JohnnyComeLately

I'll have more questions later, but a few to get started.

A quick background: Opening a tanning salon is something my wife has wanted to do for about the last 5 or 6 years, so it's pretty much going to happen (if not low,later). We both make very good money on our normal jobs. The store is on my wife's way home from work, and about 15 minutes from my work. It's about 30 minutes from the house. The salon has 10 beds, 3 employees and has been in business for about 10 years.

We've put an offer in for the low 100s, and the asset list is about half the sale price (FMV). It was about 1/2 year sales three years ago, but after 9/11 it looks like sales have dropped. They did try to sell once before and has a long, protracted escrow that fell through. Sales have fallen 50% with only a reduction of expenses around 15%. So now the selling price is just under one years' sales. If these percentages won't work and you need numbers, let me know. I'm trying to avoid giving out too much. Back to us. I have an MBA and the wife has a MS in Business, so we have academic experience but no real world. We've had a lawyer review the original offer and we're going to a CPA with the taxes this week.
Few questions now:
The landlord's lease looks draconian, with provisions we "Must use landlords contractor for improvements, pay for any damages to plate glass (regardless of fault), pay for regular pesticide, etc, etc". Any killers to look for in landlord leases? I plan on canvassing a few retailers to get a sense of the landlord's "reasonableness".

Did others in the industry see a large drop off in sales post-9/11 too? The seller attributes the drop to the economy and letting advertising lag.

Anyone else ever had an issue buying a single location from a multistore company? They had 3 and are selling one location. The partnership is dissolving and the single owner left only wants two stores. We plan on keeping the name the same and hope to retain the employees (who previously floated from store to store).

My wife plans on taking two weeks off her normal job to work in the store and get to know the staff and store. The owner is offering minimal training. How much training would a TYPICAL new owner expect to need?

The seller is offering a $3000 rebate if he drops the 90 days warranty on equipment and replaces all the bulbs on the UltraBronze High Pressure bed. Is the warranty and bulb about equal to $3k in value? (Yes, this is a loaded question..) The oldest 5 beds were Puretans built in 1996. 4 beds are Tan Tech's which are 2 years old. The Ultra Hi-Pres. is 5 years old. The timer is a 2 year old FST.

Thanks for your time, and understanding

John

DWhite6872

I really do not like buying someone's salon...How much cash out of pocket do you have to come up with?. How many salons are in the area? There is so different variables..but I will keep it short how much cash is needed for this vs. a new salon with your taste and NEW beds...they have changed a lot since 1996.. If you want to send me a private message please do and I will help anyway I can!

studio 102

Not knowing area, I would never pay in the low 100's for something as you described as a losing proposition(at least that is my impression). You could open your own salon for that money. Sales are down, beds are old, lease is out dated and probably the mall property is, as well, if managed by a company with a 'draconian' thought.
The most valuable asset of buying an existing salon is the data base. The price should be based on this. How many clients and importantly,how many current (last 12 months).
Personaly, based on what you stated, I'd walk..do it my own way.

Oh..and if both have 'normal' jobs, I would plan on getting rid of one. You can't run a succesful salon as an absentee owner..even if it is 'on the way home from work'. You need to have a better hold on things by being there a good portion of the time. Do not trust anyone to do what you should be doing to make it a success.

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[ This Message was edited by: studio 102 on 2004-10-03 06:13 ]

Neon Beach

"The landlord's lease looks draconian, with provisions we "Must use landlords contractor for improvements, pay for any damages to plate glass (regardless of fault), pay for regular pesticide, etc, etc". Any killers to look for in landlord leases? I plan on canvassing a few retailers to get a sense of the landlord's "reasonableness"."

It would be a good idea to try and talk to other tenants to see what the story is.


"Did others in the industry see a large drop off in sales post-9/11 too? The seller attributes the drop to the economy and letting advertising lag."

With 9/11 and the beginning Iraq thing, it just rebounded here this past Winter. Rev were down, but not 50%.

As far as the age of the units, if they are working well and don't look battered and abused I wouldn't worry about it. Some people on this site have lots of money I guess and feel the need to buy new, bigger beds every 4 or fives years. Mine are 6 years old, work as well as they did the day I got them and certainly don't look there age. Use what's is there until you have the means to replace them.

Client list is important, but you have to look and see not only how many are so called "current", but how many are seasonal. Many of mine are only here for 2 or 3 months every Winter and not year round. You do know about the seasonality?

Sheila in Minnesota

Start from scratch -

Pass on this 'opportunity' ~ you got the tools to find the right location and your own employees.... I would never keep staff ~ especially from a multi location store.

Landlord issues suck - you can do everything right and still take it up the butt from a landlord....

Depending on the area of the country - - - 30 mins from home could be horrendous on a Call Off employee..... so that is not a positive either ~

If I were to do it over ~ I would build my own Stand-alone or stripmall.... my salon would be paying off ~ ME ~ in lieu of that ~ Pay MORE for that awesome busy strip in great repair (you don't want to be paying for a new roof, new surface in the lot, or new lighting in your CAM charges)......

If you are planning on keeping both your jobs and want minimal input to a turn key ~ then consider becoming a Licensee or Franchise establishment - where all the rules and decisions are made for you.

9-11 and El Ninio (2001 into 2002) did indeed kick that crap out of growth and did drastically effect anyone of us depending on Spring Breakers (which were cancelled) and J Term Travel (also cancelled)....

But you are considering entering a 'Seasonal Business'.... one that is under constant attack from the Derms and Cosmetic Companies (and even some Sunless honchos) to the tune of Millions and Millions of lobbiest Bucks a year.....

I loved MY salon ~ but I can't honestly say that I found much to love within the industry ... You need to decide if you want to get in to Make a Living or get in to Hide Income....

Most of the most successful people I've met were looking for a tax shelter ~ and darned if they didn't wind up kicking *** in performance too ~

Sorry this is so disjointed ~ I am watching some old jocks scream at each other before the game .... dam ~ those Black guys should teach the White guys how to dress!!!!

Steve Underhill

You must approach buying a salon the same way as if you where opening a new one. If it is for sale it is typically failing. Identify the problems, can they be corrected. If so it can be a smart investment. If not, stay away from it. Correct the problems immediately and do something for your existing clients to keep them as a client and to change their spending habits.

JohnnyComeLately

Thanks for all the replies and the PMs. We're still looking at the financials, as it's difficult to pull the numbers for just one store out of the numbers for all. We're going to be negotiating soon. The main reason we're buying one instead of building is severalfold. The biggest reasons are an existing database of customers (one of which I just found out today is a long time friend from a TransAm/Camaro car club) who are long time customers, and they've ironed out the small details. I don't have to get that call at 12 noon, "Come quick! The Windows OS is crashing and the credit card machine wont work". Everything is up, the business still always generates more cash than is spent, even on its worst month, and the employees are very enthusiastic.

I'll post more. Right now my wife feels I've given too much away during the sensitive part of the deal, so I'll wait to post more.

Neon Beach

TransAm/Camaro car club?

First genration?

tanMBA

How far apart are the 3 stores? I am sure you are already thinking of this but make sure you get some sort of protection from the other two locations actively soliciting the customer list that you are buying. Otherwise, it is worth a lot less. Either way, I personally would still be hesistant of buying 1 out of 3. If you keep the same name (and it is the same for all locations), whether your customers know it or not your brand reputation is tied into what the other owner does (which you also would have no control over).

tanu01

Listen to sheila!
Bob