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PLANET BEACH PITCHES TANNING SALON-SPA COMBO

By Carole Paul

By the late 1990s, when tanning salons had become a growth industry, Steve Smith, a Gold’s Gym franchisee in New Orleans, noticed an absence of regional or national companies in the business. Smith’s entrepreneurial spirit and experience as a gym owner convinced him that bringing franchising to the indoor tanning industry was a good idea. In April 1995 he opened Electric Beach, a membership-based tanning salon built much along the lines of the typical gym model. When Smith began to expand, he decided Electric Beach did not quite reflect what he wanted the company to stand for: an “otherworldly” salon experience. In the fall of 1995 he opened the first Planet Beach, in Atlanta.

The company grew rapidly. “In 2001 we opened 50 locations, and in 2002 hit the 100-location mark,” said Chad Calongne, Planet Beach’s director of leasing. In 2005 Entrepreneur magazine ranked Planet Beach No. 1 in the U.S. tanning salon category.

But by then there were plenty of indoor tanning names, and the concept was growing stale, according to Calongne. Planet Beach needed to create some kind of added value to differentiate itself. After considerable research, executives decided to switch to a spa platform. Planet Beach’s “Contempo Spa” concept married the tanning business to the day spa business. The chain offered a body-moisturizing bed, a water-massage bed and a skin-rejuvenation therapy device called a photo-facial machine. “We learned that in the day spa industry, more and more people wanted privacy when the services were provided,” Calongne said. “A significant difference in what we do in comparison to a day spa is that we use automated equipment, offering all services in a private room with machines.”

By the summer of 2005, everything was in place. But no amount of preparation could have enabled Smith to foresee what happened next. “Approximately four and a half weeks after our CEO announced the rebranding at our annual convention in Lake Tahoe [Nevada], we went to bed on August 26 and woke up on August 27 to find we had to leave,” says Calongne. “Hurricane Katrina was coming.”

This was certainly not conducive to running a business in the midst of a rebranding campaign.

In the aftermath of the storm, authorities declared the company’s headquarters in Marrero, La., to be off-limits.

Within two weeks a temporary office was set up about 45 minutes from headquarters. The franchise sales department operated from there almost through Christmas. To facilitate communications, Smith enlisted the help of a conferencing service company. Every morning at 9 he held a “meeting” with the whole company. “It was like a roll call,” said Calongne. “Everyone called in to hear his report and fill each other in on what was happening in their department.” Though scattered all over the country, the employees were able to work remotely. Meanwhile, the sheriff’s department was issuing passes selectively to allow some to return briefly to the city. Thus, the COO was able to retrieve the servers from the headquarters.

Franchises outside the affected area moved the rebranding process forward, though, learning about the equipment and introducing customers to it. Approximately 258 franchises are now operating as spas; the rest are in the process of switching over. And the change is paying off, says Calongne. “In the very first quarter of the conversion, the existing franchise locations that converted to Contempo Spa experienced a 47 percent average same-store sales increase from the previous year,” he said. The company continues to grow rapidly. At press time it had 352 units in 38 states, Canada and Australia.

Planet Beach seeks densely populated markets with household income in the $60,000 to $70,000 range. Seventy percent of its customers are women between 18 and 44, and approximately 75 percent are white. Part of the rebranding strategy is to increase the breadth of services to appeal to a more diverse population. Most Planet Beach Contempo Spas are in neighborhood areas, primarily grocery-anchored open-air and lifestyle centers, and one regional mall, Jordan Creek Town Center, the largest of its kind in Iowa.

“We’re opening a spa about every four days,” said Calongne. “Our projected new spa openings for 2007 [are] 97, about 220 percent more than 2006. We aim to have 500 locations open by 2008.” The greatest growth is in Greater Philadelphia and Bergen County, N.J. The company’s shopping list also includes Arizona, Denver, Las Vegas, Portland, Ore., Salt Lake City, Seattle-Tacoma and, in California, Los Angeles-Orange County, Riverside, Sacramento and San Francisco.

In selecting locations, the company looks at traffic flow (20,000 cars a day), visibility, tenant mix, security and parking in areas that will not cannibalize its franchises. The stores are typically in-line and measure about 1,650 square feet, with a minimum frontage of 20 feet.

When considering co-tenants, Planet Beach seeks stores that have high foot traffic, such as video stores and dry cleaners. “The more frequently customers go to them, the more opportunity I have to market to those areas,” said Calongne. And “I always like to know where Starbucks is. Starbucks customers tend to be very loyal.”