Technology Enabled Business Model

Mainstream business perception maintains the salon industry yields mediocre margins, low barriers to entry, high competition, involves managing creative people and navigating hard to predict “fashion-like” trends. NO THANK YOU!

Meanwhile, new technology is driving a structural transformation of the salon industry. Technology is enabling a new business model based on stylists renting a chair or suite.

The emerging salon suite model focuses on the real estate and construction segments of the value chain exclusively and is uninvolved in the actual operations of the salon businesses operating within the salon suite facility. This keeps our development business model simple and capital partners happy. 

The salon industry is very fragmented with no large participants to consolidate and distribute industry information to the mainstream business community. Therefore this profound transformation of a very large market is occurring largely unnoticed by the mainstream business community.

Although the business model has existed since the 1980’s it didn’t begin rapidly expanding until roughly fifteen years ago due predominately to technology. The wide-spread adoption of cell phones for the first time provided cosmetologists a convenient and direct form of communication with their individual customers. The introduction of smart phones provided cosmetologists abundant tools for scheduling, communication, marketing and payment processing - all possible without needing a central receptionist.

millennial habits will continue the market's shift towards the rental model

By 2025 it is estimated that Millennials will make up as much as 75 percent of the workforce. The customer value proposition provided by the salon suite business model lines up strongly with the beliefs and attitudes of millennials.

Unlike Baby Boomers, who may have been happy to work for someone else, many Millennials do not want to be company “lifers.”

Research indicates that 72% of millennials want to be their own boss, 74% want flexible work schedules and 88% favor work/life integration (i.e., blending work with the rest of their life more inextricably).

Cone’s 2013 survey of over 1,200 U.S. adults found Millennials to be the generation most focused on corporate social responsibility when making purchasing decisions. Almost all Millennials responded with increased trust (91%) and loyalty (89%), as well as a stronger likelihood to buy from those companies that supported solutions to specific social issues (89%).

In December 2016, Ted Gibson (“most expensive hairstylist in the world”) closed his famous NYC salon. In an interview, his partner Jason Backe cited as a primary reason: "With social media, new artists do not need a big-name salon or brand backing them. Our salon model is not inspiring to millennials." 

Large, Fragmented and Noncyclical Industry

According to IBISWorld, U.S. salon industry revenue is estimated at ~$56bn annually and expected to grow at ~2.5% per year.

IBIS estimates there are more than 1.8mm cosmetologists in the U.S. with 352,380 cosmetologists operating as W-2s.

The industry is highly fragmented with the largest participant comprising less than 3% of total industry revenues.

The salon industry has historically been noncyclical. During 2008 industry revenues remained flat while employment grew.

New York Metro and Manhattan 

Based on BLS data, The New York metro area is the largest hairstylist market in the country with 2x more stylists than the second largest (Chicago) and nearly 3x more stylists than the third largest (Los Angeles). Manhattan comprises the most affluent hairstylist market within metro New York.

Proven Concept With Zero Store Failures

The salon suite concept is a proven business model with locations in every major MSA including LA, Chicago, Boston, Miami, San Francisco and NYC. The industry as a whole currently includes an estimated 800 - 1,000 facilities nationwide.

Store failures are rare and since 1998 our brand has never had a store failure regardless of market or location. 

New stores typically achieve breakeven in their first 6 months regardless of MSA and Court Stone's recently completed 24th Street Manhattan location achieved store-level breakeven within 4 months of opening.

Under-Penetration of Salon Suite Business Combined with Industry Transition Creates Meaningful Supply / Demand Imbalance

Although the Dallas market has been experiencing accelerating salon suite development since the early 2000’s, most US markets are in their salon suite development infancy. Based on Dallas salon suite counts as a mature-market control, the largest cosmetology markets in the US (ranked by BLS employment data) appear very underpenetrated to salon suite development. The Facility Penetration chart illustrates Court Stone's estimated development penetration for the four largest metro areas in the U.S.