Hollywood Tans is a well-known tanning salon chain that has grown substantially since its founding in 2001. Many people wonder if Hollywood Tans is a franchise or a corporate owned business. The short answer is that Hollywood Tans operates primarily through franchises, but there are some corporate owned locations as well.
History of Hollywood Tans
Hollywood Tans was founded in 2001 by Joe Leal, an entrepreneur with previous experience in the fitness industry. Leal opened the first Hollywood Tans salon in Pembroke Pines, Florida.
The concept quickly took off, appealing to people’s desire for that sun-kissed, bronzed “Hollywood” look. Leal began selling franchises for new Hollywood Tans locations in 2003. The franchising model fueled rapid expansion in states like Florida, Texas, and California.
By 2009, Hollywood Tans had over 300 locations across the United States. The brand was acquired by Sun Tan City in 2017, which continued to expand through both corporate owned and franchised locations. Today, there are nearly 400 Hollywood Tans salons across the U.S.
Franchise vs Corporate Owned Locations
The vast majority of Hollywood Tans locations are franchised. This allows entrepreneurs to open their own Hollywood Tans salon with the brand name, systems, and support provided by the corporate office. As of 2023, about 95% of Hollywood Tans locations are independently owned franchises.
There are also some corporate owned Hollywood Tans locations. These are salons fully owned and operated by the parent company, Sun Tan City. Corporate locations allow the company to test out new products, layouts, and initiatives before rolling them out to the wider franchise network.
Here is a breakdown of Hollywood Tans locations:
| Type | Number of Locations |
|---|---|
| Franchise owned | Around 380 |
| Corporate owned | Around 20 |
As you can see, franchises make up the vast majority of Hollywood Tans salons. But corporate does operate a handful of locations across the country.
Benefits of Franchising
There are a few key reasons why franchising has been an effective growth model for Hollywood Tans over the years:
– **Capital from franchisees** – Opening each new location requires significant upfront investment. Franchisees put up most of the capital needed to open and operate each salon. This allows the parent company to expand quickly without taking on huge financial risk.
– **Motivated owners** – Franchisees are business owners who are invested in the success of their salon. Their income depends on the salon’s profitability. This motivates them to provide great customer service and build a loyal client base.
– **Local market knowledge** – Franchisees have in-depth knowledge of their local area which helps them cater to local customers. The parent company would struggle to have this same local expertise across hundreds of scattered locations.
– **Scalability** – The franchising model enables quick scaling up without radically altering the corporate structure. Expanding through corporate owned stores would require huge HR/operational changes.
Franchising has clearly been an effective approach for Hollywood Tans, enabling a small chain to expand into a national brand with hundreds of locations. But company owned stores also play an important role.
Benefits of Corporate Owned Locations
While most Hollywood Tans locations are franchised, the corporate owned stores provide some unique advantages:
– **Testing ground** – Corporate locations serve as real world testing grounds for new products, equipment, layouts, and policies before system wide roll out.
– **Training centers** – These locations often serve as training hubs to get new franchisees up to speed on operations and customer service standards.
– **Quality control** – Company managers can set the bar for operational execution, cleanliness, and service levels. This maintains brand consistency across all stores.
– **Market entry points** – Corporate stores allow Hollywood Tans to enter a new market before selling to franchisees in that area. This builds local brand recognition.
– **Increased revenue** – While riskier, profits from corporate owned stores go directly to Hollywood Tans’ bottom line. This diversifies revenue beyond just franchise royalties.
The mix of both franchise and corporate owned stores has fueled Hollywood Tans’ rapid growth while allowing local adaptations and centralized control.
Franchisee Selection Process
For entrepreneurs interested in owning their own Hollywood Tans franchise, the selection process is rather rigorous. Hollywood Tans seeks franchisees who are passionate about the business and meet certain financial criteria.
Here is an overview of the franchisee selection process:
– **Initial application** – Prospects complete a detailed application providing background on their skills, experience, and financial position.
– **Interviews** – Multiple interviews are conducted with candidates by the Hollywood Tans executive team.
– **Net worth requirement** – Hollywood Tans requires a minimum net worth of $350,000 for franchisees. This provides financial stability.
– **Liquid capital requirement** – Franchisees must have at least $100,000 in liquid personal assets to invest in the business. This ensures adequate working capital.
– **Financial history review** – Hollywood Tans analyzes credit history, bank statements, tax returns, and existing businesses. They want established entrepreneurs.
– **Agreement signing** – Once approved, franchisees sign legal franchise agreement and make initial franchise fee payment.
– **Training** – New franchisees undergo multiple weeks of hands-on training before opening their salon.
This selective process allows Hollywood Tans to maintain consistent quality and business standards across all franchised locations.
Franchise Fees and Ongoing Costs
There are considerable upfront and ongoing fees associated with owning a Hollywood Tans franchise location. These include:
**Initial franchise fee** – $50,000
This payment allows the franchisee access to the Hollywood Tans system, branding, and training programs.
