Barber Shop Company is a business that offers a unique franchise model based on internships. It’s a formula that’s proving successful.
Adam Johanson, the CEO at Barber Shop Company, has ambitious plans for his four-year-old company. Those plans centre around what he calls a virtuous circle which can see high-performing team leaders become ‘intern owners’ who then are helped to become store owners of one of the established stores.
The company says it’s New Zealand’s largest and fastest growing barber company. It currently has 15 outlets, 12 of which are franchises.
That seems pretty strong progress for just four years, but Adam says it’s “an okay start” and that they have a long way to go yet. He would like to have at least 100 shops in New Zealand in the next three to four years, which would give them a 14 to 15 percent share of the New Zealand men’s grooming market.
A big part of the business plan is its intern programme. People who are already fully trained as barbers come into the network of stores as barbers or team leaders. As they learn the Barber Shop Company’s processes and protocols, they graduate to team leaders and then apply to become an ‘intern owner’ where they are trained to become store owner.
Within six months they are 100 percent funded into a store as a going concern.
Because the company has built the store to a profitable level, this means the new franchisee has the cashflow to pay down the debt and is able to own the store outright within five years. The typical value of a BarberShopCo store is $300,000 to $400,000.
The company would like to place interns into as many of its shops as possible.
“It provides better performance which means a better client experience and great outcomes for them and for us,” says Adam. “We are calling it a virtuous circle where everyone is winning out of what we are doing.”
Essentially, he says, they are working hard to try to create something good for everyone.
And the world of barbershops appears to be a booming market with an obvious proliferation of barbershops in recent years. Adam says that when the company opened its first store in January 2015 there weren’t that many shops around the country and of those, many were traditional barbershops, with a good number of men still choosing to use women’s hairdressers. He says it is a far bigger market in places like the United Kingdom.
The premise for the company is based on stylish, masculine-focused stores offering great customer service, consultation, innovative styling and product recommendations in an environment dedicated to men.
“It made no sense to me to be in an environment created for women – we have created an environment for men, with men’s magazines, a décor that appeals to men and a playlist for men,” explains Adam.
It also provides a range of men’s haircare products including their own BarberShopCo branded products.
Adam says it is a very process-driven company and they want to create a world-class environment, right down to having a hand basin in front of every mirror so the barbers can wash their hands between clients.
“It is important we are credible with clients. As they sit in the chair they know we care about hygiene and they trust us to make good recommendations.”
To date they haven’t done any advertising and have built the business through referrals.
The business came about because Adam, who is 36 and comes from a sales background, saw a gap in the market to provide wholesale haircare product into barbershops with their high client turnover. He felt many barbers did not seem to be upselling hair product to their customers, partly because the hair product might cost $40 to $50 while the haircut itself was $20. So he sourced a value product barbers could sell at the more affordable price of $20.
Initially he was travelling around the country, selling the haircare products from the back of his car.
“I did that for a number of months and even though we were suggesting the barbers finish the cut with a product and on-sell it, I realised without changing the environment of the barber shops it was hard to cross sell.”
And that is what he is doing with Barber Shop Company. They are stylish, well-designed stores where each component of the service and its delivery is very process driven and where they “combine technical expertise and client service excellence to educate, engage and add value so our clients look and feel incredible”, according to the company’s website.
Adam’s business partner is the founder of NZ Home Loans, John Erkkila, and Adam says he has bought a lot of IP into the business.
As to challenges, he says they have had many, citing every day as a new challenge. “Business is buoyant at the moment but finding enough people to come work with us is hard.”
They are 20 people short at the moment, both interns and employees.
Approaching each day as a new challenge is actually a modus operandi for BarberShopCo.
“Very little remains static for very long and so we need to be prepared, actually excited to question ourselves each and every day,” explains Adam. “Are we doing everything we possibly can to improve our client experience and team outcomes?”
A solid pathway
To become an intern people have to choose the leadership path and learn all the internal management systems and the processes involved in running each business; so they need to be experienced barbers first.
Adam explains the funding to buy a franchise comes from using the cashflow in that particular business unit to secure the debt from the bank and franchisor.
“We lend them our asset, so they can borrow the money. Because cashflow is strong, the bank will often lend 75 percent of the purchase price while the franchisor tips in the remaining balance as a loan. Both loans are paid down within five years.”
An ambitious franchisee could be thinking about succession and how to bring on their own interns who can help facilitate a joint venture for network expansion or a capital outcome.
As to what he has learnt in building the business, Adam says learning not to take no for an answer has been one aspect and having the strength to find talented people to join the business.
The company recently exhibited at a trade show in the UK to actively recruit trained barbers and from 46 applicants they have placed more than a dozen.
The first recruit was just arriving when NZBusiness spoke to Adam.