What Do I Have to Lose, Right?
Guests:
Dana White is founder and CEO of Paralee Boyd hair salons.
Jay Goltz is founder and CEO of Artists Frame Service and Jayson Home.
Laura Zander is co-founder and CEO of Jimmy Beans Wool.
Producer:
Jess Thoubboron is founder of Blank Word Productions.
Episode Highlights:
Dana White: “My managers are taught listening exercises. When you hear a guest in the chair, speaking of their father who is sick in the hospital, you’re going to get a call from us in a couple of days: ‘How’s your dad?’”
Dana White: “I had to make a very hard decision and I had to fire a manager. That was ugly.”
Jay Goltz: “My belief, in the city these days, is you’d better have one or two things: you’d better have high-rises, or you’d better have parking. If you’ve got neither, you don’t have enough customers.”
Jay Goltz: “The best franchises are turnkey businesses. A moron could run them. I don’t think a moron could run your business.”
Laura Zander: “Instagram advertising now is so saturated. It’s fantastic. It’s useful, and I think it’s probably at its peak in my opinion, but it’s going to start turning people off here pretty soon and we’re all going to start ignoring it and we’re all going to find a different platform to go to.”
Laura Zander: “For us, it was always, ‘How do I recreate the in-store experience online?’… We did that through YouTube videos.”
Full Episode Transcript:
Loren Feldman:
Let’s meet this week’s 21 Hats Podcast lineup. With us today are Laura Zander, CEO of Jimmy Beans Wool, a digital version of a neighborhood yarn shop that is based in Reno, Nevada; Jay Goltz, who has several businesses in Chicago, including a picture framing shop, Artists Frame Service, and a home furnishing store, Jayson Home; and please meet Dana White, who is with us for the first time. Dana is founder of a chain of hair salons based in Detroit that specializes in helping women with thick and curly hair. In creating the salons, Dana adopted the principles of Lean to make them operate as efficiently as possible and to allow women to walk in without scheduling an appointment. Dana has two locations in Detroit and big ambitions to take the chain national. Welcome to the podcast, Dana.
Dana White:
Thank you, Loren. Good to be here.
Loren Feldman:
We’re excited to have you here. Jay and Laura, as always, feel free to jump in. But I want to start by introducing Dana, talking a little bit about how she got into this. Dana, before you opened this business—correct me if I’m wrong—you were an international labor relations specialist?
Dana White:
Yes, I was.
Loren Feldman:
What exactly did that entail?
Dana White:
It started with me working on behalf of a labor union for healthcare workers. It started with healthcare workers, then it went from there to teachers. Then before I knew it, I was teaching people in the Middle East how to negotiate contracts, how to have a healthier workplace environment—even though there were labor issues that, here in America, we would cringe at the thought, but over in the Middle East, it can be quite different. My job was to go over there and help workers manage that.
Loren Feldman:
Given that experience, I assume that managing your employees at your own business has been the easiest thing possible?
Dana White:
No, absolutely not. It’s been helpful when it comes to having an eye or an ear towards the needs of my staff and putting that up top. But for the most part, labor just depends on the industry. A lot of it depends on the culture around the industry. Having textile worker culture or teacher culture or healthcare worker and nurses culture has not helped me in the beauty industry. And if it has, it’s been minimal.
Loren Feldman:
How did you get into the beauty industry? What prompted this?
Dana White:
My own experience and the experience of my family. I was working over in the Middle East and I made a hair appointment here in Michigan, because I lived in New York at the time, and I was coming to visit my family. I had to get my hair appointment before I could get my flight. I had to call back and say, “Hey, can we reschedule this flight so I can make my hair appointment?” No, that that didn’t fly, so instead of flying directly to Detroit to spend more time with my family, I actually flew into New York, was there for a couple of hours in a place where you could walk in and get your hair done, go back to the airport, and then catch a flight out to be with my family.
My family had issues of their own in regards to moving appointments, and it was just too much. I decided there are salons in New York where you can walk in, but they weren’t very deliberate about your time, they weren’t very deliberate about their customer service or the products that they were using. I decided to take that model that had been around since the 80’s and bring it into the new century, and then Paralee Boyd was born.
Loren Feldman:
Jay, you’ve had that experience with having to balance your flights with your styling, right?
Jay Goltz:
Well, my pilot’s gotten fairly easy to work with. He understands the importance of my hair, so we’ve worked it out.
Loren Feldman:
Dana, I understand the need that you saw there. What made you think that this was a problem that you could address?
