March 31, 2024 • 40 mins
Welcome back to Retail Intel with your host, Brian Sheehan! Salon Republic is completely transforming and elevating the studio scene for today’s beauty professionals!✨Founded by Eric Taylor, Salon Republic's community of like-minded independent beauty professionals share their unique talents, creating an environment full of inspiration!
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Episode Transcript
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Brian Sheehan (00:00):
Hey.
Well, welcome to Retail Intel,the podcast where we dive deep
into the dynamic world ofcommercial real estate.
I'm your host, Brian Sheehan,and I'm thrilled to be your
guide on this journey throughthe bustling streets of retail,
the aisles of shopping centers,and the world of commercial
(00:21):
property investment.
With me today is Eric Taylor,founder and CEO of Salon
Republic.
Eric is also host of the HairGame podcast and chair of the
Professional Beauty Federationof California.
If you're not familiar withSalon public is a complete
rethinking of the ideal workingenvironment for today's beauty
professionals.
Not just a salon, but aone-of-a-kind experience curated
(00:44):
by each beauty pro.
I'm excited to learn more.
Eric, welcome.
Eric Taylor (00:49):
Thank you.
Thanks for having me.
Brian Sheehan (00:52):
So how have you been?
How's business?
Eric Taylor (00:54):
Well, I've been great.
I'm in California right now.
We're having one of those quoteunquote atmospheric rivers.
So things are flooding and somepeople are enjoying it.
Some people aren't.
My office actually, since thisis a real estate podcast, those
listeners might enjoy or notenjoy hearing about the flooding
(01:14):
of my office.
So as we speak, my feet are onsome wet carpet.
Brian Sheehan (01:21):
Oh, wow.
It looks sunny.
But you're near a window, Ithink, and I wouldn't have
guessed you're flooded outthere.
Eric Taylor (01:29):
Yeah, but that's okay.
Life moves on.
Brian Sheehan (01:33):
Well, I'd love to start with your background.
So you founded Salon Republicclose to, what, 25 years ago?
Yeah, I started it.
What were you doing prior tofounding?
Sure.
So I
Eric Taylor (01:45):
went to college.
I went to Pepperdine.
I studied finance in college.
I went to Pepperdine to playbaseball, and my baseball career
got truncated by an injury.
So then I had to get real aboutlife, and I figured finance was
a good thing to learn.
And so that's what I did.
And right before graduating, Iwas kind of struggling to think
(02:09):
of a good way to spend my timeafter I graduated.
This was in the late 90s.
And for those listeners who areold enough, they remember that
this was the dot-com craze.
And so I had a lot of friendsgoing into investment banking.
I had a lot of friends who weredoing the dot-com thing.
Some guys were going intoincubators, if the listeners
(02:32):
remember those things, right?
You hire a bunch of supposedlyreally smart people, you pay
them a lot of money, you throwthem in a really fancy office,
and then they're just supposedto magically come up with some
really good business ideas.
Brian Sheehan (02:44):
Great business idea, yeah.
Eric Taylor (02:46):
Right?
And the global crossing, youknow, those days.
So a lot of my friends weredoing that and I thought, boy,
this is interesting, but Iwanted to do something more
entrepreneurial.
My dad was in the real estatebusiness.
His dad was in the constructionand real estate business in New
York City.
And I thought, okay, so I'velearned quite a bit about that
because his office was in ourhouse as I was growing up.
(03:09):
I kind of saw him renting outhis industrial real estate
mostly, his warehouse space.
And growing up, my brother andI were sent around to the
tenants during the holidays, andwe would give away turkeys to
the tenants.
That's kind of old school.
Landlords don't do that kind ofstuff anymore.
So I was raised in that kind oftraditional real estate
(03:29):
environment.
And then on the other side ofthe coin was my mother, who was
a professional oil painter.
She had her studio in thehouse, and she was actually
rather successful as an oilpainter And what was interesting
about growing up and watchingher become a successful artist
(03:50):
was she had to temper hercreativity with the reality of
having to sell something tosomebody who was willing to pay
for it.
So she couldn't go off intothese wild creative tangents.
If she wanted to sellsomething, she needed to balance
(04:10):
that creativity with whatpeople actually wanted to buy.
And so I watched her do this,and she ended up having quite a
career and painted many famouspeople.
She did portraiture as well aslandscape art and sold art to
very wealthy people and paintedsome famous athletes.
Emmett Smith, she painted JimBrown.
(04:32):
She painted the Supreme CourtJustice Warren Burger before he
passed.
She painted the King ofMongolia.
So she had created this greatcareer with where so few artists
are able to do it.
And so there are so manylessons in growing up in a
household where you had thesetwo influences.
So I wanted to be anentrepreneur as well.
(04:53):
And so as I was approachinggraduation at school, I thought
to myself, my time is nevergoing to be less valuable than
now.
Whatever path I choose, I'mgoing to get experience and I'm
going to all of a sudden starthaving expectations of what I
should be getting paid And sonow is the time, upon graduating
(05:16):
from college, to try things.
And so I was very interested inunconsolidated industries.
I looked at car washes.
I looked at dry cleaners.
I looked at beauty services,hair salons, because these are
industries that are everywhere,yet...
very few companies actually hadvery much of the market.
(05:39):
And to me, that meantopportunity for somebody who
knew as little as I knew comingout of college.
And I didn't have a lot ofmoney.
As much as I'm saying that myparents were successful, middle
class.
We were able to have a nicehouse.
We belonged to a middle of theroad country club.
So not rich, but they did wellenough to provide a comfortable
(06:02):
life for my brother and I.
Certainly not enough to reallybackstop a bunch of ideas that
their kids might have.
So long story short, I lookedat these various industries and
I was finding the salon industryto be one that combined the
artistry of my mother with thekind of pragmatic, necessary
(06:24):
sort of business of real estate.
And, you know, people have toget their hair cut.
Most people, Brian, I don'twant to insult you, but I'm
looking through
Brian Sheehan (06:35):
the
Eric Taylor (06:36):
computer screen and I don't see a lot to cut.
But in the hair industry, welike to say it's what we leave
on.
It's not what we take off.
So I thought, you know,everybody's got to get their
hair cut.
And, you know, women love toget their hair colored.
And it just seems like such aresilient business.
I I think I'm going to put someeffort into this.
(06:59):
So when I graduated fromPepperdine in Malibu,
California, I moved back toTexas, which is, I'm from
Dallas, and I had a girlfriendthere.
And her hairstylist moved toone of the first studio-based
salons that had ever beencreated.
Nowadays, some people call thisthe salon suites industry.
I like to call themstudio-based salons.
(07:22):
What I eventually ended updoing, what Salon Republic now
is quite a bit different than alot of the franchises like Sola
and Phoenix, and we'll get intothat a little bit.
But her hairstylist moved toone of the first studio-based
salons, and she got home andcalled me on the landline,
because she was living with herparents as well at the time, and
she said, you've got to checkthis place out.
(07:44):
And it was five minutes from myparents' house, and I jumped in
the car, drove down the street,walked in, and it made
immediate sense to me.
That salon was 10,000 squarefeet.
The salon is still there infact and we're going back 26
years okay if anything there'sgoing to be a recurring theme in
this conversation that is theresilience of this business that
(08:06):
salon is still there it's about10,000 square feet it's got
about 60 studios in it and Iinitially walked in all those
years ago and it made immediatesense to me it was the perfect
combination of the environmentin which I was raised between my
mom and my dad the founder ofthe concept his name was Keith
He was there.
(08:27):
in the salon that day.
And he approached me and askedif I needed help.
And I said initially, I'mlooking to get a haircut.
I lied to him.
I said, I'm here to get ahaircut.
And that led to him walking mearound the salon and kind of
telling me about the salon.
And as we were walking, I saw abunch of happy beauty
professionals that had their ownspaces.
(08:49):
They had their own studios andthey're working happily with
their clients.
And I could see that some hadtheir doors closed and had
privacy and Some had their doorsopen and they could be kind of
part of the greater thing ofwhat was happening there in the
salon.
