The future of the beauty business

By Sarah Stowe | 03 Apr 2017 View comments

Which two brands have created a beauty powerhouse? Inside Franchise Business: a powerhouse of beauty brands.

A merger plus a partnership in the hair and beauty space offers franchise opportunities with the new entity’s full treatment plan for growth.

Two key brands in the hair and beauty industry, Australian Skin Clinics and Ella Rouge, merged last year and formed a subsequent partnership with salon Hairhouse Warehouse.

Australian Skin Clinics MD Deb Farnworth-Wood says all three companies share the same target market, which gives them the opportunity to provide enhanced services and offerings. “It is this customer-focussed culture that has aligned the businesses so well," she says.

Both the merger and partnership had been easy decisions, with all companies having clear synergies.

“Ella Rouge Beauty has been looking after millions of Australian women and their beauty needs for more than 17 years,” says Farnworth-Wood. “The alignment of the brands will improve trade with common suppliers, improve the ability to negotiate with future retail landlords, and bolster existing support and resources.

“It also means new franchise opportunities across both the Hairhouse Warehouse and Australian Skin Clinics brands.”

Personal development

Furthermore, the merger provides staff members with opportunities for personal development through the new management structures. 

“We have also been able to reduce franchise fees because of economies of scale, and provide more support to our network,” says Farnworth-Wood.

However, as in any merger, she says there is a period of bedding down and understanding the differences between the organisations. “This can be slightly unsettling for some staff members, which is why it is important to ensure the whole project involves a tightly managed transition strategy.”

Farnworth-Wood sees it as a chance to share best practice and find new opportunities for growth.

“Other challenges include integration of systems, shared resources and communication, although overall the merger has been a resounding success and all parties are happy with progress so far.”

Since launching in 1992, Hairhouse Warehouse has grown to more than 140 outlets across Australia with network sales exceeding $200 million.

As for expansion, it’s the full treatment.

"The rebrand will see Australian Skin Clinics more than double its 25 stores, with further growth plans including more than 20 extra clinics in the current financial year and another four clinics in New Zealand over the next 12 months."

Vertical integration

Since Australian Skin Clinics acquired Balense Skin Care in August, vertical integration may continue to be a theme for the business in the future, says Farnworth-Wood. 

Hairhouse Warehouse co-founder/MD Joseph Lattouf sees the merger as “a great strategic step forward” with the shared outlooks of the franchise networks being “an absolute strength”.

“The Hairhouse Warehouse growth strategy includes a focus on expanding its suite of brands in the hair and beauty sector over the next three to five years, with a firm goal of an IPO or trade sale.”  

Hairhouse Warehouse franchise development manager Peter Fiasco says he sees the industry consolidating in the future.

“We believe national regulation will be introduced whereby there will be one uniform qualification across Australia. All states currently regulate individually who can operate a laser machine. In the future, we see a national standard for this.

“We believe the industry will continue to grow, and as such will become less price-sensitive and more about quality results. The price war is happening now, but we suspect this will ease over the coming years.”

Farnworth-Wood agrees. “Our industry is growing every day, and with regards to what the landscape looks like ahead, we can only comment on what we hope for our future.

“At Australian Skin Clinics, our current and future focus is not on price, it is on providing effective and credible treatments backed by years of extensive training.”

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