Dana White:
I still don’t know if it’s a problem that I’m addressing. No, I felt because it wasn’t being done and, if not me, then who? If not now, then when, so why not? All you have to lose is your life savings and you’ll have to start all over again.
Laura Zander:
Amen!
Dana White:
What did I have to lose, right? I did it and seven years later, here we are looking to go national with our franchise. I didn’t really think I could do it, but I did think I could try.
Loren Feldman:
You didn’t just open another hair salon. You tried to open a place that operated differently. If I recall correctly, you actually called some friends in the auto business who helped you think through, almost from a manufacturing perspective, how you handle your customers.
Dana White:
Yeah, it wasn’t enough to just have a space that was walk-in only seven days a week. While my guests were in the salon, I had to find the best way to be very deliberate about their time. I had two friends who were automotive engineers, and Lean was their thing, and said, “Hey, what’s the best and fastest way to get the shampoo out of the bottle? Where should I put the towels? Where should I put the shampoo? How should I blow dry the hair to get them in and out in a certain amount of time? What should we say on the phone? What should we use to cash them out and what should be the script?” Everything literally from the time they walked in to the time they walked out. Of course, you can just have somebody come to the door and not say anything. That’s quick, but we had to balance having great customer service, giving quality service, and then getting them in and out in a certain amount of time. Then how could I do all of this affordably?
Laura Zander:
Just to ask a quick clarifying question: is this like a high-end Fantastic Sams kind of thing?
Dana White:
I get that. It’s like a Great Clips for women with thick and curly hair, but it’s high-end.
Laura Zander:
Got it.
Dana White:
It’s really nice and they’re like, “Wow.” It really is deliberate about being focused on the health care of the hair. We have a lot of women who have thinning issues, a lot of women who have color or damage issues. We don’t cut or color. We trim. For the ladies with color, they come into our salon and get a steam treatment. It makes the color last longer. It keeps the hair more hydrated. A lot of our guests, after three or four visits with us, they’re seeing a noticeable change in the health of their hair.
Jay Goltz:
We’ve all seen these commercials on TV for years with hair salons, and it seems like they come, they go. Can you give us an idea of the franchise model in the hair salon business, like the Fantastic Sams? There’s probably been, not 100, but I can probably think of three or four that I’ve seen come over the last 20 years and I don’t even know if they’re all in business still. Could you give us a snapshot as to how that whole franchise model has worked?
Dana White:
I think in the past, it’s also the market that they’re trying to target. Women can be much more involved in their hair salon. Don’t get me wrong. Men can too. I have family members who go to the same barber they’ve gone to since they were eight. Now they’re 50. I think that the franchise model—I don’t want to say it failed, because you still have some Super Cuts and some BoRics and some Great Clips—I think it was too blanketed and it wasn’t tailored enough. They had general haircuts. It was very business, right? Just get you in and out and give you a good haircut. I don’t think they focused on the quality of the products they were using for hair health, and then I’m not sure if they really had to, because I don’t know that market.
But I think where that failure was, for example, our level of customer service is my managers are taught listening exercises. When you hear a guest in the chair, speaking of their father who is sick in the hospital, you’re going to get a call from us in a couple of days. “How’s your dad?” Or, “My daughter is going to homecoming.” In a couple of days, “How was homecoming?” “I just had a job interview.” “How did that interview go?”
I don’t think that they were doing that, and then what I’m concerned with is, how do we do it when we get busier and when we scale? But If we go up to seeing 100 guests per salon and managing that volume, how do we keep that personal? The other thing is, my market has never seen anything like this before.
Loren Feldman:
What do you mean when you say “my market,” Dana?
Dana White:
Women with thick and curly hair. You talk to women with thick and curly hair and they go and make an appointment at a salon, they are upcharged or it takes them longer. Because your hair is curly, you’re here. Right now, my market is predominantly African American, but we have a lot of redheads, we have a lot of women of Indian and Middle Eastern descent, because when they go and make an appointment at a regular salon, they are charged more, their appointment is longer.
Laura Zander:
You’re a genius.
Dana White:
Thank you!
Loren Feldman:
Dana, I think it’s worth emphasizing that, from day one, you’ve been thinking about this as something that you want to go big with. It wasn’t that you opened one salon just to try to build a business and make a living that way. In fact, you’ve created custom technology that you might sell to other hair salons, but that would make it possible for you to manage your customers along the lines of what you were just saying. So if a customer walked into your shop in Detroit, and then a month later into a shop in Brooklyn or somewhere else, that person in the next shop would know exactly who this customer is and how to treat them.