And people kind of had controlover their environment.
And so I said to Keith, I said,you know, to be honest with
(09:10):
you, I did not come in here toget my haircut.
I just graduated from collegeand my girlfriend's hairdresser
works here and she told me aboutit and it sounded amazing.
So I wanted to come see it formyself.
And I think it's reallyspectacular what you're doing
here.
And would you mind if I kind ofhang around?
You don't have to pay me.
I can...
you know I'll Give me things todo.
I'll take out the trash.
(09:31):
I don't know much about things,but I'd like to learn.
And so I worked for him forfree for about a year.
And he was my mentor.
And I learned what beautyprofessionals, how they work.
I learned what they like.
I learned what they need to besuccessful.
I learned that the clients lovethe privacy that they get with
(09:52):
their beauty professional andthe ups and downs of the
business.
And then after about a year, Idumped the girlfriend and I
moved back out to Californiawhere there were no such salons.
And in 2000, I opened the firstSalon Republic, which was in
Studio City, California.
Brian Sheehan (10:09):
That's incredible.
I'll be honest, the first timeI walked into a studio-based
salon, it was a little lost onme.
I was confused.
You know, I went with my mom.
This was probably, like yousaid, 20, 25 years ago.
And I didn't understand if itwas all one business or
different businesses.
And so I guess for somebodythat's unfamiliar with it, how
(10:30):
do you explain a studio-basedsalon to someone?
Eric Taylor (10:35):
Well, I essentially say that we take a large space
between about 8,000 and 25,000square feet.
And well, frankly, it dependswho I'm talking to.
If I'm talking to a real estateguy, I would say I subdivide
the space into individualstudios that we then rent to
independent beautyprofessionals.
And then we maintain thefacility, we layer in certain
(10:59):
amenities, and that's theessence of that version of the
description.
If I'm talking to, let's say,one of my wife's girlfriends,
I'm like, we have a salon whereeverybody has their own space,
where everybody has their ownstudio, and they work
independently in there.
Typically, that's good enoughto do the job, but I've found
(11:22):
that after all these years,unless somebody actually walks
in, they don't quite get it.
Brian Sheehan (11:28):
Yeah, you really do have to go in to understand
that And you explaining yourbackground makes perfect sense
then how you kind of got here,which is that combination of art
and science and real estate.
And so I get that a little bit.
But what is it that kind ofdrives you in this industry,
(11:49):
this business?
You kind of have a passion anda talent for it.
Got gray hair, you know.
So, I mean, it kind of makessense.
But like, what do you loveabout studio based salons?
Eric Taylor (12:00):
Yeah.
So, you know, what's interestingabout that question is I'm not
sure that I had, I'm not sure Ieven recognized the answer until
a number of years after Istarted the business.
But the answer is just soobvious.
And it really is the fact thatI grew up in an entrepreneurial
(12:20):
environment with each of myparents doing their own thing,
eating what they kill, right?
And that was a lot of myexplanation of my mom's
situation.
You know, she needed to makemoney and she had to balance
things out, the art and thepragmatism of making something
commercially viable.
And that to me, I just lovedit.
It seemed, frankly, starting abusiness, running a business, I
(12:45):
mean, it is so much part of myDNA.
I almost feel like everyindividual needs to do it.
There's so much that can belearned from it.
You know, human nature, youlearn about yourself.
It gives you a sense ofownership.
It gives you a sense ofaccountability, responsibility,
(13:06):
pushes you outside of yourcomfort zone.
You know, you need to do thingsthat you never thought you
could do before.
And so that That really issomething that I just value so
greatly.
And so, like I mentioned, itwas a number of years later that
I realized that's one of thethings I like about doing this
(13:27):
so much is that I'm givingbeauty professionals the
opportunity to be entrepreneurs.
They don't have to work insomebody else's world.
What most traditional salonsare, is somebody who started a
salon and they put, let's say,10 chairs in the salon and they
(13:48):
paint the walls the color theywant.
They choose the furniture thatthey want.
The owner puts the music onthat they want and they have the
temperature of the air thatthey like and they hire the
person for the front and theycreate the culture and they
decide the hours in which thepeople who work there should be
able to work.
They decide what products aregoing to be used in the salon.
(14:11):
So most beauty professionalswho work in a salon like that,
which is the traditional type ofsalon, they're working in
someone else's world.
And these are creative people.
And so I've always believedthat creative people especially
work best when they're able todecide how they work, when they
(14:31):
work, what they wear to work,the type of clients that they
want to interact with every day,the type of hairstyle, the type
of hair services that they'redoing.
If they want to do supercreative, quirky styles that are
on the cutting edge of thingsand they want to be around those
types of clients, then in ourenvironment, they can do that.
(14:53):
That's not the case when you'reworking in a traditional salon.
So I felt like I was givingpeople the opportunity to do
what I value so much, which ishaving kind of that
entrepreneurial spirit.
Brian Sheehan (15:07):
I guess that kind of leads me into my next
question.
I'm a real estate guy.
I love real estate.
I love doing deals.
I love learning about concepts.
We own and operate shoppingcenters.
And the salon-based...
studio-based salon businessseems to do well in our
environment.
My sense is it's a prettycompetitive space.
(15:30):
There's other operators outthere.
You guys seem like best inclass, really.
But I guess I'm curious to hearyou talk a little bit about the
competition in the space, butmore specifically around what
makes Salon Republic unique.
And really, what is it aboutyour business and the model that
makes it so resilient?
Eric Taylor (15:50):
Sure.
So as far as thedifferentiation and the type of
studio salon that I've alwaysbelieved in and that we've
eventually been able to developacross the chain.
First off, I believe in acompany-owned chain.
You know, the franchise modelis one that allows people to
(16:13):
expand really fast, but I'vealways believed that the quality
of the salon is simply anaggregation of all of the people
working in the salon.
And it's hard to control thequality of the salon if you're
going to focus on sellingfranchises to franchisees.
A lot of the proposition thatthe franchises in this industry
(16:37):
propose to franchisees is whatthey call a semi-absentee
business model.
They essentially say to, let'ssay, somebody who's saved
$750,000 and they don't want toput it in the stock market, they
say, okay, well, you can put upthis location and you can clip
(16:57):
coupons and you can spend therest of the time on the golf
course or you you know, fishing,and it's semi-absentee.
You don't really have to putmuch effort into it.
And certainly, in all the yearsthat I've been doing this, I've
seen a lot of the franchiseunits, a lot of the franchise
salons out there, operate injust that way, where the owner
(17:19):
isn't there very often.
And if, let's say, a light bulbgoes out in a hairstylist's
studio on a Saturday, whereshe's going to make the majority
of her income for the week,there's nobody there to change
that light bulb.
And it's important to have thatkind of support to make that
(17:41):
environment a really, reallygood one for the beauty
professional.
So I've always believed inhaving the control over the
unit.
So we are 100% corporate owned.
Another thing that we do is wetake a much larger footprint
than our competitors do.
They tend to average around5,000 square feet, and then they
(18:04):
build a box that has minimumhallway widths, and then they
cram as many studios as possibleinto that footprint.
We take, I would say average,our average square footage is
about 16,000 square feet, and wehave wider hallways than
everybody else.
We put a lot of nice furniturein the hallways.
We put a tremendous amount ofeffort into interior design.
(18:27):
The place needs to look like, Iwant it to look like the nicest
salon that they've walked into.
And one of the things that isso great about having that
larger footprint is a host ofthings.
Number one, we have a muchlarger presence on the street.
Okay.
It's a substantive lookingfacility from the street.
(18:48):
Number two, it allows us tolayer in amenities such as
full-time managers.
So we have full-time people inthe front of the salon and very
nice reception area, marbledesk, you know, very nice.
Everything looks as good as wecan possibly make it.
