Essential Steps for Franchising or Selling Your Salon

By Aydin Asli, COO of Yocale 

With over 25 years of experience in the SMB and Enterprise space, I’ve witnessed firsthand the triumphs and challenges of building a successful business. In the salon industry, where passion and creativity reign supreme, maximizing value through franchising or outright sale requires combining artistry and style with exacting business acumen.

If you are considering selling or even franchising your salon, there are a few key factors you need to look out for. These key performance indicators (KPIs) can help you understand your strengths and weaknesses. Even if you do not end up selling or franchising, this exercise will provide deeper insights on where to go next with your business. Here’s what you need to know:

1. Financial Performance

The obvious first step is to inspect the raw numbers in your finances closely. What you are looking for primarily is consistency: Can you show a solid revenue growth and profitability trend over time? This is the easiest way to demonstrate that your business is stable and scalable.

A potential buyer or franchisee will want assurances that they are investing in a healthy business with potential for the future. It is vital to keep a close eye on expenses like rent, utilities, and staff costs. Efficient operations translate to higher profit margins, making your salon more attractive.

We do have to go beyond basic profit, loss, and operating costs. You will want to calculate two key metrics: Customer Acquisition Cost (CAC) and Customer Lifetime Value (CLV).

CAC is the money you spend to acquire a new customer (a combination of sales and marketing expenses). CLV is the revenue an average customer generates for the business. It can represent how loyal your customers are in terms of revenue. A low CAC and high CLV signal that your business is a great investment.

This is an excellent point to flag one essential ingredient to all the above and everything else we will discuss. With good data, this is possible to understand. Not having some sort of Customer Relationship Management (CRM) software and appointment system will make it hard to find out how loyal your clients are and how much they spend. The same goes for CAC, which requires you to track marketing efforts and their outcomes diligently.  

2. Operational Excellence

Operational success is closely tied to financial success, but it is essential to examine the two separately. Sometimes, money doesn’t have all the answers (although it usually does).

Let’s break this down into three different areas, as operations encompass everything you do day-to-day in your business.

Client Retention Rate: This was already discussed with CLV, but in an operational sense, it speaks to the quality of service a client receives and what you do outside of that to bring them back. Loyalty systems, memberships, packages—there are many ways to encourage repeat business. The most effective of them are all built on that quality of service.

A straightforward, salient, and essential measure of this is your Google Reviews. We’ll talk about them later. Again, having a system that manages client profiles and their appointment history is the only way to keep track of this without going crazy. A high client retention rate signals a loyal customer base and a strong brand reputation.

Staff Turnover: Low staff turnover indicates a positive work environment and well-trained employees. This stability is a valuable asset for any buyer or franchisee.

Booking Efficiency: Are you making the most of your time and that of your staff? Maximizing appointment slots and minimizing downtime is crucial. Reducing the number of no-shows is another element to consider here. This is where we see the easiest wins and most obvious success with Yocale. It handles all these automatically through a centralized online calendar, booking notifications, and staff scheduling.

3. Brand Reputation and Social Media Activity

It’s time to talk about Google reviews. When I talk to business owners, this is the one facet of their digital presence that they understand the importance of. Google uses both the quantity and quality of reviews for a business to rank it in searches. Do you want to know why you don’t see yourself on Google Maps when you search for your particular business type? 95% of the time, a competitor having more and better reviews than you is the reason.

Do everything possible to get a review from every client. A Google My Business listing with great reviews is a legitimate, tangible asset.

However, we are moving into an era where Google isn’t the be-all and end-all of online discovery for potential new clients. Instagram, TikTok, and AI search are proving to be real competitors to Google. Like the reviews, having a TikTok or Insta account with many relevant followers and good engagement is a real asset, providing social proof of your brand name recognition. This is going to be a considerable factor when franchising.

Building that presence and brand requires you to stand out from the crowd. Do you have a keen understanding of what differentiates you from your competitors? Investors or franchisees will want to know.

That’s a lot of work to do alone in this section. To nail this stuff down, you must minimize the amount of non-valuable admin work you do. Going back to the easy wins you get with Yocale, cutting down on schedule, phone tag, and paperwork is at the top of my list when I talk to business owners who use it.

4. Growth and the future

Let’s say you have all of the above handled. Solid financials, efficient operations, and a recognizable brand. What’s next, then? What makes sense in your local market? Is it more services, a new location, higher prices, selling more products? Doing a market analysis on what is possible for your business’s future will be valuable, even if you don’t end up selling.

Beyond your local market, can you prove that your salon’s current business model could succeed elsewhere? Scalability is an essential component of franchising. McDonald’s has been proven to work almost everywhere!

Finally, proof that you are staying ahead of the curve and innovating often goes under the radar in these projects. Are you using the latest machines? Are you up to date on the latest treatments and products? Have you adopted sustainable practices?

5. The Right Tools for the Job

Leveraging technology like Yocale can significantly enhance your salon’s performance and, in turn, its valuation. Features like online booking, automated reminders, point-of-sale integration, and detailed reporting provide valuable insights into your KPIs and streamline operations.

Focusing on these critical aspects can position your salon for maximum value, whether you choose to franchise or sell. Remember, building a successful salon is a marathon, not a sprint. Consistent effort, attention to detail, and a commitment to excellence will determine your success.