Dana White:
Yeah, we collect data now and I’ve just thought of technology that will allow us to collect data on a bigger scale. I think it comes down to, that’s where we’re going in business. If you’re not looking at artificial intelligence, if you’re not looking at data collection on the front-end, as well as the back-end, I think there’s got to be room in everybody’s business to collect data, because that lets you know how you grow. I want to solve this problem everywhere, because everywhere I’ve gone, I’ve not been able to have it solved consistently. I want to solve this problem everywhere consistently.
Right before I opened, I drove from New York City to the Grand Canyon in a Chrysler minivan. I was in Iowa, and I asked women there with thick and curly hair, “Where do you get your hair done? How long does it take? How much does it cost?” And resoundingly, it was the same thing. I’ve noticed that hair care has not evolved for this market in well over 50, 60, 70 years. That was my impetus to go ahead and start it and see if it’ll work in my original hometown—I’m from Kalamazoo, but I lived in Detroit for years—and then take it from there.
Loren Feldman:
As you know, the idea of the 21 Hats Podcast is to have the kind of conversations with business owners that you don’t often hear in public. So let me put you on the same hot seat that I put Jay and Laura and our other regulars on. Is your business—and by that, I mean the two existing locations in the Detroit area—is it making as much money as you think it should?
Dana White:
No, it’s not.
Loren Feldman:
Why not?
Dana White:
Do you want the Dr. Phil answer, or…?
Loren Feldman:
I want the Dana White answer.
Dana White:
Okay, Dana White has two reasons. One, I believe it is the market. That’s not my business. It’s several business owners in the Detroit metropolitan area, especially in the Detroit area, that are saying, “Detroit is not as ready for a small business comeback as it would like to be.” It’s coming back, but it’s not where it needs to be for all of these businesses to thrive. That’s restaurants, hotels, and the service industry.
Jay Goltz:
Let’s be specific about that, though. The question is: why? I have a very similar story to yours. I started a picture framing business. It was a big hit. I opened a store in the suburbs, the numbers weren’t as good as I thought, and then I realized I was in the wrong neighborhood. I opened a third store and it was much better. So the question is, when you say they’re “not ready,” quote unquote, for small business, is it because the density of the customer isn’t there?
Dana White:
Yes.
Jay Goltz:
Okay, that’s legitimate.
Dana White:
It was something that I went out to explore it with my lender, with other business owners. I’m a Goldman Sachs 10k SB alum. It was something that the business advisors that you keep in touch with were saying amongst their graduates. The density isn’t there. A lot of the restaurants wouldn’t survive if they didn’t cater, because the people aren’t coming in from the suburbs. They’re not coming in from the suburbs and staying to eat, and if they are, they’re only going to the bars and restaurants that they know. They’re not going to pay $20 for a steak. They’re going to pay $10 to $12 for a steak. That was for the restaurant. For my specific purposes, it was I don’t think I did a good enough job managing the expectations and putting out through marketing, which I’d done very little of, who we are and how we’re different. That transition hasn’t quite happened. For some of my guests, yes, but for other guests, no. They want the traditional salon, but they want to be walk-in only seven days a week, but they don’t know who they have to be or what it takes in order for that to be there.
For example, you can’t come to the salon and bring four kids and serve them dinner in the lobby in a walk-in only salon, because you’re not going to be there that long. We can’t give you a color appointment-based salon. They come in and they want a color. They think it’s either go to my stylist or go to Paralee Boyd. I’m trying to show them that you go to both.
Laura Zander:
Have you studied Jimmy John’s at all? Because I hear a lot of similarities there. The education of the customer and creating a new segment of the market, that takes a while for people to understand and catch on.
Dana White:
The Dr. Phil answer is, I got tired and I did the minimum.
Loren Feldman:
You’re saying when you got tired, it was the marketing that fell through the cracks?
Dana White:
No, when I got tired, it was the growth, meaning do more for data compilation, do more for updating your training. Everything that moves the business forward, I did less of that and did the things that move the business forward everyday. Payroll, supply ordering, inventory.
Jay Goltz:
There are certain blocks in Chicago—Halsted, if you’re familiar—literally every other storefront is empty. Every other storefront. You go to other streets, that’s not the case. It seems obvious to me, but you don’t hear it talked about. My belief, in the city these days, is you’d better have one or two things: you’d better have high-rises, or you’d better have parking.