And there's a human when youwalk in and the human greets you
(19:08):
and helps the client find thebeauty professional, helps the
beauty professional with someissues that they're having you
know this is a very humanbusiness and so to not have a
human on site presents a lot ofproblems so we believe is very
very important to have thatsupport of the manager at the
front it also allows us to havea beauty supply at the front of
(19:33):
our location so we carry about80 of the most popular products
in the beauty industry and wehave them available at wholesale
pricing to our beautyprofessionals no one else does
that and one of the reasons whynobody else does it is because
nobody has 140 i mean we haveour beverly hills location has
(19:54):
about 200 beauty professionalsin the facility so that is a
critical mass of beauty pros whoneed to be supplied with
professional product.
And so we've developed therelationships with the brands
and we're able to carry allthose products.
And so that's a tremendousconvenience to a hairstylist to
(20:17):
walk down the hall and to buy atthe best prices, the color that
they need for the last minuteclient that may have just booked
and needs a Redken 6N to dothat, let's say that color for
our client coming in.
So we've been doing that forprobably seven or eight years.
We're still very excited aboutthat.
And our beauty professionalslove that kind of convenience.
(20:40):
And then the last thing that wedo that nobody else does is
towel service.
We offer free unlimited towels,complimentary unlimited towels
to everybody there in thefacility.
And for the real estate peoplelistening, that sounds like
maybe not that big of a deal.
But if you're a hairstylist andyou've got seven clients on a
particular day and you use,let's say, three towels per
(21:02):
client, at the end of the day,the typical independent
hairstylist needs to take thatbag of towels and they need to
wash them.
And oftentimes they're washingthem in the salon.
So how long does a load of washtake?
You know, it takes an hour,hour and 20 minutes.
Who wants to hang around for anhour and 20 minutes at the end
of their very busy day?
You want to go home.
(21:23):
So we provide towels foreveryone.
And it is a tremendous costbecause...
I like to say there's got to bea landfill somewhere with about
a million of my black towels init because these things just
disappear.
I don't know where they go.
They just incinerate into theatmosphere somewhere.
(21:47):
But we continue to buy towels,and we have them there on site
for all of our beautyprofessionals to use, and nobody
else does that.
So we differentiate ourselveswith those things, and we've
been able to attract the mostsuccessful beauty professionals
anywhere in all the markets thatwe operate in.
One of the early beautyprofessionals that we got, his
(22:09):
name is Guy Tan.
and Guy Tain became the mosthigh-profile hairstylist in the
world through social media andhis kind of entertaining antics
on YouTube and Instagram.
And so Guy was with us formany, many years before he
developed his own brand, and nowhe's not behind the chair
anymore.
But we have a lot of very, veryhigh-profile hairstylists.
(22:32):
We have L'Oreal's number oneeducator worldwide, works in our
location, and many, many othertop-quality beauty professional.
So we care a great deal aboutthat.
Brian Sheehan (22:43):
I kind of chuckled for a minute thinking
about the three towels per day.
I have a 13 year old daughterwho, you know, seems to go
through a lot of towels.
So I guess I have some sense ofwhat kind of impact that
potentially has on a salonbusiness.
But I'm curious for those highprofile professionals who've
(23:04):
been with you in the past andthe ones that are with you now,
do you survey them?
Have you found any It wasreally the towel service was
kind of the big thing thatreally, you know, clinched the
deal for them.
There are other things about itthat really speak to them.
Eric Taylor (23:20):
Yeah, we do occasional surveys to test the
pulse.
But most of the informationthat we get is just in those
one-on-one conversations sincewe have people on site and we
get to know the people and wedevelop that community.
We get to know the beauty proswho work in our salons.
And frankly, it's verysubjective.
(23:41):
I mean, towel service iseverybody pretty much who uses
towels loves the towel service.
But sometimes Some people mightprioritize the fact that they
can just walk down the hall andbuy the professional products in
the onesies, twosies quantitieswhenever they need it.
Some people like that more.
(24:02):
Some people like the fact thatthere's a large community of
other beauty professionals whoare working independently but
yet provide a a community thatmost people like so it's it's
very very subjective
Brian Sheehan (24:18):
it sounds like this incredible ecosystem that
happens within the walls of thespace and i guess i wasn't aware
of the beauty supply aspect tothat and it makes me want to ask
more about how that virtuouscycle impacts the other spaces,
(24:39):
the entire center?
You know, from a landlord'sperspective, what is it about
Salon Republic that makes this areally desirable use?
Eric Taylor (24:48):
Sure.
So I would say there's a fewanswers to that question.
Number one, highly resilienttenant.
So we have 25 salons right now.
We'll have 31 by the middle of2024.
We've been doing this foralmost 24 years, and we've only
closed one salon.
And the only reason we closedis because the landlord
(25:09):
practically forced us outbecause they wanted to repurpose
the building.
So we've never closed a salonon our own because...
the business struggle.
That is just so rare in thisindustry.
And that includes, of course,the Great Recession.
We sailed through the GreatRecession just fine.
So extremely resilient businessmodel.
(25:32):
One of the other things thatlandlords love about us is the
quality of person, the qualityof demographic that we bring to
a shopping center.
You know, our goal when we opena salon is to attract the best
beauty professionals in themarket.
You know, we're not cheap towork in.
So the hairstylists who come towork at Salon Republic, they're
(25:55):
successful hairstylists andthey have well-heeled clients.
You know, they have high-incomedemographic clients.
And these are people who, youknow, depending on the market,
it's It's somewhere between,let's call it 60 and 80% female
clients who come to the salonand they spend a while in the
(26:17):
salon and they patronize theother tenants in the salon.
They eat there.
They're going to shop nextdoor.
And these are the exact type ofpeople that 99% of landlords
want to come to the center.
And that customer is comingbecause they're hairstylist went
(26:38):
there.
Okay, so the landlord doesn'thave to do anything to get this
high income demographic to cometo the shopping center except
for put Salon Republic therebecause we are a destination for
this type of demographic.
So we have gone into more thanone struggling shopping center
and within a year, the shoppingcenter has completely turned
(27:03):
around.
And by the way, because we're adestination, we can take the
worst spaces in the shoppingcenter.
We can take the elbow of theshopping center.
We can take the second floorthat's been vacant for seven
years.
We love that because thehairstylist is going to go where
the salon is and the client isgoing to go where the salon is.
(27:25):
We do not need to be on thatoutlot out by the street on the
hard corner.
So that's That's the otherthing.
And then the third thing Iwould say that landlords love
about us, and I never reallythought about this until one of
the landlords said it, maybe 10years ago, they said, one of the
things we love about you guysis that you aggregate personal
(27:47):
care services under one tenant.
So instead of having a nailsalon and 900 square feet that's
owned by a manicurist who'snever opened a nail salon
before, has never read a leasebefore, is relatively not
creditworthy, relativelyunsophisticated, and frankly,
(28:10):
difficult to deal with.
And then a little salon overthere, and then a little waxing
place over here, and then maybethere's seven little places and
a shopping center, and thelandlord has to deal with each
of them.
You know, they deal with us.
And, you know, we've gotten tothe point now where we're
somewhat sophisticated.
We have about 75 employees.
(28:31):
We're creditworthy, thenational creditworthy.
We've got a facilities group.
So when there's a leak in thefacility, we We get in there and
we fix it in a professionalmanner.
When it comes to interactingwith the landlord, we have a
real estate group here in theoffice right behind me.
And there are professionals atit.
(28:52):
And they respond quickly andthey take care of things and
they understand the relationshipbetween landlord and tenant.
And so I thought that was kindof interesting when I first
heard that.
Brian Sheehan (29:02):
Oh, it's fascinating on so many levels.
I don't often think about yourbusiness as you being a landlord
per se, and the business ofoperating real estate is so far
removed sometimes from thebusiness of what goes on inside
a retail or restaurant space.
So you really have to have apassion for it.
You have to have the teamthat's that can support it.
(29:24):
It sounds like you do.
How many locations did you saythat you have open?
Eric Taylor (29:29):
We have 25 open and we're opening six in the next
five months, if I'm doing themath right, I think.
So it'd be 30, 32.
