggressive marketing initiatives to establish a strong market awareness of the brand around the City of London. Competitive Strategy The challenges for the Salon de Paix are recruitment, retention, and productivity. Recruitment of an excellent pool of hair stylists and spa staff is an essential requirement of our business. Retention of quality staff will be done through a generous incentive and bonus package for high-performing employees. The salon staff is a pleasant combination of veteran stylists and new talents. Productivity is gained through constant evaluation of employees through the help of salon management software. A strong client retention strategy, consistent retail dollar to service dollar sales, and competitive daily sales goals are the components of salon productivity. There are three major ways in which we will create an advantage over its competitors over the next twelve months: a.) Brand management and development, consistent quality service, and established value pricing; b.) high employee motivation such as bonus incentives; and, c.) highly innovative and incentive based service options. Financials The salon operations will be financed by equity and leverage. The ratio is 70% equity and 30% leverage. The main owner of the salon will put in her savings of 150,000 British pounds and she will borrow 60,000 British pounds for the renovation of the salon space. The commercial loan is payable over a one year period with a 5% interest rate. The real estate property on which the salon building stands on is the family property of the salon owner. Operations Salon de Paix will commence daily business operations on January 31, 2008 with the opening of our first salon. In preparation for the opening, the business partners leased space, renovated the space, purchased salon equipment and hired staff. Marketing and Promotions The tri-media will be utilized for the advertising. The planned expenditures for marketing and promotion over the next twelve month period is meant to achieve the primary objective of increasing the awareness of the new salon. There will be advertisements placed in the major British dailies and tabloids. Promotional flyers will be distributed to the area residents near the salon location. There will be radio advertisement at least three times a day. There will be a television advertisement daily. The promotion expenses will be approximately 15,000 British pounds over the next six-month period ending May 31, 2008. Personnel The salon will have a lean management and staff structure. There are three management staff: the president, the salon manager and the marketing manager. There will be 20 salon staff: five stylists, five nails assistant, 5 skin care assistants and 5 spa assistants. There will be an additional 120 salon staff that will be hired once the salon opens four more locations within the year. The salon manager is responsible for the day-to-day operations of the salon and prepares receipts daily and organizes accounting items for the accountant COMPANY OWNERSHIP The company is owned by three individuals: Mr. Brown, Mr. Ridge and Mr. Game. The three pooled their life savings to finance the operations of this salon. Mr. Brown is the CEO. Mr. Ridge is the Salon Manager. Mr. Game is the Marketing Manager. The total investment cost is £300,000. Each partner contributed is £ 100,000.00 each. The salon is located at 233 St. Johns Hill, Batersea, London. BUSINESS MISSION The Salon de Paix aims to promote beauty and aesthetics in the middle class UK market by providing quality beauty and health treatment services at value pricing. The salon will focus all its resources in delighting its customers as they enter the salon premises. SALON MOTTO The Salon de Paix prides itself in this motto: Time for myself”. The salon engages their customers through staff recommendation of services and products that will enhance their personal beauty. The salon relies on customer feedback and personalized care. The focus is on building a personal hair, nails, spa and skin care regimen for each client and helping them to achieve positive results regular salon visits. INTERIORS AND PHYSICAL SPACE The Salon de Paix has a Morrocan style theme and concept. Morrocan inspired interior design is established around the salon and spa space. The pastel uniforms of the support staff, the decor, the layout, reflect the aspirations of the owner. The pastel shades connote femininity and with friendliness. The white overalls of the hair stylist, the nail specialist and the spa managers offer the impression of cleanliness, beauty care and professional status of the salon and spa staff. Light is manipulated to reflect off white surfaces ensuring that the faces and hands to be treated are clearly visible to the salon staff, while keeping the identity of the customers discreetly away from public view. The walls are painted with Morrocan style painting. Detailing is extensive. The furniture are also Morroccan-inspired. Fittings have the economical elegance of instruments, while the design of the lighting and use of different types of glass and colour create layers of transparency and translucence which impart a fitting sense of mystery and ephemerality. PAMPERING THE CUSTOMER The Salon de Paix