Regal nails Wal-Mart
Chain rides the big retailer's coattails
Regal Nails Salon & Spa has been opening 100 new salons inside of Wal-Mart stores a year. The franchise currently has more than 940 locations in the retail powerhouse.
The secret to success for Regal Nails Salon & Spa, which is getting ready to celebrate its 1,000th store opening, is a powerful landlord—Wal-Mart.
Regal Nails currently has 940 locations open in Wal-Mart stores across the country. They opened the first Wal-Mart store in November 1997. Initially, Wal-Mart agreed to a few test locations. In 1998, the chain opened another 15 trial locations. “We went from there,” says “Charlie” Quy Ton, founder of Regal Nails in Baton Rouge, La.
Regal Nails has since been opening more than 100 new Wal-Mart locations each year, including 124 salons in 2006. The in-store locations represent prime real estate for Regal, which is able to tap into Wal-Mart’s enormous traffic base. Wal-Mart Supercenters typically average about 50,000 transactions per week. Considering the retailer averages between one to two people per transaction, that means Wal-Mart Supercenters are drawing some 70,000 people per week, Ton notes. “If our capture rate is only a few percent of that, we are doing well already,” he says.
When he was 14, Ton left South Vietnam on a boat to The Philippines without the security of family and later joined an older brother in the U.S. He attended Louisiana State University and while there made a bet with an Asian-American friend to see who would be the first to make a million.
A chemical engineer by training, he couldn’t find a job in the mid-1990s.
His wife owned a nail salon at the time, and Ton turned his attention to product distribution for the nail business, but his adopted hometown of Baton Rouge didn’t have enough salons to make it worthwhile. Instead he set up an import business, doing mail-order nail salon supplies.
A trip to his local Wal-Mart a couple of years later gave him the idea that if a hair salon worked there, so could a nail salon. Wal-Mart wasn’t interested at the time, but a year later when he approached the leasing agent again, a space opened up and he was given less than a week to open the salon.
Since 70 percent of Wal-Mart’s customers are women, according to Ton, it wasn’t much of a stretch that the concept was successful.
Plenty of perks
In addition to the tremendous access to potential customers, a second advantage is that Regal Nails doesn’t have to market or advertise. Wal-Mart runs its own marketing and advertising program, often promoting its in-store services such as the nail salons, portrait studios and optical stores. “So in our franchise, we don’t charge any marketing fee,” Ton says.
A third benefit is cheaper rent. Retail rents tend to be more expensive in high-demand markets such as New York, California and Florida. That is not the case with Wal-Mart. The retailer charges the same rent regardless of the location. In addition, Wal-Mart does not charge rent for each square foot of space leased, but rather charges a flat rental rate based on a set size category, such as 0 to 450 square feet.
Canh Truong operates four nail salons in Florida, two of which are Regal Nails located within Wal-Mart Supercenters. “I really love doing business with Regal Nails in Super Wal-Mart because there is a large number of people that know Wal-Mart,” Truong says. “I would love to do more Wal-Mart stores if they had more locations available.”
Charlie Ton found that it really is all about location, location, location.
Truong pays about $2,800 per month for the Wal-Mart space compared to $10,000 a month for his nail salon located in a shopping mall. Although net profits are comparable between Truong’s mall and Wal-Mart locations, the mall stores require more effort. It takes more work and more employees to generate higher sales at the mall locations for much the same profit, Truong says.
Regal Nails occupies a variety of different size stores depending on what space is available at an individual store. The smallest Regal Nails Salon is 280 square feet, while the largest store in the chain is 2,000 square feet. “We prefer a large space, but we take what we can get,” Ton says. Lease terms are three years initially, followed by three two-year options for a total of nine years. “Wal-Mart is a very good landlord. The leasing department is very easy to work with,” Ton says.
Wal-Mart Stores Inc., which currently operates Wal-Mart Supercenters, Discount Stores, Neighborhood Markets and Sam’s Club warehouses, operates more than 4,000 facilities in the U.S. and more than 2,700 international stores. In addition to Regal Nails, the retailer leases space to other franchisees such as Subway and McDonald’s. Wal-Mart declined to comment for this article.
In addition to the strong traffic flow that fuels the customer
base, one of the perks of dealing with Wal-Mart is that they are on-site and accessible. Wal-Mart has its own high standards of keeping its stores clean and well-maintained, so there is never an issue of battling an absentee landlord or management company to get something repaired or cleaned.
From a sales perspective, the Wal-Mart locations do well, although the sales still depend heavily on the operator. “We have had to shut a few locations each year due to poor operators,” Ton says. All of the Regal Nails locations are franchisee operated. Although Regal Nails does close a few locations each year, once the company puts in a new operator, those locations usually do well, he adds. Currently, Regal Nails has a waiting list of interested franchisees.
In fact, the Wal-Mart locations have been so successful that Regal Nails is working to expand the in-store concept into other retail stores. Regal Nails has one location in a Meijer grocery store in Michigan, and the company is in the process of opening two locations with H-E-B, the San Antonio-based grocery chain. Salons in Houston and Kyle, Texas are set to open this summer.