If you’ve got neither, you don’t have enough customers, and the problem with Halsted where I’m talking about is, there’s neither. The reason why there are very few restaurants left in Lincoln Park, which no one thinks about, it’s simple: permit parking. All the side streets that people used to park in when they went to dinner all had permits. Now you can’t park there unless you are a resident. There’s nowhere for people to park their car, therefore the restaurants are not what they used to be. I would think a hair salon’s the same thing: if you’re near some high-rises, you’ve got heavy density, or they drive. I’ve got to think that’s one of the key elements to where the right location is.
Loren Feldman:
Does that apply to you, Dana?
Dana White:
Our high-rises are businesses. The DMC is across the street (Detroit Medical Center), Blue Cross Blue Shield is down the street. What I’m going to do is open at 7AM.
Jay Goltz:
Wow, smart.
Dana White:
Validate parking. That’s what I’m gonna do. I’m going to open at seven before they have to be there at nine, and I can get you out by 8:30 every time. So open at 7AM, validate parking, take away the challenges. But what I had to do because, again, my Dr. Phil portion of this is that I got burnt out, so that means staff wasn’t as quality as now that I’ve been reinvigorated. I have a great staff right now. Now, we can start talking to them about opening at 7AM and not worry about losing people.
Loren Feldman:
How did you get reinvigorated?
Dana White:
Well, first thing, my mom is huge. My mother walked in and got her hair done and said, “Oh, no, no, no, no.” She called me and said, “Oh, no, no, no, no.” I walked in, and I was never happy and I never wanted to be there. And I’m like, “If you don’t want to be there, then close.” Well, no, you don’t want to close. I had to make a very hard decision and I had to fire a manager. That was ugly. I hired an operations person who would oversee my new manager, the manager that oversees both locations. I had to not be afraid to command respect. It was something I learned at Small Giants: I’m managing people that used to bully me. I was like, “Like me.” It was this weird dynamic that I had to get rid of in order to make this turnaround in my business.
Jay Goltz:
You were allowing them to bully you.
Dana White:
When I was a kid, they were, yeah. But now, when I grew up, it was like that baggage was still there. I learned that at the Small Giants conference that was here in Detroit. I was like, “Oh my goodness.” So yeah, it’s learning to be the boss.
Loren Feldman:
Dana, I want to talk about the marketing aspect a little bit. I think you did say that you haven’t done as much of that as you probably should have. Why is that?
Dana White:
Money and lack of competence and actually knowing if I know what to do. I know how I want the ads to look. I’ve actually tried, but again, in this environment, you’re looking at marketing companies that want you to pay $12,000 a month to try, because they’re used to your Art Vans, your Suburban Chevrolets, your Little Caesars Pizzas, your Meijer Thrifty Acres, which is a huge grocery store chain here. If you guys know of a small marketing firm, there are a ton of small businesses here that would love to give them business!
Jay Goltz:
I could tell you the problem, because I’ve lived through it for 40 years. The problem is, they can’t make money on little accounts. They can’t make enough money on them, so you are forced—and this is what I’ve done—to learn how to do it yourself.
Loren Feldman:
I want to hear from someone. who’s had a lot of success doing exactly that, and that’s Laura Zander. Laura, you really got your business off the ground through digital marketing, if I recall, especially YouTube videos. Is that right?
Laura Zander:
Yeah, and then we’ve transitioned into print marketing and more traditional marketing as well. What’s worked really well for us is teaming up with a college and finding either college interns or, as Jay said, graphic designers, working with a business professor and getting their whole class to do a project on your business. You’ve probably explored that.
Dana White:
I spoke at USC last year, and they have opened up both their communications college and their business college. I literally just posted that internship last week for January.
Laura Zander:
Oh, perfect.
Jay Goltz:
There are people out there in the world who are mission-driven. I have them working for me. They love what they do here. They could go work at a big ad agency and be at an ad factory where they’re just doing one little piece and getting yelled at by the art director, or they can sit here with the owner of the company and a couple of other people and brainstorm and figure out the ad and do it and execute it. It’s a wonderful thing for those people. But you’ve got to find the people who want to be in that environment, because they can make more money at the big ad agency. That’s the reality.
Laura Zander:
The other talent pool, Dana, that I have pulled from—and you might have a similar experience—are my own customers. My customers are more passionate about my product than just about anybody else. You’d be amazed. I’m sure you know. Your customers are doctors, they’re lawyers, they’re graphic designers, they’re stay-at-home moms, they’re people who are smart and talented and some of them, like Jay said, don’t want to go work at an advertising agency and might be willing to trade. They’re going to be your best advocates and your best marketers, at least in my experience.
