Hand & Stone Massage and Facial Spa in Dallas, TX
Guest: Kris Smith
Topics: Hand & Stone Massage, member-based business
Chris Ressa 0:02
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Welcome to retail retold everyone. Today I’m joined by Chris Smith. Chris is the vice president of real estate development for hand and stone massage and Facial Spa. Chris has been in the retail franchising and real estate business for over 30 years. I’m excited for him to join the show. Welcome, Chris.
Kris Smith 1:15
Great to be here. I appreciate the time and appreciate the opportunity to talk about real estate and hand and stone. Terrific.
Before that though. Why don’t you tell the audience a little bit more about you and who Chris is?
Sure. Ah, well, you know, you mentioned earlier my 30 years experience in franchising and that literally is the case I started you know way back in high school with a Domino’s Pizza franchisee at Domino’s Pizza franchisee opened his first location in the town I grew up in in Virginia. I got a job making pizzas. For him even before I could drive ended up delivering pizzas for him when I got my driver’s license and continued to work for the same Domino’s Pizza franchisee throughout high school. And on the college I was fortunate enough to get a baseball scholarship to Virginia Tech. And I would work for the same franchisee throughout, you know, breaks and holidays and summers. And when I graduated from college, it was the height of Desert Storm and the and the economy was very poor at the time. And I was interviewing at different companies and I said I was going to continue to work for that same franchisee until I found a real job. We’ll fast forward about 13 years later, I was still with Domino’s Pizza, but I had become a Domino’s Pizza franchisee of my own. And when I sold my Domino’s pizza franchise, I went to go work for Domino’s Pizza corporate in Atlanta, where I was responsible for the operations team that supported all of the franchisees in the southeast part of the country. So I went from kind of one side of the fence to the other. What brought me to the area I live in now which is New Jersey is a partner and I purchased the Pizza Hut franchisee was a 18 unit failing pizza franchisee where the franchisee was going into bankruptcy and really neglected the business and we got it at a phenomenal price and cleaned up the operations and implemented delivery which is really what that that business needed. And had a great run there for probably about four years before we sold that business. I was with Dunkin brands, the parent company of Dunkin Donuts, I was responsible for the development of their locations throughout throughout New Jersey and eastern Pennsylvania, which is the Philadelphia suburbs. And I started here at Hannon stone about 11 years ago when we had about 47 locations came on to head up there their real estate development team here. And was I can say it without without a doubt the best decision I’ve ever made. This is the not only the best organization I’ve ever been a part of, but more importantly, the best management team that I’ve ever worked with. We’re now at 512 locations and growing we’ve got about 80 in the pipeline in one phase or another of development and you know, live in this world every day and literally look forward to getting up and and coming to work and helping franchisees kind of achieve their their goal of business ownership.
Wow, what an incredible story. First off, we’re in New Jersey do you live?
I actually live in in Burlington Township, New Jersey, our offices in here in Tricos, Pennsylvania, and I live about 20 minutes so just over the bridge, so to speak. Begin to New Jersey and Burlington Township.
No, well, route 130. I am in northern New Jersey in a town called kindelan. So I know the area of Burlington is corporate offices are not far from they’re there, and they’re down there. Second, what position in baseball?
I was an outfielder? Yeah.
Got it. Were you thinking about going into the minor leagues and working your way up?
You know? Yes, I know, obviously, as a kid growing up, that was my aspiration. But, you know, as you as you grow in any, you know, sports field like that, you’ll quickly realize there’s a lot of good athletes out there. And could I have maybe kicked around in the minor leagues for a while? It’s certainly possible, yes. But I don’t think I quite had what it takes to make the major leagues. But I was happy to get as far as I did, I can tell you that. Wow,
that’s really cool. I wrestled in college at Rutgers University. So I know the college athletic experience quite well. And especially in Division One, like yourself, one of the things that I’m really intrigued by your role, and I’m, I’m really interested to see how much it matters in your businesses. You’ve been a business owner, and you’ve been a franchisee in on that side of the table. Yeah. how impactful is that experience, when you’re working with your existing franchisees?
