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Hand & Stone Massage Furloughs Employees, Retains Members


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So far, only two Hand & Stone locations have been approved for a Paycheck Protection Program loan from the Small Business Administration—which as of Thursday has exhausted the $350 billion designed to provide an incentive for small businesses to keep their workers on payroll.

As soon as Hand & Stone Massage and Facial Spa locations starting closing on March 17 due to COVID-19, they began a promotion where if members stay active—meaning they don’t cancel their memberships—during March, April and May, they’ll receive a free massage or facial.

“People want to see that their local massage therapist is going to be there when they come back and are looking to get that first massage after quarantining,” said Todd Leff, CEO of Hand & Stone. He said they’ve retained about 90 percent of members so far. “It’s a vote of confidence in the brand for them to agree to stay on.”

Nevertheless, Leff understands that some people were hit harder financially than others. In response to the last financial crisis, the brand switched to a month-to-month membership model in 2010 that can be frozen or terminated at any point.

With more than 450 units in 31 states and Canada, nearly all Hand & Stone massage therapists and estheticians have been furloughed or laid off to allow them to collect unemployment benefits.

In the meantime, massage therapists are using Hand & Stone’s training platforms to learn additional safety and hygiene protocols, while managers are learning best practices for communicating with members and learning how to keep customers engaged. They’ve also created the ability for franchisees to presell memberships and gift cards to generate revenue during this period where they can’t be physically open.

“This is a tremendous time for estheticians with downtime to be able to go online and get additional training and achieve certain statuses and certifications they didn’t have time to do before, frankly,” Leff said.

A contactless customer transaction platform was already being developed before COVID-19, but the pandemic sped the process along. In the near future, customers won’t need to stop at the front counter at any point in their transaction and will complete all forms and payment on their phones. The front desk associates who normally handle those processes will switch to more of an educational role for first-time customers.

“Some things are prone to stay in place for a long time, and for us, it’s developing that contactless customer transaction,” Leff said. “It’s caused us to think differently about the business.” 

Leff’s three main objectives during the pandemic are to preserve liquidity for franchisees, to protect and motivate employees and to prepare to reopen the system. They’ve suspended ad and intellectual technology fees and have been helping franchisees apply for rent relief from their landlords, as well as walking them through federal loan applications.

So far, only two Hand & Stone locations have been approved for a Paycheck Protection Program loan from the Small Business Administration—which as of Thursday has exhausted the $350 billion designed to provide an incentive for small businesses to keep their workers on payroll.

Despite financial uncertainty, Leff has seen a spike of massage therapist applications, a change from the past several years.

“We’ll find the smaller marginal competitors will go out of business,” Leff said. “It’s been a big eye-opener. It’s much better to be an employee of a business like Hand & Stone than it is to try to be an independent contractor…it’s a more stable and quality work environment.”

Having led franchisor communications after 9/11 and after the recession in 2009, Leff has seen how in uncertain economic environments, more people become interested in the world of franchising.

“I’ve always said franchising benefits from a mild recession,” Leff said. “We’re going to see a whole new group of people looking for opportunities because they’re no longer employed…so once we start emerging from this, conditions will be in place for franchises to grow.”

For the past couple years, the company has typically opened one spa location per week and sold one franchise agreement per week. Current prospective franchisees, however, are taking the wait-and-see approach, said Bob McQuillan, vice president of franchise development at Hand & Stone. McQuillan agreed with Leff that as unemployment goes up, people will be looking to do something entrepreneurial and potentially invest in a franchise.

“After this, you’ll see an absolute uptick in our industry and with Hand & Stone,” McQuillan said. “We’re a company that for the fourth year in a row, we haven’t closed a business. Try to find a franchise with 450 locations that can say that.”

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The latest news, opinions and commentary on what's happening in the franchise arena that could affect your business.

Laura MichaelsLaura Michaels is editor of Franchise Times. She can be reached at 612.767.3210, or send story ideas to lmichaels@franchisetimes.com.
 
Beth EwenBeth Ewen is senior editor of Franchise Times. She can be reached at 612.767.3212, or send story ideas to bewen@franchisetimes.com.
 
Nicholas UptonNicholas Upton is restaurants editor at Franchise Times. He can be reached at 612.767.3226, or send story ideas to nupton@franchisetimes.com.
 
Mary Jo LarsonMary Jo Larson is the publisher of Franchise Times Magazine and the Restaurant Finance Monitor.  You can find her on Twitter at
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