offers packages which reflect success, independence and beauty. The customer is welcomed at the consultation area where her needs are identified and the corresponding treatment is advised. The walls are decorated with the qualification certificates of staff and various membership certificates of professional organizations. The salon offers a dignified lounge which serves as a waiting area with comfortable seating, Starbucks coffee and assorted women’s magazines. These assorted magazines include Marie Claire, Cosmopolitan, Hello and OK. The clients are taken to a private room after their treatment. The salon has several bathroom facilities; screened cubicles or private rooms where treatments are carried out. Moreover, the salon offers private cubicles for nail treatments. The salon has its own routines and invisible tracks along which staff walk in greeting clients, guiding them to treatment rooms, offering refreshments, and finally leading to the point where payment is made. The salon offers the pleasant aromas of perfumed creams and lotions, cups of tea and coffee, and the smell of nail products as its signature smell. EXTERNAL ANALYSIS The Economy and Business Environment The UK economy has shown itself to be particularly resilient to the shocks that have affected other countries in recent years. It has largely overcome the effects of the September 11th 2001 attacks on the US, the South Asian crisis sparked by SARS and it had weathered the July 7th and 21st terror attacks on the UK mainland. Health and beauty spending in the UK is buoyant as this is now regarded as non-discretionary. Spending on the body as a way of enhancing beauty is regarded as important since British men and women regard it as a right to have a “body beautiful”. Spending in this sector is expected to register an annual 30% growth rate. This development is very encouraging for salon owners and operators. Target Customers The Salon de Paix targets the young mothers and the university students who belong to the middle class segment. This market segment accounts for 45% of the female population in the UK. The purchasing power of the UK middle class has increased since the 2000s. The strong growth of the UK economy has opened up educational and work opportunities for all. This market segment has been neglected by the high-end British salons. The Salon de Paix will aggressively market to this sector. Market Dynamics There are only two salons which cater to the middle class market in the City of London. Given the total population of the city, the Salon de Paix can get a big market share of the given market segment. The demand for salon services per customer is three visits per month. The Salon de Paix can give discounts to encourage a repeat business from its customers. The Salon de Paix is the only salon with a Morrocan-inspired interiors. COMPETITION AND PORTER’S FIVE FORCES Threat of New Entrants There are many possible new entrants to the salon business. Potential competitors include suppliers of cosmetics, skin care products, beauty products and spa products which may want to do forward linkages by opening a salon. Fashion houses can also do backward linkages by opening hair and beauty salons for their top clients. Power of Buyers The customers and regular patrons of the salon and spa outlets do not establish a salon unless they possess the training and qualification for these types of services. The salon business is highly service-oriented. Power of Suppliers The suppliers of beauty and cosmetics products can also enter the salon and spa business with the proper strategy. However, Salon de Paix can strengthen its sales and promotions of beauty and cosmetics products to retain the goodwill of the company suppliers. The varying prices of beauty and cosmetics products can allow salon operators to be flexible in their product offerings. RIVALRY The competition in the salon and spa business is intense. Salon de Paix can build on quality service, value pricing and excellent customer relations as a means to ward off the strong competitors. The specific market focus on the middle class market is also a strong strategy for the company. Excellent after sale service can be used to build customer loyalty. Revenues and profitability Revenues forecasting for the first year of operation are £5,759,400. Profits are forecast to be £2,000,000 before tax and interest. PRODUCTS AND SERVICES OFFERED SPECIAL HEALTH TREATMENTS Health treatments form part of the range of services on offer. Clients access the salon in order to address pre-natal and post-natal massage services. Each massage session costs 75 pounds. The massage therapists try to promote psychosocial well-being on the customers. Feeling happy and relaxed were the phrases used by male and female customers after each massage session. Salon therapists guide clients in their selection of treatments, or recommend products to them. The popular media, TV make-over shows and advertising are all sources of information on what is and is not appropriate for particular types of men and women to wear, to purchase, even how and what to eat. In addition, social relationships reinforce consumption patterns and choices in style. In the very process of growing up female, a woman