Beauty Shops

SIC 7231

Companies in this industry

Industry report:

This category encompasses establishments primarily engaged in offering beauty or hairdressing services. It includes unisex salons as well as combination beauty and barber shops. Beauty and cosmetology schools are also covered in this category. Information concerning only barber shops can be found under SIC 7241: Barber Shops.

Industry Snapshot

The service industry that has developed around hair care has long been dominated by small, single-owner neighborhood establishments. Only in the later twentieth century did this industry see the growth of chain salons, which are usually part of larger, diversified parent corporations. Such corporate entities often operate outlets on a franchise basis. These chain and franchise-based hairdressing establishments are most often located in shopping malls.

There were 244,347 establishments in this industry in 2010, according to Dun & Bradstreet's Industry Reports. Together these establishments generated $19.3 billion in sales and employed 760,958 people. A large majority were small shops employing fewer than five people.

For several years, Glemby International and Essanelle dominated the national chain-operated salon industry. Such outlets were commonly found in major American department stores under a variety of other names. In the late 1980s, however, such companies as Supercuts gained a significant foothold in this industry segment by offering discounted, no-frills services. The industry as a whole saw growth rates ranging between 15 and 20 percent during the late 1980s, as smaller salons targeted working women and larger companies opened numerous outlets that provided fast and low-budget hairstyling services.

Since the 1980s, the industry has diversified to target specific consumer trends, and companies filling these niche markets have grown considerably. A prime example is the Hair Club for Men, which offers nonsurgical hair replacement.

Organization and Structure

In a beauty salon run as a sole proprietorship, the principal is most likely female and is often an active hairdresser in the establishment. Such salons are typically geared exclusively toward women and offer a range of additional services, including manicures, facials, and massages. These auxiliary services provide an important part of the income generated by the smaller salons. Both owners and employees of these beauty shops are usually licensed cosmetologists who have attended state-certified cosmetology schools and passed standardized exams before receiving their licenses. Stylists are typically compensated on a commission-only basis or through a salary-plus-incentive plan.

Hair salon chains generally market their services toward families; consequently, they report a larger number of men and children among their clientele. These salons staff a larger number of stylists and primarily offer only the basic services of cutting, perming, and coloring. Stylists in these establishments generally receive a straight salary without any further compensation.

Franchised salons, which are commonly found in such high-traffic areas as strip malls, may be started up by a single entrepreneur or by a group. The franchisee pays the franchise holder an up-front fee, typically between $25,000 and $35,000, and continues to pay a 10 percent royalty on sales. In turn, the franchise holder pays for advertising costs and avails other resources to the franchise unit.

Background and Development

The service industry of hairstyling dates back to ancient Egypt, Rome, and Greece. Not until the late nineteenth century, however, did establishments geared toward the public begin to flourish. Their popularity was aided by the development of technological innovations that created new demands for hairstyles. These novelties included the use of synthetic and organic hair-coloring products in 1883 and the invention of a chemical method of permanent waving around 1927.

Schools of cosmetology were first established in the late 1890s to train students, primarily women, for the burgeoning profession. For many years, small sole proprietorships were standard in the industry. As the purchasing power of working women rose rapidly during the 1970s and 1980s, the industry began to expand and the number of corporate-owned salons increased dramatically.

Hairdressing services proved to be virtually recession-proof in the late twentieth century, as consumers traditionally cut back on other discretionary expenses before decreasing their spending on personal grooming. The industry experienced an annual growth rate that ranged between 10 and 20 percent until the early 1990s, when it fell drastically to only 3 percent. After that smaller, privately owned salons and no-frills unisex establishments focused on filling specific niches in the market rather than competing against one another. Some corporate-owned salons focused on providing fast service at inexpensive prices. These entities concentrate on capturing market share through a large number of outlets spread among densely populated communities. The older and more established sole proprietorships often market their fuller range of personal care services not as luxuries but rather as accompaniments to a more healthy and vivacious lifestyle. These salons offer their clients such services as tanning facilities, relaxation massages, and seaweed bodywraps. Industry analysts have theorized that an aging class of baby boomers will freely spend extra income on such services that make them feel youthful, and they forecasted success for salons offering these amenities in addition to traditional beauty services.

Current Conditions

Beauty salons that offered a variety of services to both men and women were holding their own in the early 2010s as Americans waited for the economy to recover from the recession of the late 2000s. According to Dun & Bradstreet, California had the most beauty salons in 2010, with 31,745, followed by Texas with 19,869; Florida with 16,414; and New York 15,426. California also accounted for the largest percentage of industry revenues, generating about 12 percent of total sales. Still, the industry remained highly fragmented, with the 50 largest companies holding just 15 percent of the market, according to Hoover's.