Yeah, I think we'll be at 31 bythe middle of 2024.
Brian Sheehan (29:45):
And then how about for next year?
How many do you think you'llopen in 2025?
Eric Taylor (29:50):
So next year, our goal is for 10 locations.
And we're looking at acquiringsome other salons around,
typically some people who'vegotten into the business and
they don't like it very much, orthey're not doing a very good
job taking care of thehairstylists.
And so we're looking atacquiring them as well.
(30:10):
So that's the goal.
Brian Sheehan (30:12):
smaller footprint salons?
You're looking at those 5,000,6,000 square foot operators and
want to grow those?
Eric Taylor (30:19):
Nope.
Typically it's larger or ifit's a smaller one with an
opportunity to expand it, wereally like the larger
footprints.
I think we're right at themoment, we're looking at 8,000
up into the mid 20,000neighborhood.
Our largest location is about26,000 square feet.
Brian Sheehan (30:40):
I never think about yours being kind of a
one-stop shop in the wellness,health, beauty space and how
that dynamic kind of plays outin the center.
Who do you like to be aroundthen when you're looking at
potential future opportunitysites?
Eric Taylor (31:00):
You know, frankly, we don't really care that much
as long as...
I know landlords don't hearthat very often, but...
We don't really.
We don't really care that muchunless the center has kind of
positioned itself in a very kindof discount outlet type of
(31:21):
situation.
Because we attract the highquality beauty professionals who
want to be able to charge...
on the upper end of the marketfor beauty professionals.
To be next to a 99-cent storeis not the best for us.
But otherwise, we don't reallycare.
Brian Sheehan (31:41):
Where do you want Salon Republic to be in five
years?
If I interview you again inthat time frame, how many will
you have open?
What's changed, if anything?
I
Eric Taylor (31:53):
hope that we have continued to refine the type of
salon that we build.
I hope that we've continued tomaintain the sense of community
within each location and acrosslocations.
On that note, we throw aholiday party annually that's
become quite a thing.
(32:14):
This last holiday party we hada month and a half ago and at
the end in December of 2023, wehad about 2,000 people and a
large kind of nightclub facilityin Hollywood and with pumping
music and a lot of the beautybrands show up and people like
to have fun with each other andmeet new people and we love that
(32:35):
community.
So hopefully we continue tomaintain that sense of being a
part of something and in termsof our footprint You know,
hopefully we continue to grow ata 10 plus pace per year.
Um, if we can grow it more thanthat while maintaining the
quality and the community, then,then that, that would be a
welcome surprise.
Brian Sheehan (32:57):
That's awesome.
I mean, these are not smallprojects, so if you can take on
that kind of pipeline, I mean,that's just really incredible.
Eric Taylor (33:04):
Yeah.
I mean, we have an in-houseconstruction group that works
under our, our real estate teamand, um, These guys have worked
at very large publicly tradedcompanies, rolled out dozens of
units per year.
They've already done thisbefore.
And so I've tried to build ateam with a tremendous amount of
(33:26):
experience so we don't tripourselves up.
Brian Sheehan (33:30):
How often are you looking at centers that you
want to acquire and turn around?
Eric Taylor (33:35):
Oh, well, I mean, in the 24 years I've found...
many, many pieces of realestate that I would love to
acquire and buy.
Typically, historically, ithasn't made a lot of sense.
I did buy one, which was afreestanding unit, 12,000 square
feet in Colorado.
I bought that location.
(33:55):
This was right after thesubprime washout, 2010, and I
bought it directly from the bankwho had repossessed the
building.
We still have that salon.
It's owned real estate but inmost of the most of the
environments in which we operateyou know Southern California
(34:18):
Texas Washington State Coloradoit doesn't make a lot of sense
for us to buy the real estate
Brian Sheehan (34:26):
I can believe that you know this has been
really awesome I had just acouple other questions here one
Specific to the business, youhad mentioned, we talked before
about the run rate.
And what is that?
Why is it important to yourbusiness?
Eric Taylor (34:43):
So run rate in terms of us finding beauty
professionals for it?
Yeah, I think
Brian Sheehan (34:49):
it was about the turnover that happens in the
industry sort of generally.
And your business is bufferedfrom that because you experience
a much lower rate of turnover.
turnover, I guess.
Eric Taylor (35:03):
Right.
So the way that we look atthis, if you look across the
economy at employees in general,workers in general, typical
turnover of an employee is abouta third Which makes sense.
You look around your office andlife expectancy is about three
(35:26):
years or so.
And so that's kind ofindustry-wide.
And then you look at myindustry in particular and I
think the the number which bythe way is nobody has a good
number on this because myindustry is so highly fragmented
and there's there's no datacompilation company whose will
(35:49):
ever be able to to get this kindof accurate data but most
people figure it's about thesame so a salon will turn over
about a third of its peopleevery year.
The turnover within SalonRepublic is in the teens.
So we're about half of what theaverage turnover is.
And I think that's just aresult of the fact that the
(36:11):
beauty professionals are able tobuild the type of work
environment that they want.
If they want to make a changein their environment, they Let's
say they're tired of a certainkind of furniture that they have
in there or they're tired ofthat really loud paint color on
the walls because maybe theirlife has changed a little bit.
(36:32):
They can change it.
They don't have to find anothersalon to work in.
So the flexibility and thefreedom and that independence
allows them just a lot ofopportunities.
Brian Sheehan (36:44):
I mean, it's a real testament to the success.
Maybe it's a driver of thesuccess in your business, but I
just found that to beincredible.
There's that kind of deltabetween sort of what the
industry experiences and whatSalon Republic experiences.
My last question for you, as alandlord, what do you like, what
(37:04):
do you need from your landlordpartners for Salon Republic to
be successful?
Who are some of your bestlandlords?
Maybe not by name, but what arethey doing to help you win?
Eric Taylor (37:17):
Well, we have a lot of different landlords, a lot
of the biggest ones thateverybody knows.
You know, Westfield is alandlord in multiple locations.
I don't mind naming them, noreason why I can't.
Westfield, we're in a number oftheir locations.
Douglas Emmett, which isprimarily an office landlord,
we're in a number of theirbuildings as well.
Great relationships with all ofour landlords.
(37:39):
There's a few that aren'tpopping into my head at the
moment, but we like to developrelationships with landlords and
continued to be sentopportunities from other
properties in their portfolio.
And we like to have a templatelease with a particular landlord
who might prioritize somethings and not other things.
(38:02):
And so it just kind ofexpedites the process.
We like long-term leases, 10years plus, because we go in
there with a lot of our ownmoney.
And so just like a landlord isdeveloping a property, there's a
big capital expense componentand that needs to be justified
over time with cash flow.
(38:22):
So we come in with a lot of ourmoney and then otherwise we
look for some economicparticipation in some regard.
We're rather flexible in thatregard.
And sometimes the economicparticipation that we request
from the landlord could be inthe form of free rent.
(38:43):
Sometimes it's in the form ofTI.
Every landlord is different.
Some of our landlords wouldrather give us TI money and have
us start paying a full rentright away.
And as long as the economicswork for us, that's fine with
us.
And so we've done it that way.
We've come to the table withmore cash and then lower rent.
(39:03):
In the beginning, we have apretty sophisticated modeling
that we do financially and ourbalance sheet allows us to be
pretty flexible.
Brian Sheehan (39:14):
Well, Eric, it was great speaking with you
today.
Thank you for joining me onRetail Intel.
I love learning about SalonRepublic.
It's just an incrediblebusiness that you've built.
Be on the lookout for new SalonRepublic locations opening near
you and be sure to check themout on Instagram at
loveerictaylor and atsalonrepublic.
(39:36):
And check out Eric's podcast,The Hair Game, wherever you find
your podcasts.
Whether you're an aspiring realestate mogul, a seasoned pro or
simply curious about the placeswhere we shop dine play and
work this podcast is your allaccess pass to the world of
commercial real estate connectwith me on LinkedIn and if
(39:57):
you're interested in being apart of the Retail Intel podcast
send a message tonationalaccounts at
phillipsedison.com if you wantto hear more about new and
expanding brands keep tuning into Retail Intel and please
subscribe follow like and repostTalk to you next time.