**Royalty fee** – 6% of gross sales
This is an ongoing weekly fee paid to the corporate office based on total salon sales.
**Marketing fee** – 2% of gross sales
Paid each week to fund local and national marketing campaigns.
**Grand opening support** – $15,000
Covers the corporate team’s time assisting with pre-opening planning and grand opening events.
**Lease, equipment, payroll** – Variable costs
Franchisees pay for all salon lease costs, tanning equipment, renovations, payroll, taxes, and other operating expenses.
**Product purchases** – Ongoing
Inventory like tanning lotions and eye wear are purchased directly from Hollywood Tans corporate.
The total investment to open a new Hollywood Tans franchise ranges from $140,000 to $425,000. Ongoing expenses include the weekly royalty and marketing fees equal to 8% of total sales.
Franchise Agreement Term Length
The Hollywood Tans franchise agreement signed between the corporate office and franchisees is valid for a term of 10 years.
Here are some key points on the 10 year term:
– The agreement expires 10 years after the franchise location first opens for business.
– At the end of the term, franchisees must sign a new 10 year agreement to continue operating the salon.
– Franchisees are generally offered the chance to sign a renewal agreement as long as they have been compliant with brand standards.
– Hollywood Tans can opt not to renew an underperforming franchisee’s contract at the end of the term.
– If not renewed, the franchisee must de-identify the salon and cease use of Hollywood Tans branding and systems.
– The franchisee can sell the salon business to a new owner approved by Hollywood Tans when renewing the agreement.
The 10 year franchise term gives both parties the flexibility to evaluate whether to continue the relationship or go their separate ways after a decade of business together.
Pros and Cons of Owning a Hollywood Tans Franchise
As with any major business investment, there are both advantages and potential challenges to owning a Hollywood Tans franchise location.
**Pros**
– Strong branding and reputation
– Corporate support with site selection, marketing, operations, training
– Centralized tanning product sourcing
– Revenue diversification beyond tanning with lotions and eyewear
– Concept resonates in many markets without localization
**Potential Cons**
– Significant upfront and ongoing fees
– Need to manage part time hourly employees
– Changes to tanning industry trends and regulations
– Encouraging customers to maintain subscriptions through off-peak seasons
– Investing time marketing to compete with other local salons
Like all franchises, becoming a Hollywood Tans owner entails major financial risk. But the brand recognition and corporate support help mitigate this risk for savvy entrepreneurs.
Alternative Franchise Options in the Salon Industry
For prospective franchisees interested in the salon industry, Hollywood Tans is far from the only option. Some other major franchised salon concepts include:
**European Wax Center**
– Service focus: Waxing services for hair removal
– Total locations: Over 800
– Initial investment: $246,000 – $500,500
**Drybar**
– Service focus: Blow outs and hair styling
– Total locations: Over 140
– Initial investment: $350,000 – $475,000
**The Woodhouse Day Spa**
– Service focus: Massages, facials, full scale spa
– Total locations: Nearly 80
– Initial investment: $278,000 – $737,500
**Sport Clips**
– Service focus: Men’s hair cuts
– Total locations: Over 2,000
– Initial investment: $224,000 – $390,000
**Great Clips**
– Service focus: Value-priced hair salon
– Total locations: Over 4,500
– Initial investment: $140,000 – $250,000
Franchisees looking at Hollywood Tans should research these and other salon concepts to find the right match based on their skills, market, and investment appetite.
Market Trends and Outlook
Some key trends impacting the tanning salon franchise industry overall include:
– **Growing health consciousness** – Consumers, especially younger generations, are more aware of tanning’s health risks. This may limit growth potential.
– **Preference for spray tanning** – Spray and sunless tanning services are growing as alternatives to traditional UV tanning beds.
– **Increased competition** – Small independent salons compete on price. Larger franchised competitors also battle for market share.
– **Regulatory restrictions** – States continue to introduce legislation restricting minors’ access to tanning beds, impacting the customer pool.
– **Ongoing COVID impacts** – Pandemic aftershocks on consumer discretionary spending and comfort in close contact services may linger.
Despite some external threats, the Hollywood Tans franchise opportunity still offers proven financial models, strong branding, and corporate support to mitigate risk for qualified entrepreneurs. But candidates should carefully consider their local market dynamics before investing in any franchise.
Conclusion
Hollywood Tans is predominately a franchise concept, with around 95% of locations independently owned and operated by franchisees. This has fueled rapid national scaling while allowing entrepreneurs to leverage the brand, systems, and corporate support. The franchise model has clearly driven Hollywood Tans’ growth from a small Florida chain into a tanning salon leader with nearly 400 locations across the United States. While health and regulatory concerns pose challenges, Hollywood Tans remains committed to providing franchisees a potentially rewarding business ownership opportunity in the years ahead.