Industry Leaders

Regis Corporation of Minneapolis, Minnesota, was the world's largest owner and franchiser of hair salons in the early 2010s, with some 12,700 salons in the United States, Canada, Puerto Rico, and the United Kingdom. About three quarters of Regis' salons were located in North America. The firm operated the chains Supercuts, Sassoon, MasterCuts, Hair Club for Men and Women, and others, as well as salons located in Wal-Mart stores. Despite its position as world leader, the firm held only a 2 percent share of the highly fragmented U.S. salon market. Regis traces its roots to a single barbershop founded in 1922, which grew to an enterprise of 60 shops over the next three decades. During the 1960s, it began establishing salons in shopping malls, a strategy that fueled rapid growth. It also began acquiring competitors, including its purchase in 1999 of the 980-salon chain The Barbers, Hairstyling for Men & Women. In 2004, Regis also acquired Blaine Beauty Career Schools' 15 locations, Pennsylvania's Holiday Hair's 150 locations, and the 90-outlet hair replacement chain founded in 1976, Hair Club for Men and Women. With 56,000 employees, Regis's revenues in 2009 exceeded $2.3 billion.

Founded in 1974 in Memphis, Tennessee, Fantastic Sams began franchising in 1976. Fantastic Sams was also a leader in value priced, full-service hair care franchises, with more than 1,300 salons in the United States, Canada, and Japan. Cheveaux LLC. acquired Fantastic Sams in 2003 after former owner Opal Concepts, Inc. filed for Chapter 11 bankruptcy in 2002. Opal's other salons operated under such names as Jose Eber Salons, Pro-Cuts, Carlton Hair International, Linear Hair, American Hair Force, and Haircuts Plus.

Ratner Companies LC based in Vienna, Virginia, was another leader in the industry. The firm owned several popular chains, including BUBBLES, Hair Cuttery, Salon Cielo, ColorWorks, and Salon Plaza, and operated two Paul Mitchell schools in Florida and Virginia. In 2010 the company employed about 10,000 people. Headquartered in Bolingbrook, Illinois, Ulta Salon, Cosmetics & Fragrance offered a variety of services targeted at a female market, including hair services, manicures and pedicures, massages, and other services. Ulta Salon operated about 340 shops in 12 states and employed 10,300 people. The company reported sales of more than $1.2 billion in 2009. Other industry leaders in 2010 included Sports Clips, Premier Salons, and Supercuts Inc.

Workforce

Women are generally the owners of and principal stylists in privately owned and operated salons. Smaller salons have an average staff of three employees, most of whom are fully licensed cosmetologists. Often these stylists work full-time, but many salons also hire part-time employees. Larger firms often employ a receptionist, a greater number of stylists, and a shampoo crew. Employees in a salon's shampoo crew are usually students in cosmetology programs who work in salons on an apprenticeship basis.

According to the Occupational Outlook Handbook, approximately 630,700 hairdressers, hairstylists, and cosmetologists were employed in the United States in 2008, with another 76,000 jobs held by manicurists/pedicurists, 38,800 by skin care specialists, and 22,900 by shampooers. About 44 percent of cosmetologists were self-employed, working in a privately owned and operated salon. The remaining 56 percent leased workspace from the owners of such salons, with their income coming from either commissions or wages. The average hourly wage in 2008 for hairdressers, hairstylists, and cosmetologists was $11.13. Skin care specialists earned an average of $13.81 an hour; manicurists/pedicurists, $9.46 an hour; and shampooers, $8.32 an hour. Factors that contribute to income include size and location of the salon, the number of hours worked, and the ability to attract and maintain clientele.

All states require the licensing of cosmetologists, a process that typically entails graduation from an accredited cosmetology school and successful completion of written and practical examinations. Licensed cosmetologists are often required to attend additional classes to keep abreast of new styles and techniques.

According to the Bureau of Labor Statistics, employment in the cosmetology industry will increase as fast as the national average for all professions through 2018. Manicurists are expected to experience the fastest growth, as are other such specialists as estheticians, who provide skin treatments, and electrologists, who remove unwanted hair through electrolysis.

© COPYRIGHT 2018 The Gale Group, Inc. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. For permission to reuse this article, contact the Copyright Clearance Center.

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