Hey.
Well, welcome to Retail Intel,the podcast where we dive deep
into the dynamic world ofcommercial real estate.
I'm your host, Brian Sheehan,and I'm thrilled to be your
guide on this journey throughthe bustling streets of retail,
the aisles of shopping centers,and the world of commercial
(00:21):
property investment.
With me today is Eric Taylor,founder and CEO of Salon
Republic.
Eric is also host of the HairGame podcast and chair of the
Professional Beauty Federationof California.
If you're not familiar withSalon public is a complete
rethinking of the ideal workingenvironment for today's beauty
professionals.
Not just a salon, but aone-of-a-kind experience curated
(00:44):
by each beauty pro.
I'm excited to learn more.
Eric, welcome.
Eric Taylor (00:49):
Thank you.
Thanks for having me.
Brian Sheehan (00:52):
So how have you been?
How's business?
Eric Taylor (00:54):
Well, I've been great.
I'm in California right now.
We're having one of those quoteunquote atmospheric rivers.
So things are flooding and somepeople are enjoying it.
Some people aren't.
My office actually, since thisis a real estate podcast, those
listeners might enjoy or notenjoy hearing about the flooding
(01:14):
of my office.
So as we speak, my feet are onsome wet carpet.
Brian Sheehan (01:21):
Oh, wow.
It looks sunny.
But you're near a window, Ithink, and I wouldn't have
guessed you're flooded outthere.
Eric Taylor (01:29):
Yeah, but that's okay.
Life moves on.
Brian Sheehan (01:33):
Well, I'd love to start with your background.
So you founded Salon Republicclose to, what, 25 years ago?
Yeah, I started it.
What were you doing prior tofounding?
Sure.
So I
Eric Taylor (01:45):
went to college.
I went to Pepperdine.
I studied finance in college.
I went to Pepperdine to playbaseball, and my baseball career
got truncated by an injury.
So then I had to get real aboutlife, and I figured finance was
a good thing to learn.
And so that's what I did.
And right before graduating, Iwas kind of struggling to think
(02:09):
of a good way to spend my timeafter I graduated.
This was in the late 90s.
And for those listeners who areold enough, they remember that
this was the dot-com craze.
And so I had a lot of friendsgoing into investment banking.
I had a lot of friends who weredoing the dot-com thing.
Some guys were going intoincubators, if the listeners
(02:32):
remember those things, right?
You hire a bunch of supposedlyreally smart people, you pay
them a lot of money, you throwthem in a really fancy office,
and then they're just supposedto magically come up with some
really good business ideas.
Brian Sheehan (02:44):
Great business idea, yeah.
Eric Taylor (02:46):
Right?
And the global crossing, youknow, those days.
So a lot of my friends weredoing that and I thought, boy,
this is interesting, but Iwanted to do something more
entrepreneurial.
My dad was in the real estatebusiness.
His dad was in the constructionand real estate business in New
York City.
And I thought, okay, so I'velearned quite a bit about that
because his office was in ourhouse as I was growing up.
(03:09):
I kind of saw him renting outhis industrial real estate
mostly, his warehouse space.
And growing up, my brother andI were sent around to the
tenants during the holidays, andwe would give away turkeys to
the tenants.
That's kind of old school.
Landlords don't do that kind ofstuff anymore.
So I was raised in that kind oftraditional real estate
(03:29):
environment.
And then on the other side ofthe coin was my mother, who was
a professional oil painter.
She had her studio in thehouse, and she was actually
rather successful as an oilpainter And what was interesting
about growing up and watchingher become a successful artist
(03:50):
was she had to temper hercreativity with the reality of
having to sell something tosomebody who was willing to pay
for it.
So she couldn't go off intothese wild creative tangents.
If she wanted to sellsomething, she needed to balance
(04:10):
that creativity with whatpeople actually wanted to buy.
And so I watched her do this,and she ended up having quite a
career and painted many famouspeople.
She did portraiture as well aslandscape art and sold art to
very wealthy people and paintedsome famous athletes.
Emmett Smith, she painted JimBrown.
(04:32):
She painted the Supreme CourtJustice Warren Burger before he
passed.
She painted the King ofMongolia.
So she had created this greatcareer with where so few artists
are able to do it.
And so there are so manylessons in growing up in a
household where you had thesetwo influences.
So I wanted to be anentrepreneur as well.
(04:53):
And so as I was approachinggraduation at school, I thought
to myself, my time is nevergoing to be less valuable than
now.
Whatever path I choose, I'mgoing to get experience and I'm
going to all of a sudden starthaving expectations of what I
should be getting paid And sonow is the time, upon graduating
(05:16):
from college, to try things.
And so I was very interested inunconsolidated industries.
I looked at car washes.
I looked at dry cleaners.
I looked at beauty services,hair salons, because these are
industries that are everywhere,yet...
very few companies actually hadvery much of the market.
(05:39):
And to me, that meantopportunity for somebody who
knew as little as I knew comingout of college.
And I didn't have a lot ofmoney.
As much as I'm saying that myparents were successful, middle
class.
We were able to have a nicehouse.
We belonged to a middle of theroad country club.
So not rich, but they did wellenough to provide a comfortable
(06:02):
life for my brother and I.
Certainly not enough to reallybackstop a bunch of ideas that
their kids might have.
So long story short, I lookedat these various industries and
I was finding the salon industryto be one that combined the
artistry of my mother with thekind of pragmatic, necessary
(06:24):
sort of business of real estate.
And, you know, people have toget their hair cut.
Most people, Brian, I don'twant to insult you, but I'm
looking through
Brian Sheehan (06:35):
the
Eric Taylor (06:36):
computer screen and I don't see a lot to cut.
But in the hair industry, welike to say it's what we leave
on.
It's not what we take off.
So I thought, you know,everybody's got to get their
hair cut.
And, you know, women love toget their hair colored.
And it just seems like such aresilient business.
I I think I'm going to put someeffort into this.
(06:59):
So when I graduated fromPepperdine in Malibu,
California, I moved back toTexas, which is, I'm from
Dallas, and I had a girlfriendthere.
And her hairstylist moved toone of the first studio-based
salons that had ever beencreated.
Nowadays, some people call thisthe salon suites industry.
I like to call themstudio-based salons.
(07:22):
What I eventually ended updoing, what Salon Republic now
is quite a bit different than alot of the franchises like Sola
and Phoenix, and we'll get intothat a little bit.
But her hairstylist moved toone of the first studio-based
salons, and she got home andcalled me on the landline,
because she was living with herparents as well at the time, and
she said, you've got to checkthis place out.
(07:44):
And it was five minutes from myparents' house, and I jumped in
the car, drove down the street,walked in, and it made
immediate sense to me.
That salon was 10,000 squarefeet.
The salon is still there infact and we're going back 26
years okay if anything there'sgoing to be a recurring theme in
this conversation that is theresilience of this business that
(08:06):
salon is still there it's about10,000 square feet it's got
about 60 studios in it and Iinitially walked in all those
years ago and it made immediatesense to me it was the perfect
combination of the environmentin which I was raised between my
mom and my dad the founder ofthe concept his name was Keith
He was there.
(08:27):
in the salon that day.
And he approached me and askedif I needed help.
And I said initially, I'mlooking to get a haircut.
I lied to him.
I said, I'm here to get ahaircut.
And that led to him walking mearound the salon and kind of
telling me about the salon.
And as we were walking, I saw abunch of happy beauty
professionals that had their ownspaces.
(08:49):
They had their own studios andthey're working happily with
their clients.
And I could see that some hadtheir doors closed and had
privacy and Some had their doorsopen and they could be kind of
part of the greater thing ofwhat was happening there in the
salon.
And people kind of had controlover their environment.
And so I said to Keith, I said,you know, to be honest with
(09:10):
you, I did not come in here toget my haircut.