Loren Feldman:
Laura, have you also made use of your customers as, to use the phrase “influencers”—people who you’re not actually paying to market your business, but who share what they create with your yarn, for example?
Laura Zander:
Oh, totally. That’s what I was thinking about when Dana was talking about, whether it’s Fantastic Sams or Great Clips, I’m not sure that those franchises are still relevant and have not turned a corner, in terms of social existence and social marketing. That seems like a huge hole and a huge opportunity for her business to really take advantage of that and jump in with both feet.
Influencers are people who are active. We’re really focused on the micro influencers right now. We’re dedicating a percentage of our time and energy to what I call the “A-listers,” but it’s the B and the C-listers, it’s the Rocky story—they’re the ones who are going to fight the hardest and who are going to work really hard for you and that we want to support, because our whole goal is to get these B and C-listers into the A-list.
Loren Feldman:
How do you do it? How do you encourage people to spread the word?
Laura Zander:
You just be you and just be real and be honest and be supportive and you communicate. It’s just human. It’s the golden rule. Just be a good person, support people, and if you like what they do, interact with them and see if there’s stuff you could do together.
Jay Goltz:
I’ll tell you what I see all the time that surprised me. You go to these websites, and it says “About Us.” You hit About Us thinking, “I’m going to hear about Laura’s story,” and you don’t even hear the name of who owns the company. They just go, “We’ve been dedicated to blah, blah, blah,” the typical advertising baloney. They don’t even tell you who they are. If you’re just authentic and say, “Hey, my name is Jay Goltz. I started this business because I thought I could give a better product and blah, blah, blah,” or whatever, people are interested in your story if it helps them, and if what you do does help them. I do think there’s an opportunity to stand out, because a lot of companies aren’t doing it.
Laura Zander:
Loren, you were talking about marketing. And yes, digital marketing has been a big thing for us, but 17 years in and now we’re on our third evolution. What has really pushed this third evolution are the relationships that we’ve built over the last 17 years. It’s not the digital marketing. It’s the fact that we’ve always been nice to people.
Loren Feldman:
Tell me, Laura, at one point, when I was at Forbes, we did a short story about you guys and the success you were having with Facebook’s look-alike ads, which is where you basically upload your emails for your existing customers and they come back to you with customers who have similar demographics, based on their Facebook profiles. You can target ads at this similar audience to the one that you already have. I think you’ve moved away from that and I’m curious why. I’m also curious whether you think that would be effective for Dana and Jay too.
Laura Zander:
The reason that we’ve moved away from it is I believe—or at least my observation over the last 15 years of what’s happening with digital marketing—like fashion, things come in fashion, and then they fall out. Snapchat comes in, and everybody’s on top of it, and they’re all loving it, and they pounce on it to the point where—and this is the case, in my opinion, of Facebook advertising—in the beginning, it was kind of raunchy. It wasn’t very attractive. It wasn’t organic, it wasn’t authentic. We happened to jump into it when it was at its high, at its most organic and most effective. Then the effectiveness started to wear off because everybody jumped on that bandwagon. Then it becomes—I don’t know what the right words are—not dirty, but it just became so commercial.
Jay Goltz:
Trite.
Laura Zander:
It’s very trite, and it’s just not a game that we want to play anymore. Sure, we’re still playing it. We’re still doing some and we’re participating. But that’s not where our focus is. Our focus is now: what’s next? How do we get in on not necessarily the beginning, because the early adopters are the ones who end up spending way too much money for way too little, but trying to get in on the tail end of the early adoption, and the beginning of the mass curve?
You see it with Instagram. Instagram advertising now is so saturated. It’s fantastic. It’s useful, and I think it’s probably at its peak in my opinion, but it’s going to start turning people off here pretty soon and we’re all going to start ignoring it and we’re all going to find a different platform to go to. Do I think it would be helpful for them? Sure, maybe dabble in it a little bit, especially if you can do some localized advertising. I personally right now am a big fan of going back to billboards, going back to print, going back to 1980’s, 1990’s stuff that nobody else is looking at.
Jay Goltz:
The key also though is she’s got a storefront. That’s got to be the top way to get new customers: people going by your storefront. I saw a salon in Chicago, it was very funny. They had a big picture of Christopher Walken and it said “Walk-ins welcome,” and it was funny. Using the storefront to get attention, that’s why we all pay a lot of rent to be in a storefront. Most people’s front windows are not really doing much, and I think they could be doing more with it, and the signage. Signage is still critical.
