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To understand how a real-world beauty salon makes its business decisions, we visited Subway Salon, an upscale hair-cutting and coloring establishment located in a New Jersey suburb. The business—started in 1970—was still going strong in early 2009, despite the weakness in the economy. The owners, Robert and Barbara Castagno, employed 40 colorists, stylists, assistants, receptionists, and other employees as of January 2009. That puts Subway in the top 1-2% of beauty salons, based on number of workers (80% of beauty salons employ less than ten workers, according to statistics from the Census Bureau).
Robert and Barbara both still keep a full schedule of hair-cut and hair-coloring clients. So to run the business day-to-day, they hired a salon manager, Isaac Molina. Isaac explained to us how the salon is organized. There are 37 ‘stations’ for hair-styling and coloring. The hair styling stations line the exterior walls and their chairs have natural wood arms, while the black-armed coloring stations fill the middle of the salon. Four of the busiest colorists have two stations apiece to handle two customers simultaneously.
Each hair-styling station has a chair, a built in mirror and a side panel with a door containing equipment: curling and flat irons, blow dryer, clippers, trimmers, a set of hair products (moisturizers, gels, styling aids, and samples of products, cutting capes, and a collection of shears). Each coloring station has the same basic structure; however, the equipment includes bowls, brushes, spatulas, color capes, and a selection of combs).
In addition, there are four other main areas: a shampoo section with nine shampoo units with sinks and back washes; a nail and wax department ( with two pedicure chairs, one waxing bed, three manicure stations and one nail dryer), a coloring room (with a few different color lines, developers, manuals and catalogues); and a reception area with desks and binders. To supplement the blow dryers, the salon has specialized dryers: four hooded dryers using hot forced air and two rolling ball dryers that look like space age helmets that use electrical resistance.
In terms of other costs, Robert and Barbara undertook a major renovation of the salon’s two floors of leased commercial space in 2001. They also purchased software which helps them handle client reservations, along with the necessary computer hardware, including seven computers on site. Subway uses the services of professional accountants, lawyers and marketing firms.
What about labor? The salon pays colorists and stylists a base salary, plus an additional sum—known as a commission–based on the number of customers they handle and the revenue they bring in. Robert offers the example of a stylist with a weekly base salary of $500. The stylist might also get a commission equal to 30% of the revenue she brings in through her customers above a preset sales quota. For example, in a particular week, suppose a stylist generated $2000 in sales. That week, she would earn her base salary of $500 plus a commission of $225 (which is 30% of $2000-$1250 sales quota). This example excludes the per customer service charge deducted from the commission.
Not everyone gets the same salary and commission, of course. When workers are hired, they have to perform a demonstration on a model. Based on their skills, they are assigned a level of expertise, on a scale of one to five with five as the highest, with the highest prices. Customers choose the level of expertise they want. If new customers don’t know what they want, says Isaac “the staff at the front desk asks them about the service they desire, the kind of expertise they seek and the budget they have.” Answers such as ‘very experienced’ will usually generate assignment to a higher level, more expensive employee. A customer who stresses value is usually given an appointment with a level one or two employee. Isaac noted that taking the time up front to talk with the customer ensures greater customer satisfaction and makes good business sense.
Ultimately, the business-know knowledge of how to run the business comes from the owners, Robert and Barbara. Since the beginning, they’ve been focused on trying new and different techniques for cutting, shaping and coloring hair. Today they belong to Intercoiffure, a Paris-based organization of high-quality hairdressers, with members in 50 countries. In addition, Robert and Barbara participate in fashion industry shows in Paris, New York and Las Vegas.
How is the salon doing during the downturn? Robert doesn’t appear to be worried. “We’ve been through this before,” he said. He believes that they can weather this recession better than other salons due to their longevity, image, reputation and size. “We would put any expansion plans on hold, of course,” he added. In terms of expenses, the salon anticipates spending more on promotion and advertising, with an emphasis on electronic e-mail. If absolutely necessary, Robert would have to consider reducing the size of his payroll by cutting back on assistant hours. He hopes that business will continue to be brisk and he will be able to avoid that possibility.
Reported and written by Judy Scherer