I just graduated from collegeand my girlfriend's hairdresser
works here and she told me aboutit and it sounded amazing.
So I wanted to come see it formyself.
And I think it's reallyspectacular what you're doing
here.
And would you mind if I kind ofhang around?
You don't have to pay me.
I can...
you know I'll Give me things todo.
I'll take out the trash.
(09:31):
I don't know much about things,but I'd like to learn.
And so I worked for him forfree for about a year.
And he was my mentor.
And I learned what beautyprofessionals, how they work.
I learned what they like.
I learned what they need to besuccessful.
I learned that the clients lovethe privacy that they get with
(09:52):
their beauty professional andthe ups and downs of the
business.
And then after about a year, Idumped the girlfriend and I
moved back out to Californiawhere there were no such salons.
And in 2000, I opened the firstSalon Republic, which was in
Studio City, California.
Brian Sheehan (10:09):
That's incredible.
I'll be honest, the first timeI walked into a studio-based
salon, it was a little lost onme.
I was confused.
You know, I went with my mom.
This was probably, like yousaid, 20, 25 years ago.
And I didn't understand if itwas all one business or
different businesses.
And so I guess for somebodythat's unfamiliar with it, how
(10:30):
do you explain a studio-basedsalon to someone?
Eric Taylor (10:35):
Well, I essentially say that we take a large space
between about 8,000 and 25,000square feet.
And well, frankly, it dependswho I'm talking to.
If I'm talking to a real estateguy, I would say I subdivide
the space into individualstudios that we then rent to
independent beautyprofessionals.
And then we maintain thefacility, we layer in certain
(10:59):
amenities, and that's theessence of that version of the
description.
If I'm talking to, let's say,one of my wife's girlfriends,
I'm like, we have a salon whereeverybody has their own space,
where everybody has their ownstudio, and they work
independently in there.
Typically, that's good enoughto do the job, but I've found
(11:22):
that after all these years,unless somebody actually walks
in, they don't quite get it.
Brian Sheehan (11:28):
Yeah, you really do have to go in to understand
that And you explaining yourbackground makes perfect sense
then how you kind of got here,which is that combination of art
and science and real estate.
And so I get that a little bit.
But what is it that kind ofdrives you in this industry,
(11:49):
this business?
You kind of have a passion anda talent for it.
Got gray hair, you know.
So, I mean, it kind of makessense.
But like, what do you loveabout studio based salons?
Eric Taylor (12:00):
Yeah.
So, you know, what's interestingabout that question is I'm not
sure that I had, I'm not sure Ieven recognized the answer until
a number of years after Istarted the business.
But the answer is just soobvious.
And it really is the fact thatI grew up in an entrepreneurial
(12:20):
environment with each of myparents doing their own thing,
eating what they kill, right?
And that was a lot of myexplanation of my mom's
situation.
You know, she needed to makemoney and she had to balance
things out, the art and thepragmatism of making something
commercially viable.
And that to me, I just lovedit.
It seemed, frankly, starting abusiness, running a business, I
(12:45):
mean, it is so much part of myDNA.
I almost feel like everyindividual needs to do it.
There's so much that can belearned from it.
You know, human nature, youlearn about yourself.
It gives you a sense ofownership.
It gives you a sense ofaccountability, responsibility,
(13:06):
pushes you outside of yourcomfort zone.
You know, you need to do thingsthat you never thought you
could do before.
And so that That really issomething that I just value so
greatly.
And so, like I mentioned, itwas a number of years later that
I realized that's one of thethings I like about doing this
(13:27):
so much is that I'm givingbeauty professionals the
opportunity to be entrepreneurs.
They don't have to work insomebody else's world.
What most traditional salonsare, is somebody who started a
salon and they put, let's say,10 chairs in the salon and they
(13:48):
paint the walls the color theywant.
They choose the furniture thatthey want.
The owner puts the music onthat they want and they have the
temperature of the air thatthey like and they hire the
person for the front and theycreate the culture and they
decide the hours in which thepeople who work there should be
able to work.
They decide what products aregoing to be used in the salon.
(14:11):
So most beauty professionalswho work in a salon like that,
which is the traditional type ofsalon, they're working in
someone else's world.
And these are creative people.
And so I've always believedthat creative people especially
work best when they're able todecide how they work, when they
(14:31):
work, what they wear to work,the type of clients that they
want to interact with every day,the type of hairstyle, the type
of hair services that they'redoing.
If they want to do supercreative, quirky styles that are
on the cutting edge of thingsand they want to be around those
types of clients, then in ourenvironment, they can do that.
(14:53):
That's not the case when you'reworking in a traditional salon.
So I felt like I was givingpeople the opportunity to do
what I value so much, which ishaving kind of that
entrepreneurial spirit.
Brian Sheehan (15:07):
I guess that kind of leads me into my next
question.
I'm a real estate guy.
I love real estate.
I love doing deals.
I love learning about concepts.
We own and operate shoppingcenters.
And the salon-based...
studio-based salon businessseems to do well in our
environment.
My sense is it's a prettycompetitive space.
(15:30):
There's other operators outthere.
You guys seem like best inclass, really.
But I guess I'm curious to hearyou talk a little bit about the
competition in the space, butmore specifically around what
makes Salon Republic unique.
And really, what is it aboutyour business and the model that
makes it so resilient?
Eric Taylor (15:50):
Sure.
So as far as thedifferentiation and the type of
studio salon that I've alwaysbelieved in and that we've
eventually been able to developacross the chain.
First off, I believe in acompany-owned chain.
You know, the franchise modelis one that allows people to
(16:13):
expand really fast, but I'vealways believed that the quality
of the salon is simply anaggregation of all of the people
working in the salon.
And it's hard to control thequality of the salon if you're
going to focus on sellingfranchises to franchisees.
A lot of the proposition thatthe franchises in this industry
(16:37):
propose to franchisees is whatthey call a semi-absentee
business model.
They essentially say to, let'ssay, somebody who's saved
$750,000 and they don't want toput it in the stock market, they
say, okay, well, you can put upthis location and you can clip
(16:57):
coupons and you can spend therest of the time on the golf
course or you you know, fishing,and it's semi-absentee.
You don't really have to putmuch effort into it.
And certainly, in all the yearsthat I've been doing this, I've
seen a lot of the franchiseunits, a lot of the franchise
salons out there, operate injust that way, where the owner
(17:19):
isn't there very often.
And if, let's say, a light bulbgoes out in a hairstylist's
studio on a Saturday, whereshe's going to make the majority
of her income for the week,there's nobody there to change
that light bulb.
And it's important to have thatkind of support to make that
(17:41):
environment a really, reallygood one for the beauty
professional.
So I've always believed inhaving the control over the
unit.
So we are 100% corporate owned.
Another thing that we do is wetake a much larger footprint
than our competitors do.
They tend to average around5,000 square feet, and then they
(18:04):
build a box that has minimumhallway widths, and then they
cram as many studios as possibleinto that footprint.
We take, I would say average,our average square footage is
about 16,000 square feet, and wehave wider hallways than
everybody else.
We put a lot of nice furniturein the hallways.
We put a tremendous amount ofeffort into interior design.
(18:27):
The place needs to look like, Iwant it to look like the nicest
salon that they've walked into.
And one of the things that isso great about having that
larger footprint is a host ofthings.
Number one, we have a muchlarger presence on the street.
Okay.
It's a substantive lookingfacility from the street.
(18:48):
Number two, it allows us tolayer in amenities such as
full-time managers.
So we have full-time people inthe front of the salon and very
nice reception area, marbledesk, you know, very nice.
Everything looks as good as wecan possibly make it.
And there's a human when youwalk in and the human greets you
(19:08):
and helps the client find thebeauty professional, helps the
beauty professional with someissues that they're having you
know this is a very humanbusiness and so to not have a
human on site presents a lot ofproblems so we believe is very
very important to have thatsupport of the manager at the
front it also allows us to havea beauty supply at the front of
(19:33):
our location so we carry about80 of the most popular products
in the beauty industry and wehave them available at wholesale
pricing to our beautyprofessionals no one else does
that and one of the reasons whynobody else does it is because
nobody has 140 i mean we haveour beverly hills location has
(19:54):
about 200 beauty professionalsin the facility so that is a
critical mass of beauty pros whoneed to be supplied with
professional product.