Laura Zander:
Signage, and then doing the classic grassroots marketing. I’m sure you’ve done this, Dana, but that’s going to church groups and giving a presentation, going to the Girl Scouts meeting and giving a presentation. I get a lot of a lot of eyeballs on me, not because of knitting locally, but because of the business side of it. You don’t have to talk about hair. Don’t do a presentation on hair necessarily. You go do a presentation on what it’s like to be a female business owner in the up-and-coming Detroit community, and maybe already have, but you end up on the cover of Detroit magazine. That would be my goal. Because as I always say, every person who reads Reno magazine knows someone who knits, so if I can get my face out there and my name out there with an unusual business, something that you don’t typically see, it’s gonna stick.
Loren Feldman:
Laura, I think also the secret with your YouTube videos was that they were not ads at all. What you were actually doing was providing guidance—helping your customers solve problems and figure things out and do what they love to do better. First of all, am I right about that? And second of all, I’m thinking there’s got to be a corollary to that, certainly for Dana, and maybe for Jay too.
Laura Zander:
Yeah, absolutely. Again, it goes back to being authentic before authentic was cool. We opened a storefront and then we built an online segment because, like you, we’re in an area that has low traffic. We don’t have a huge population. It takes hours to get here from any other big city, blah, blah, blah. So for us, it was always, How do I recreate the in-store experience online? That’s through the technology that you’re talking about: how do I answer the questions that they might have when they’re in the store online?
We did that through YouTube videos. In the beginning, my husband was clever enough to realize right when Google bought YouTube that if we used the right keywords, and we created these things strategically and did it based on product names, that Google would index us, and the SEO would really help us, so that when somebody looked up one of our products, our videos popped up as the first things. For hair and for framing, of course that’s doing how-to stuff, but I also feel like that stuff’s pretty saturated. We feel like that in our industry. Everybody’s caught on. So, what’s next? I want to do virtual reality, so that’s what’s next. How do we create some virtual reality where this is what it would look like if you got your hair straightened?
Jay Goltz:
Let’s go back to the original premise. Let’s do a little whiteboarding here. What are Dana’s options? Option one is: keep these two stores, get the sales up, make a really nice living, have a nice life. Option two is: franchise, go national. What’s involved with that? What kind of commitment is involved with that? What kind of potential problems? Third one is: take an investor and own them yourself. Let’s flesh that out a little bit, because I think that’s interesting and a good time to do that.
Loren Feldman:
Dana, any reaction to that?
Dana White:
I love those options. I think it’s a combination of option one and option two. I’ve learned recently that I don’t have to do one separately from the other. They can be concurrent. Option three, taking on an investor, I tried. I don’t have children. But I wasn’t ready to give the promise of my children. I hadn’t found an investor—as Loren had told me years ago, which I still use to this day—that is the unicorn investor. I don’t think investors understand that there is still room for something new. I think they’re used to investing into different versions of the same thing, and so when you do have something that is very new, they approach it the same way. I think a unicorn investor will see the problem that I’m solving for, that it hasn’t been done ever, and the way I’m doing it is different, and approach investing with me in that way, understanding that your returns aren’t going to come in the same form, had you invested in an app—that the returns are going to come differently, that this is a legacy investment. This is long-term.
Jay Goltz:
I’ve been exactly where you’re at. I did talk to a franchise consultant and I did think that whole thing out. At the moment, I realize that most successful franchises have three things: they’ve got proprietary products; they’ve got a name brand that’s important that if you’re traveling anywhere, you can stop into the same name that you were in your hometown or across town or whatever else; and they had some incredible system that was helpful to grow the business. I realized in the picture framing industry not one of those was valuable, and as a result, the franchises that have been in the framing industry haven’t really worked.
I would ask the question: have you done enough research to understand what the pitfalls of franchising are? Because when you take someone’s life savings and you put them in the store and it doesn’t go right, they sue you. That’s a problem. There are plenty of franchises that have worked great, and there are plenty that have been spectacular failures because here’s the problem I see. This is not a turnkey business. The best franchises are turnkey businesses. A moron could run them. I don’t think a moron could run your business and I know a moron can’t run a good frame business.
Dana White:
That’s a hard call. First of all, you can’t pull somebody off the street to do hair. There has to be some semblance of training. You have to go to cosmetology school and have a license. You have a foundation as far as the operators behind the chair. That’s one thing. The second thing is behind the front desk, the front of the house. That can be trained. That’s why the technology when it’s adapted is important, because it makes it that much easier. But that can be trained. Not the technology, but the order, the process, can be trained. I think you’re right. Can, you know, somebody just come in and push a button? No, but I don’t know if I want to franchise like a Tim Hortons where you get a cup of coffee, press a button for Americano, press a button for a latte.
