* He doubled the education component, adding a week of pretraining just to make sure new hires were comfortable with the large comb and small shears used in every Supercuts. The cost was negligible, just one week's salary, with the payoff in employee confidence. Then he added again, this time quarterly workshops for all employees, with training in customer service and continuing education "on what's hot and what's new." Besides keeping stylists on the cutting edge, it would build an esprit de corps based on shared excellence.
* He started a company newspaper and gave a yearly awards bash to build morale. He sent each employee a handwritten card on her birthday. They could have more than jobs with him, if they wanted; they could have careers. To build his staff, he spread responsibility: each shop manager was expected to hire, train, and evaluate the stylists in her shop, and each assistant manager had the same duties for the receptionists. Then he developed a management apprentice program to let stylists prepare to climb up, assuring himself of enough ready talent that he could promote from within.
* He introduced brand-name product sales and still more incentives, commissions, and contests galore -- and in the process dramatically increased his net.
The results, year in and year out, have been dazzling: 1988 sales in Grace's shops averaged $375,700, some 30% higher than volume franchisewide, with margins running between 18% and 20%. In an industry plagued with employee turnover, 9 out of 20 of his managers have been with him since the beginning, while another 7 have more than five years' tenure. Product sales consistently run 50% over the national average and bring $300,000 -- about 25% of his total profit -- straight to his bottom line.
The genius of franchising, at its best, is the partnership it creates -- spreading responsibility and reward away from the corporation down to the individual unit owner. Grace's success has come from pushing that partnership one step further down, building unity of purpose and depth of management that could do any CEO proud.
In 1980, when Grace, then 37, opened his first franchise, he had no intention of owning a chain of haircutting salons, let alone running them. Trained as an accountant, he barely knew a shag cut from a shag rug. Besides, he already had a new small business of his own, a consulting office he set up in his hometown of San Francisco after years in the corporate fold, managing investments for a handful of individuals and doing a bit of franchise consulting. Supercuts was a client, a fledgling franchisor selling its package as a passive investment requiring, at most, eight hours of his attention each week.
Grace started with one significant advantage. Unlike most potential franchisees, forced to make projections from the vague outlines of a uniform franchise-offering circular, he'd had access to the corporate books. "Given the required investment range, it was clear you could be wrong by a very large factor and still do well," Grace says. "I figured, if I can do as well as the company's stores, I'll think I've died and gone to heaven."
Grace's projections, in fact, were very wrong. He'd hoped eventually to net some $100,000 a year on a start-up investment of $75,000. After the initial shakedown, it turned out that his first two stores produced more than a 100% return far more quickly than he'd hoped. His third store showed a 150% return on investment in its first year. Grace was convinced he could become "a major player" -- if he could find the locations, capital, and personnel to do it. Although the Bay Area was largely spoken for, Los Angeles, an hour away by plane, was still untouched. He could cherry pick, looking for high-visibility, high-traffic strip malls. He was willing to pay rents far higher than the franchisor recommended -- assuming, correctly it would turn out, that the prime location would guarantee an equally higher return. Although he had no capital of his own, he had an investment client with some money to play with.
After Grace's first 3 L.A. stores opened, returning 300% a year on a total investment of $190,000, he would have no trouble finding all the money he would need. Under the corporate name of Cynosure, he would eventually open 20 different units separated into 7 different legal entities, with Grace's ownership stake as high as 100% in 3 stores and as low as 21% in 6 others. "Gary Grace Enterprises," they answer the phone at headquarters; it is Grace, not Supercuts, that his investors bet on.
They leave management to him, too. "I don't write them memos," Grace says. "I send them money."
Grace loves being in the shops; it's the most fun he has in his 40-plus-hour workweek. From the beginning he counted on enough personal exposure to his team to guarantee they would handle things the same way he would. But he never considered moving south to L.A., and he has never had to, except for a few months at a time.
The relationship starts with one basic agreement: "You're the manager, responsible for making sure you have things the way you think they should be," he insists. "You can't say, 'Do something because Gary says so,' if you say you're the manager of the shop."
He'll be there to help, and so will Malie; 19 other store managers are just a phone call away. But it's up to each store manager herself to keep things humming. That means staying on the floor, in touch with everyone, cutting at least 85 heads a week, keeping the productivity and attendance charts in the break room up to date, and reminding Laura to try to smile a little more. Managers hire, train, and discipline. They decide whose productivity merits a raise beyond the established pay scale and who isn't performing to their standards and will have to be let go.
Formally, they conduct the evaluations of all shop employees every four months, filling out a six-page form reviewing goals, accomplishments, and opportunities to improve, with everyone graded from 1 to 10 on their contributions in weighted categories such as shop atmosphere, mastery of job, and teamwork. For stylists, it's a way to boost their income. Points earned over each four-month evaluation period translate into dollars in an annual bonus, up to $375, paid each December. An effective manager can do better still, adding more than $1,000 to her $20,000 salary. To make sure there are no surprises, managers conduct mini-evaluations each month as well, looking at statistics for categories such as volume and attendance, measuring each employee against goals she set for herself. It's an endless cycle -- feedback and follow-up -- starting each time with self-evaluation and ending in a lengthy employee-review session with the shop manager and with general manager Malie.