And so we've developed therelationships with the brands
and we're able to carry allthose products.
And so that's a tremendousconvenience to a hairstylist to
(20:17):
walk down the hall and to buy atthe best prices, the color that
they need for the last minuteclient that may have just booked
and needs a Redken 6N to dothat, let's say that color for
our client coming in.
So we've been doing that forprobably seven or eight years.
We're still very excited aboutthat.
And our beauty professionalslove that kind of convenience.
(20:40):
And then the last thing that wedo that nobody else does is
towel service.
We offer free unlimited towels,complimentary unlimited towels
to everybody there in thefacility.
And for the real estate peoplelistening, that sounds like
maybe not that big of a deal.
But if you're a hairstylist andyou've got seven clients on a
particular day and you use,let's say, three towels per
(21:02):
client, at the end of the day,the typical independent
hairstylist needs to take thatbag of towels and they need to
wash them.
And oftentimes they're washingthem in the salon.
So how long does a load of washtake?
You know, it takes an hour,hour and 20 minutes.
Who wants to hang around for anhour and 20 minutes at the end
of their very busy day?
You want to go home.
(21:23):
So we provide towels foreveryone.
And it is a tremendous costbecause...
I like to say there's got to bea landfill somewhere with about
a million of my black towels init because these things just
disappear.
I don't know where they go.
They just incinerate into theatmosphere somewhere.
(21:47):
But we continue to buy towels,and we have them there on site
for all of our beautyprofessionals to use, and nobody
else does that.
So we differentiate ourselveswith those things, and we've
been able to attract the mostsuccessful beauty professionals
anywhere in all the markets thatwe operate in.
One of the early beautyprofessionals that we got, his
(22:09):
name is Guy Tan.
and Guy Tain became the mosthigh-profile hairstylist in the
world through social media andhis kind of entertaining antics
on YouTube and Instagram.
And so Guy was with us formany, many years before he
developed his own brand, and nowhe's not behind the chair
anymore.
But we have a lot of very, veryhigh-profile hairstylists.
(22:32):
We have L'Oreal's number oneeducator worldwide, works in our
location, and many, many othertop-quality beauty professional.
So we care a great deal aboutthat.
Brian Sheehan (22:43):
I kind of chuckled for a minute thinking
about the three towels per day.
I have a 13 year old daughterwho, you know, seems to go
through a lot of towels.
So I guess I have some sense ofwhat kind of impact that
potentially has on a salonbusiness.
But I'm curious for those highprofile professionals who've
(23:04):
been with you in the past andthe ones that are with you now,
do you survey them?
Have you found any It wasreally the towel service was
kind of the big thing thatreally, you know, clinched the
deal for them.
There are other things about itthat really speak to them.
Eric Taylor (23:20):
Yeah, we do occasional surveys to test the
pulse.
But most of the informationthat we get is just in those
one-on-one conversations sincewe have people on site and we
get to know the people and wedevelop that community.
We get to know the beauty proswho work in our salons.
And frankly, it's verysubjective.
(23:41):
I mean, towel service iseverybody pretty much who uses
towels loves the towel service.
But sometimes Some people mightprioritize the fact that they
can just walk down the hall andbuy the professional products in
the onesies, twosies quantitieswhenever they need it.
Some people like that more.
(24:02):
Some people like the fact thatthere's a large community of
other beauty professionals whoare working independently but
yet provide a a community thatmost people like so it's it's
very very subjective
Brian Sheehan (24:18):
it sounds like this incredible ecosystem that
happens within the walls of thespace and i guess i wasn't aware
of the beauty supply aspect tothat and it makes me want to ask
more about how that virtuouscycle impacts the other spaces,
(24:39):
the entire center?
You know, from a landlord'sperspective, what is it about
Salon Republic that makes this areally desirable use?
Eric Taylor (24:48):
Sure.
So I would say there's a fewanswers to that question.
Number one, highly resilienttenant.
So we have 25 salons right now.
We'll have 31 by the middle of2024.
We've been doing this foralmost 24 years, and we've only
closed one salon.
And the only reason we closedis because the landlord
(25:09):
practically forced us outbecause they wanted to repurpose
the building.
So we've never closed a salonon our own because...
the business struggle.
That is just so rare in thisindustry.
And that includes, of course,the Great Recession.
We sailed through the GreatRecession just fine.
So extremely resilient businessmodel.
(25:32):
One of the other things thatlandlords love about us is the
quality of person, the qualityof demographic that we bring to
a shopping center.
You know, our goal when we opena salon is to attract the best
beauty professionals in themarket.
You know, we're not cheap towork in.
So the hairstylists who come towork at Salon Republic, they're
(25:55):
successful hairstylists andthey have well-heeled clients.
You know, they have high-incomedemographic clients.
And these are people who, youknow, depending on the market,
it's It's somewhere between,let's call it 60 and 80% female
clients who come to the salonand they spend a while in the
(26:17):
salon and they patronize theother tenants in the salon.
They eat there.
They're going to shop nextdoor.
And these are the exact type ofpeople that 99% of landlords
want to come to the center.
And that customer is comingbecause they're hairstylist went
(26:38):
there.
Okay, so the landlord doesn'thave to do anything to get this
high income demographic to cometo the shopping center except
for put Salon Republic therebecause we are a destination for
this type of demographic.
So we have gone into more thanone struggling shopping center
and within a year, the shoppingcenter has completely turned
(27:03):
around.
And by the way, because we're adestination, we can take the
worst spaces in the shoppingcenter.
We can take the elbow of theshopping center.
We can take the second floorthat's been vacant for seven
years.
We love that because thehairstylist is going to go where
the salon is and the client isgoing to go where the salon is.
(27:25):
We do not need to be on thatoutlot out by the street on the
hard corner.
So that's That's the otherthing.
And then the third thing Iwould say that landlords love
about us, and I never reallythought about this until one of
the landlords said it, maybe 10years ago, they said, one of the
things we love about you guysis that you aggregate personal
(27:47):
care services under one tenant.
So instead of having a nailsalon and 900 square feet that's
owned by a manicurist who'snever opened a nail salon
before, has never read a leasebefore, is relatively not
creditworthy, relativelyunsophisticated, and frankly,
(28:10):
difficult to deal with.
And then a little salon overthere, and then a little waxing
place over here, and then maybethere's seven little places and
a shopping center, and thelandlord has to deal with each
of them.
You know, they deal with us.
And, you know, we've gotten tothe point now where we're
somewhat sophisticated.
We have about 75 employees.
(28:31):
We're creditworthy, thenational creditworthy.
We've got a facilities group.
So when there's a leak in thefacility, we We get in there and
we fix it in a professionalmanner.
When it comes to interactingwith the landlord, we have a
real estate group here in theoffice right behind me.
And there are professionals atit.
(28:52):
And they respond quickly andthey take care of things and
they understand the relationshipbetween landlord and tenant.
And so I thought that was kindof interesting when I first
heard that.
Brian Sheehan (29:02):
Oh, it's fascinating on so many levels.
I don't often think about yourbusiness as you being a landlord
per se, and the business ofoperating real estate is so far
removed sometimes from thebusiness of what goes on inside
a retail or restaurant space.
So you really have to have apassion for it.
You have to have the teamthat's that can support it.
(29:24):
It sounds like you do.
How many locations did you saythat you have open?
Eric Taylor (29:29):
We have 25 open and we're opening six in the next
five months, if I'm doing themath right, I think.
So it'd be 30, 32.
Yeah, I think we'll be at 31 bythe middle of 2024.
Brian Sheehan (29:45):
And then how about for next year?
How many do you think you'llopen in 2025?
Eric Taylor (29:50):
So next year, our goal is for 10 locations.