Jay Goltz:
I agree you can train those things. Here’s the moron factor though. People still haven’t figured out it’s not worth fighting with customers. They just can’t stop themselves. I’ve seen people where they just don’t get it. You can you can preach to them, you can train them, you can explain to them, “The customer’s giving you their hard earned money, it’s not worth fighting with them.” They just can’t stop themselves from fighting with customers, and that’s what I would call a moron
Dana White:
What do you mean, the “customers”?
Jay Goltz:
I’m talking about you get someone who’s great. They’re trained in hair cutting and they’re great and they know all the systems and some customer comes in who’s having a bad day and says something to them that they don’t like and they get into a fight with the customer. “No one’s going to talk to me that way. You just get out of here. I don’t need your business.” It happens every day in retail. I see it all the time. When they go broke, it’s never their fault. It’s always the bank’s fault or the government’s fault or the landlord’s fault. It’s never their fault.
Dana White:
Do they have the system? My question to them would be, I’m not setting them up to fail. I’m not saying that these franchisers are, but—
Loren Feldman:
You do have a system, Dana. One of those three elements.
Dana White:
Yes, I have a system for everything. I think it’s also about setting up the franchisee to succeed. If we’re seeing that numbers are declining, we need to go in and assess why. I’m not saying that can be a process, but there’s a system in place on how to deal with customers, and if you are not following that system, franchises can be pulled from a franchisee for a list of reasons or for two reasons.
Jay Goltz:
If you watch the McDonald’s movie, it was right there. They failed because they were starting to sell fried chicken out of them because the guy decided he should sell fried chicken. I’m confident that successful franchisors have figured out they have to be extremely careful who they sell the franchise to.
Dana White:
When I saw The Founder, it wasn’t only the people who they hired. It was also the operating agreement. There were things they overlooked. The McDonald’s brothers, that was not their thing. Kroc even said in the beginning, “Oh gosh, I didn’t realize I’d have to tell them that they couldn’t serve hot dogs.” Their franchise agreements has to be tight. We have a way we answer the phone between 9AM and noon. This is the way we do everything. Everything. The way we post signs. It works for some people, and for those it doesn’t work for, we wish them on their way. We have an employee in our salon who wants to leave because they don’t think they’re making enough money. We have a way that we have that conversation. We have to—
Laura Zander:
Dana, as somebody who is terrified of systems and rules and regulations—like I hate them because I want to just be able to do my own thing—how do you balance that? I also fully recognize that I need more systems in my life and more routine. I’m not bragging. In fact, I’m sad about it. How do you balance all of those ways you do things with a human element?
Dana White:
Culture.
Laura Zander:
So they still have some freedom to have that conversation in their way?
Dana White:
Our culture is not punitive. Even though we have the systems and processes in place, you’re not going to get in trouble. Even if you’ve bucked the system, taken a pot and popped it upside somebody’s head, okay, that’s a conversation. As an owner, we are ready to deal with the consequences of somebody not doing that. However, that has not happened. Why? Because it’s an interactive culture. It’s not dictating to you. Here’s how we do it, and if you can find a better way to do it, which you probably can or maybe not, let’s talk about it and implement it.
Laura Zander:
No wonder you’re so tired or that you got so tired. This sounds like a lot of work.
Dana White:
It is. But also the front-end of the work comes from hiring the right people. Once you have the right people like I do now, the work is done. The work comes in the documentation. When we debrief at the end of the night, and they follow the protocol or they follow the systems or processes in place, as long as we’ve done everything, if a customer’s still upset, there’s nothing we can do.
Jay Goltz:
It gets back to the hiring piece. I’ve lived through exactly what you’re talking about. The reality is my life is 180 degrees from where it was 20 years ago. I was putting out fires all day long, 25, 30 years ago. I finally figured out how to hire, and once you have the right people, it falls into place.
Dana White:
I’m comfortable with letting them—I don’t want to say fall, but letting them stumble. When I hire, I’m expecting that time when you’ve got the person who said, “You know what, I’m going to do it my way.” It’s not because, “Dana, I love being the boss and I love controlling everybody,” No, I have learned that if you don’t do things this way, things happen. I give them that leeway of time for them to hit their heads.
