For quite a few years, the nail salon industry had remained relatively stagnant and lacked innovation. Many treated the service as a low-involvement utility; a necessity in order to appear presentable and well-groomed. As such, customers generally selected providers along functional criteria such as the cost and proximity of service – branding did not play a big part.
Fast forward to today, when MiniLuxe is hoping to change the game. MiniLuxe is a nail salon concept aiming to “Starbuck” the $9 billion dollar nail salon industry by changing the largely fragmented market of low-cost providers and delivering top-quality service with integrity and consistency. There are many issues with today’s status quo: corner “chop-shops” have unsanitary practices, unclear pricing, low service levels (e.g. language is often a barrier), and inconsistent quality so the customer never really knows what she or he is going to get. MiniLuxe solves this by implementing cutting-edge hygiene processes, “wow-inducing” service levels, and standardized pricing so you know exactly what you’re getting no matter which store you visit. Also, MiniLuxe places a strong emphasis on empowering the nail technicians who, according to The New York Times, “are routinely underpaid and exploited, and endure ethnic bias and other abuse.” MiniLuxe prides itself on arming its technicians with extensive training programs, ongoing mentorship, and market-competitive pay.
While the “what” of their business is charging for high quality manicures, pedicures, waxing, and other beauty services, the “why” is focused on the idea of “self-care”. MiniLuxe’s message and value proposition to its customers conveys the importance of taking the time to “press pause” and focus on one’s health and wellness. This higher level concept of customer value capitalizes on the trend that nails and other beauty services are increasingly a means of self-expression and identity for young women and men (94% and 6% of the market, respectively).
The first distinguishing aspect of MiniLuxe is that although it is a franchise concept, all the stores to date are company-owned rather than franchises. This structure allows management to have a high level of control over new stores and the ability to ensure that they all adhere to and reinforce the MiniLuxe brand. Direct ownership of the stores, especially at an early stage of brand-building, is the most effective strategy to achieve reliable and consistent service, a key part of the business model.
Additionally, in deciding new store locations, the MiniLuxe team spends significant time and resources on understanding the demographics of the neighborhood, the composition of surrounding businesses, and other location-based characteristics that are likely to affect business in that designated market area (DMA). This information is crucial towards identifying must-have opportunities that could boost the business versus weak opportunities that should be passed on. Further, if the location is ultimately selected, the DMA profile will be crucial in determining appropriate store-specific operating characteristics, such as operating hours and staffing levels. By understanding the nature of each DMA and customizing the operations at each location, the operations team can ensure that the business model remains profitable.
Once a new location has been decided upon, there is a real focus on being extremely capital efficient in building out the new storefront. A key metric the team focuses on to monitor and improve capital efficiency is each store’s “payback period”. Payback period is defined as the time it takes a store to recover its initial build-out cost with earned operating profits. As a benchmark, less than two to three years is decent, but clearly the lower the better. By minimizing real estate and build-out costs, the firm is able to conserve cash and scale its network more rapidly.
More recently, MiniLuxe has taken advantage of mobile technology in order to maximize in-store labor utilization. One solution in the works is an on-demand mobile-app based booking service through which clients are able to make appointments directly through their phones. On the back end, the system is able to assess customer demand and immediately adjust technician compensation to incentivize greater or fewer nail technicians to come into work. By matching demand with available labor in real time, the company can ensure that the customer is always satisfied without incurring the costly burden over-staffing.
Because of the strong alignment between MiniLuxe’s operating model and business model, the company has performed very well and experienced impressive growth. Top line revenue for the company is expected to almost double in 2015, and all 8 Boston-based locations have already achieved store-level profitability. On average, the network of stores has generated 20% same-store year over year sales growth, which is high by industry standards. Most recently, MiniLuxe has recently expanded into Dallas, a new market that is yielding fantastic results to date.