And we're looking at acquiringsome other salons around,
typically some people who'vegotten into the business and
they don't like it very much, orthey're not doing a very good
job taking care of thehairstylists.
And so we're looking atacquiring them as well.
(30:10):
So that's the goal.
Brian Sheehan (30:12):
smaller footprint salons?
You're looking at those 5,000,6,000 square foot operators and
want to grow those?
Eric Taylor (30:19):
Nope.
Typically it's larger or ifit's a smaller one with an
opportunity to expand it, wereally like the larger
footprints.
I think we're right at themoment, we're looking at 8,000
up into the mid 20,000neighborhood.
Our largest location is about26,000 square feet.
Brian Sheehan (30:40):
I never think about yours being kind of a
one-stop shop in the wellness,health, beauty space and how
that dynamic kind of plays outin the center.
Who do you like to be aroundthen when you're looking at
potential future opportunitysites?
Eric Taylor (31:00):
You know, frankly, we don't really care that much
as long as...
I know landlords don't hearthat very often, but...
We don't really.
We don't really care that muchunless the center has kind of
positioned itself in a very kindof discount outlet type of
(31:21):
situation.
Because we attract the highquality beauty professionals who
want to be able to charge...
on the upper end of the marketfor beauty professionals.
To be next to a 99-cent storeis not the best for us.
But otherwise, we don't reallycare.
Brian Sheehan (31:41):
Where do you want Salon Republic to be in five
years?
If I interview you again inthat time frame, how many will
you have open?
What's changed, if anything?
I
Eric Taylor (31:53):
hope that we have continued to refine the type of
salon that we build.
I hope that we've continued tomaintain the sense of community
within each location and acrosslocations.
On that note, we throw aholiday party annually that's
become quite a thing.
(32:14):
This last holiday party we hada month and a half ago and at
the end in December of 2023, wehad about 2,000 people and a
large kind of nightclub facilityin Hollywood and with pumping
music and a lot of the beautybrands show up and people like
to have fun with each other andmeet new people and we love that
(32:35):
community.
So hopefully we continue tomaintain that sense of being a
part of something and in termsof our footprint You know,
hopefully we continue to grow ata 10 plus pace per year.
Um, if we can grow it more thanthat while maintaining the
quality and the community, then,then that, that would be a
welcome surprise.
Brian Sheehan (32:57):
That's awesome.
I mean, these are not smallprojects, so if you can take on
that kind of pipeline, I mean,that's just really incredible.
Eric Taylor (33:04):
Yeah.
I mean, we have an in-houseconstruction group that works
under our, our real estate teamand, um, These guys have worked
at very large publicly tradedcompanies, rolled out dozens of
units per year.
They've already done thisbefore.
And so I've tried to build ateam with a tremendous amount of
(33:26):
experience so we don't tripourselves up.
Brian Sheehan (33:30):
How often are you looking at centers that you
want to acquire and turn around?
Eric Taylor (33:35):
Oh, well, I mean, in the 24 years I've found...
many, many pieces of realestate that I would love to
acquire and buy.
Typically, historically, ithasn't made a lot of sense.
I did buy one, which was afreestanding unit, 12,000 square
feet in Colorado.
I bought that location.
(33:55):
This was right after thesubprime washout, 2010, and I
bought it directly from the bankwho had repossessed the
building.
We still have that salon.
It's owned real estate but inmost of the most of the
environments in which we operateyou know Southern California
(34:18):
Texas Washington State Coloradoit doesn't make a lot of sense
for us to buy the real estate
Brian Sheehan (34:26):
I can believe that you know this has been
really awesome I had just acouple other questions here one
Specific to the business, youhad mentioned, we talked before
about the run rate.
And what is that?
Why is it important to yourbusiness?
Eric Taylor (34:43):
So run rate in terms of us finding beauty
professionals for it?
Yeah, I think
Brian Sheehan (34:49):
it was about the turnover that happens in the
industry sort of generally.
And your business is bufferedfrom that because you experience
a much lower rate of turnover.
turnover, I guess.
Eric Taylor (35:03):
Right.
So the way that we look atthis, if you look across the
economy at employees in general,workers in general, typical
turnover of an employee is abouta third Which makes sense.
You look around your office andlife expectancy is about three
(35:26):
years or so.
And so that's kind ofindustry-wide.
And then you look at myindustry in particular and I
think the the number which bythe way is nobody has a good
number on this because myindustry is so highly fragmented
and there's there's no datacompilation company whose will
(35:49):
ever be able to to get this kindof accurate data but most
people figure it's about thesame so a salon will turn over
about a third of its peopleevery year.
The turnover within SalonRepublic is in the teens.
So we're about half of what theaverage turnover is.
And I think that's just aresult of the fact that the
(36:11):
beauty professionals are able tobuild the type of work
environment that they want.
If they want to make a changein their environment, they Let's
say they're tired of a certainkind of furniture that they have
in there or they're tired ofthat really loud paint color on
the walls because maybe theirlife has changed a little bit.
(36:32):
They can change it.
They don't have to find anothersalon to work in.
So the flexibility and thefreedom and that independence
allows them just a lot ofopportunities.
Brian Sheehan (36:44):
I mean, it's a real testament to the success.
Maybe it's a driver of thesuccess in your business, but I
just found that to beincredible.
There's that kind of deltabetween sort of what the
industry experiences and whatSalon Republic experiences.
My last question for you, as alandlord, what do you like, what
(37:04):
do you need from your landlordpartners for Salon Republic to
be successful?
Who are some of your bestlandlords?
Maybe not by name, but what arethey doing to help you win?
Eric Taylor (37:17):
Well, we have a lot of different landlords, a lot
of the biggest ones thateverybody knows.
You know, Westfield is alandlord in multiple locations.
I don't mind naming them, noreason why I can't.
Westfield, we're in a number oftheir locations.
Douglas Emmett, which isprimarily an office landlord,
we're in a number of theirbuildings as well.
Great relationships with all ofour landlords.
(37:39):
There's a few that aren'tpopping into my head at the
moment, but we like to developrelationships with landlords and
continued to be sentopportunities from other
properties in their portfolio.
And we like to have a templatelease with a particular landlord
who might prioritize somethings and not other things.
(38:02):
And so it just kind ofexpedites the process.
We like long-term leases, 10years plus, because we go in
there with a lot of our ownmoney.
And so just like a landlord isdeveloping a property, there's a
big capital expense componentand that needs to be justified
over time with cash flow.
(38:22):
So we come in with a lot of ourmoney and then otherwise we
look for some economicparticipation in some regard.
We're rather flexible in thatregard.
And sometimes the economicparticipation that we request
from the landlord could be inthe form of free rent.
(38:43):
Sometimes it's in the form ofTI.
Every landlord is different.
Some of our landlords wouldrather give us TI money and have
us start paying a full rentright away.
And as long as the economicswork for us, that's fine with
us.
And so we've done it that way.
We've come to the table withmore cash and then lower rent.
(39:03):
In the beginning, we have apretty sophisticated modeling
that we do financially and ourbalance sheet allows us to be
pretty flexible.
Brian Sheehan (39:14):
Well, Eric, it was great speaking with you
today.
Thank you for joining me onRetail Intel.
I love learning about SalonRepublic.
It's just an incrediblebusiness that you've built.
Be on the lookout for new SalonRepublic locations opening near
you and be sure to check themout on Instagram at
loveerictaylor and atsalonrepublic.
(39:36):
And check out Eric's podcast,The Hair Game, wherever you find
your podcasts.
Whether you're an aspiring realestate mogul, a seasoned pro or
simply curious about the placeswhere we shop dine play and
work this podcast is your allaccess pass to the world of
commercial real estate connectwith me on LinkedIn and if
(39:57):
you're interested in being apart of the Retail Intel podcast
send a message tonationalaccounts at
phillipsedison.com if you wantto hear more about new and
expanding brands keep tuning into Retail Intel and please
subscribe follow like and repostTalk to you next time.
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