will learn how to police the boundaries of her own looking and being a woman. EXPERTISE IN SPA SERVICES The salon’s day spas offer services encompassing body scrubs, skin lightening, body wrapping, herbal wraps, massage/aromatherapy, derma abrasion, stretch mark and blemishes, anti-aging, facials, makeup, skin care, waxing, polishing, and anti-acne treatments. EXPERTISE IN HAIR, NAIL, SKIN CARE SERVICES The salon staff has the expertise in washing, conditioning and styling hair, cleansing, toning and moisturizing skin. They have the appropriate knowledge of product types and how to combine them, as well as the skills to apply them. They are also knowledgeable in eyebrow shaping, eyelash dyeing, manicures, facials and waxing are examples of treatments. These are the specific services: a.) Hair: haircuts, trims and style; highlights/foils & weaving; hair & scalp treatments; relaxers, perms; colors; shampoo and conditioning; curling, reconstructing, permanent waving; b.) Nails: manicures, pedicures, polish, sculptured nails, nail repair, hand conditioning treatments. c.) Skin Care: Facials, body waxing, massage; d.) Sale of professional hair and other beauty products; and, e.) pre-natal and post-natal massage services. SPECIAL PACKAGES Superior Hair and Spa Package This package relieves stress with an indulgent salt therapy, while the facial deep cleanses and polishes the skin. This package includes the following: sodashi organic sea scrub, facial therapy (30 minutes), deluxe OPI Manicure or Pedicure, fresh fruit juice drink, light lunch and one hour use of the day Spa facilities (Sauna, Steam Room and Gym). The package costs 85 pounds for a two hour service. Indulgence Hair and Spa Package This comprehensive package includes a relaxing body massage and a 30 minute facial, a manicure and pedicure. This 140 pounds package includes: express OPI manicure, eyelash tint, sodashi signature body massage, crystal sea contouring body wrap and facial therapy (30 minutes) express OPI pedicure, fresh fruit juice drink, light lunch, and one hour use of the Day Spa facilities (Sauna, Steam Room and Gym). The duration of the package is two hours. Premium Hair and Spa Package In this package, the therapists purify, polish and smooth the client’s skin with three luxurious treatments for the face and body, then indulge your hands or feet with a deluxe manicure or pedicure. The cost is 180 pounds. This package includes Jojoba Pearl Polish, Sodashi Signature Massage, Thermal Indulgence Facial, Deluxe OPI Manicure or Pedicure. The duration is 3 hours. SWOT ANALYSIS STRENGTHS The salon has these five strengths: a.) L’Oreal supports the Salon de Paix with on-going retail training on their array of beauty products. This free training either on-site or on the salon’s premises is offered regularly. This gives the salon and spa staff a clear understanding of how something works and under what conditions. The staff are able to try the products for themselves, and to learn the specific benefits and limitations of every single product the salon carries. This will help them tailor recommendations to specific clients’ specific needs. b.) The salon has a customer database. The staff gets the clients’ birth dates so everyone gets an annual special promo - just for her or him. The software program can track the clients’ purchasing history, then plan and target promotions more effectively. c.) The salon has a software program for the performance of its employees on a per hour basis. The bonus incentives are computed accurately and regularly enhancing employee compensation. d.) The salon offers prizes from suppliers for those who are able to reach specific marketing targets. e.) The salon offers client incentive programs ranging from loyalty cards to “buy 2 get 1 free” to gift bags and other accessories to incentive for referring clients. WEAKNESSES The business has these weaknesses: 1.) The salon only has one branch at the start of operations. Hence, since it does not have economies of scale, the beauty products can be slightly expensive compared to other salons. 2.) The salon has to pirate some veteran stylists resulting in higher human resources costs at the initial year of the business. 3.) As a newcomer to the business, the salon has several slack periods during the week. The marketing staff needs to start a marketing promotions to attract new clients to enter the salon and avail of the services. 4.) The brand name, Salon de Paix, is not yet known. It has to be marketed. OPPORTUNITIES The business has these opportunities: start a database of university students in all the schools located within a 10 mile radius of the salon and mail them discounted tickets, sponsor a university beauty pageant to bring in new customers, send mails to the residences nearby to let them know about the service, initiate lectures on beauty in the university dorms to raise awareness on skin care and spa services, offer huge discounts for institutional clients such as private companies and government offices nearby. THREATS The business faces these threats: the big salons can offer to buy out Salon de Paix; the big salons can get the veteran stylists and spa manager, the big salons can also engage in price wars with this newly-opened