We have a very quick reading when you call Paralee Boyd. When you want to do, “Hi, thank you for calling Parelee Boyd, it’s a great day. My name is—” and their phone drops twice and then now she’s calling back a third time upset with you because she’s had to cut you off because your greeting is so long, that’s an example of how you bump your head. Or when we say, “Please don’t just give them a free deep conditioner,” but no, because you like her and you felt bad, you’ve told her the next time she can come and get her hair done for free three weeks later. So now she keeps coming in upset and making things up about how she can’t stand her service because she knows that she can. There are all of these little things. I let you hit your head a couple times. I say, “Do you realize why we only give a free deep conditioner within 72 hours?” My experience has dictated the process and some people think that my ego or me being on a power trip has dictated the process. No, we do things the way they are to prevent me putting out fires every day.
Loren Feldman:
Laura, does that answer your question?
Laura Zander:
It does, but I’m thinking, “Dana don’t franchise. Come work with me and create systems for us, please.”
Dana White:
Laura, you have my number!
Jay Goltz:
You said something a couple years ago when I was in New York with you. You made your presentation with Loren, and you said, I’ll never forget it, “I don’t do messy.” That’s what you said.
Dana White:
I don’t do messy.
Jay Goltz:
I said to myself, “Good luck with that.” But you’re fixing it. I believe in your business versus mine, it makes sense to me that the franchise model could very well work.
Loren Feldman:
How about you, Jay? What’s going on with you? What are you figuring out this week?
Jay Goltz:
I’m going through, once again for the third time, the bank thing where you figure out the right bank to pick. They’re local and they do a lot of small business loans because that’s where their bread and butter is. You have a great relationship with your banker and then they get bought out. Then the next one up, you think, “All right, not bad.” It seems to have been smooth. Then about three months later, they get bought out, and now you’re back with the big bank with the big billboards, with the rules and the guy making a decision in some other city somewhere, you don’t even know who he is, and you can’t get straight answers. Through no fault of my own, I’m navigating that now.
Loren Feldman:
Jay, we’ve had a number of conversations on this podcast with other people who shy away from debt. Tell us why your banker is important to you. How do you use a bank?
Jay Goltz:
I think that debt is like riding a bicycle. It’ll get you somewhere faster. But if you’re reckless, you can fall off the bicycle and crack your head open. Anybody who thinks debt is good, debt is bad—debt is both. Debt can be great. It can help your growth and can help you finance machinery. It can help you put in new inventory, or you could use it badly and get yourself into a bind. I’ve always used debt.
Here’s a shocking thing. My kid’s getting involved in the business now. He started to look at the books and he comes back to me and he says, “Dad, did you realize that we were getting a review?” It’s not an audit, but you pay extra for a review. I’m paying $27,000 a year to get the two accountants to sit in the office for about a week and go through stuff. They’ve been doing it for 20 years, and they’ve never really found anything. So I’m paying $27,000 for a review, quote unquote, so that I have the bank line. That pretty much is effectively doubling the interest on the bank line. I realized, wait a second, I’ve got some property that has no mortgages on it. I’m going to go get a mortgage on the property and not have to get the review and save $27,000 because they’re like two different worlds. The real estate side is completely different from the business side. If you put down your 30% on the other side, they just give you the money and they leave you alone. I’m figuring out how to navigate dealing with the bank thing again.
Loren Feldman:
Do you think you’re going to have to change banks again?
Jay Goltz:
It always reminds me of the fable with the fox and the scorpion. “Oh, no, no, no, I’m not gonna sting you. No, no, no. Why would I do that? No, no, no, nothing’s gonna change. No, no, no, nothing’s going to change. It’s going to be just like it was before.” And then when you get to the other side of the room, it stings you and it’s like, “I is what I is.” Do I think the big bank is going to start acting like the bank that they bought? No, I think we’re going to be right back like the other two times where, at the end of the day, the economy’s going to get a little soft. What’s the first thing they do? Go after the retailers. That’s how I was at the last bank. I got jacked around. I found out later, I asked my banker—10 year banking relationship—I said, “What happened? I never missed a payment.” And he said, “Well, you know how it goes.” I go, “No, I don’t. Explain it to me.” And he says, quote unquote, “The new guy didn’t like retail.” That was it.
It doesn’t happen with the local bank who needs your business. These mega banks don’t need small business business. They’ve got the retail business, they’ve got big business. They don’t need us. Here’s a shock. The people who write the ads aren’t the ones who give the loans. I know that’s disappointing, but it’s true. I won’t even say it’s frustrating. I’m kind of used to it. Do I think I’m gonna change banks? 50/50.
Loren Feldman:
Jay Goltz, Laura Zander, Dana White, thanks so much for joining us today.
Dana White:
Thanks for having me.
Jay Goltz:
Thank you.