business and the other chain of spa businesses can also offer a wider service with affordable prices. STRATEGIES The salon can adopt several marketing strategies. The first strategy is to promote the slogan, “Time for Myself” in London newspapers and radio advertisements. This is good for internal use and focus. The second strategy is for the salon to install attractive signage to catch customer interest and curiousity for the salon service. The second strategy is to create and promote a website for the Salon and Spa. More consumers are turning to the internet to find products and services, and locate businesses in their area. The fourth strategy is to increase client base through regular advertising. The final strategy is to do Direct Mail Advertising in the local neighborhood. Financials Service time is the key to short- and long-run profitability. The salons may be increased by reducing excess capacity and increasing the salon’s contribution margin per unit of scarce resource. Although the salon may be operating below capacity, service time is a scarce resource during periods of peak demand. The salon’s profitability may be increased by bring its operations up to capacity and maximizing the contribution margin per service hour. The incentive based salary policy encouraged hairstylists to cater clients to clients as efficiently as possible to move on to the next customer. The policy motivate the staff to perform quality services efficiently. The average service time reflected this efficiency. These are the key factors affecting the salon’s profitability. In general, the two ways to increase net profit are : By increasing contribution margin relative to common expense. By decreasing common expenses The salon owner plans to pay the hairstylists nail assistants and skin care consultants commissions based on variable commission service fees. Commissions would tie the staff’s economic interests to the salon’s economic interests. The staff should be compensated by a commission on contribution margin per hour. The towels will be laundered in-house. The staff’ compensation will be a variable commission based on contribution per service hour. The salon’s advertising strategy will encourage business during slack periods. This included offering discounts on the highest contribution margin services during specific slack periods. The rates charged will also be simplified. Since each department offers different types of services and caters to different clients, this results in different rates of service fees. For example, the cutting department offers dry cuts and wet cuts, the styling department services men, women and children, the coloring department offers three different processes—single, double and frosting and the shampooing department offers blow dry and setting services. Assigning a gross profit percentage of 100 to each department implies the contribution margin is 100%. KEY ACTIONS PLANNED IN THE NEXT 12 MONTHS EVENT JAN FEB MAR APR MAY JUNE JULY AUG SEPT Renovate Space == Recruit/ Train Staff ====== == Mktg Plan ===== ====== == Launch Day ===== ===== ====== ===== == Sales June July August Sept October Nov Dec Total Revenues and direct costs Days open in month 20 20 20 20 20 20 20 120 Facial Volume/ day 1000 1000 1000 1000 1000 1000 1000 6,000 Selling price per item 35 35 35 35 35 35 35 35 Cost price per item 5 5 5 5 5 5 5 5 Sales 35,000 35,000 35,000 35000 35000 35000 35000 210,000 Costs 5000 5000 5000 5000 5000 5000 5000 30000 Gross profit 30,000 30,000 30,000 30,000 30,000 30,000 30,000 2,700,000 Body Volume/ day 1000 1000 1000 1000 1000 1000 1000 6000 Selling price per item 55.00 55.00 55.00 55.00 55.00 55.00 55.00 Cost price per item 5 5 5 5 5 5 5 30 Sales 5500 55000 55000 55000 55000 55000 55000 330,000 Costs 5000 5000 5000 5000 5000 5000 5000 330,000 Gross profit 50,000 55,000 5000 50000 50000 50000 50000 3,000,000 Nails Volume/ day 100 100 100 100 100 100 100 600 Selling price per item 40.00 40.00 40.00 40.00 40.00 40.00 40.00 4,000 Cost price per item 7.00 7.00 7.00 7.00 7.00 7.00 7.00 42.00 Sales 4,000 4,000 4,000 4,000 4,000 4,000 4,000 24,000 Costs 700 700 700 700 700 700 700 4,200 Gross profit 3,300 3,300 3,300 3,300 3,300 3,300 3,300 19,800 Hair Volume/ day 100 100 100 100 100 100 100 100 Selling price per item 40.00 40.00 40.00 40.00 40.00 40.00 40.00 240 Cost price per item 7.00 7.00 7.00 7.00 7.00 7.00 7.00 42 Sales 4,000 4,000 4,000 4,000 4,000 4,000 4,000 24,000 Costs 700 700 700 700 700 700 700 42,000 Gross profit 3,300 3,300 3,300 3,300 3,300 3,300 3,300 19,800 Skin Care Volume/ day 100 100 100 100 100 100 100 100 Selling price per item 40.00 40.00 40.00 40.00 40.00 40.00 40.00 240 Cost price per item 7.00 7.00 7.00 7.00 7.00 7.00 7.00 42 Sales 4,000 4,000 4,000 4,000 4,000 4,000 4,000 24,000 Costs 700 700 700 700 700 700 700 42,000 Gross profit 3,300 3,300 3,300 3,300 3,300 3,300 3,300 19,800 Pre-natal and Postnatal Treatments Volume/ day 100 100 100 100 100 100 100 100 Selling price per item 40.00 40.00 40.00 40.00 40.00 40.00 40.00 240 Cost price per item 7.00 7.00 7.00 7.00 7.00 7.00 7.00 42 Sales 4,000 4,000 4,000 4,000 4,000 4,000 4,000 24,000 Costs 700 700 700 700 700 700 700 42,000 Gross profit 3,300 3,300 3,300 3,300 3,300 3,300 3,300 19,800 Read More