I can tell you the no level of experience, no level of wealth, you know, can compare to that. You know, and really, whether you were a very successful franchisee, or you were just an average franchisee, the fact that you walked in their shoes, the fact that you signed a franchise agreement and put your money down on the table, and you open your own business, that level experience, you know, you just can’t You can’t earn anywhere else. So you have an immediate, in my opinion, level of respect from a franchisee that you’re working within his business, if again, you’ve kind of walked in their shoes. And, you know, the more they learn about me personally, and the more they learn about my style of support for them, I think the more they appreciate it, because I honestly, and we have discovery days, we actually we call the Meet the Team days now, where we have prospects coming, we talk to them about the business. And I tell them that I approach decisions that are made along the way, whether it’s, you know whether or not to submit a letter of intent, the negotiations of a letter of intent, or at least negotiations, I give the perspective as if I’m going to be the one signing that lease with you, because I wouldn’t, and I couldn’t recommend the someone move forward in a direction with developing the location if I wouldn’t do it myself. And I often say that the last thing I want to do is tell you, we’re going to support you in the way that we’re going to support you. And be with you every step of the way. And literally hold your hand through this process. And then see you two years later at a conference, and you come up to me and say you know what you said you were going to do all those things and support us in a certain way and you didn’t do it, you didn’t deliver on that. I couldn’t live with myself. And we and honestly, I don’t give it a second thought because I know that we do deliver on that level of support.
That’s really insightful. Here’s not a lot of people in real estate on the franchise side who have your experience, I think you bring a unique perspective that a lot of franchise real estate people might not have and I think it’s really great. And probably I just imagine that you build connections with franchisees faster for sure,
you know, Chris not to go off on another direction, but I often am asked, okay, well, why are you still not a franchisee somewhere? Or have or you know, have a have a franchise and exactly why and that is because I value I value being successful and I value money like money like everyone else, but what I value more is my family and spending time with my kids. And I know that I wouldn’t have the same lifestyle. If I was still the owner of a large franchise, for example, not to say that I won’t get back into that side of the business at some point in the future. I have a daughter that’s going off to college in the fall. And my son is going to be a sophomore in high school. So it’s still in the cards but I appreciate kind of where I am and certainly the the opportunity that being part of this this this management team here at hand and stone affords me to spend unnecessary time I like to with with with my family so
terrific. So one question I have because it’s so unique to every franchise organization as it relates to real estate Some groups the franchise real estate development team does everything and then in some the franchisee negotiates the lease the loi, they select to hire their own brokers, the real estate development team is a support and to move things along through the process, then there’s groups that are somewhere in the middle of that wears hand and stones real estate team as it relates to how they work with the franchisees.
The question, again, I’ll go back to that initial meeting we have with the prospect during the Meet the Team day on which I present on our support of them. When they become a heinous, dumb franchisee, and I tell them, we’re going to be your partner, we’re going to be with you every step of the way, we’re going to come out to your market and do a site tour, where we’re with the broker and we’re going to each and every one of the shopping centers and we’re going to be peppering the broker with questions about how is the grocery anchor performing? What are the asking rents? What type of tenant improvement allowance is this landlord, asking or providing. And ultimately, we’re going to put a letter of intent together, the brokers used the letter of intent template that we’ve created, and we’re going to go through a top to bottom, and we are going to provide our feedback and recommendations meaning pain and stone and our brokers. At the end of which the franchisee makes the final decision, they have to give the green light for that to be submitted. From there forward. We’re on every phone call. We’re included in every email, we provide feedback and guidance throughout the process. So again, we are a partner. Ultimately, the franchisee has to be educated, and they have to be comfortable in making the decision on what direction to go in, you know, certainly based on our approval or rejection of a site, for example, but you know, we’re a partner along the way we’re not, you know, we’re not we’re not a passive franchisor we’re not going to sell them agreement and a franchise agreement say okay, let us know when you found a location. If that was our strategy, we would not be as successful as we had been.
Terrific, great insights. Now I want to get to know Chris a little bit more. I got three questions for you. You ready for this? Call this clearly air. Question one. What is one skill you don’t possess, but wish you did?
I hate to admit it. But I wish I had the ability to I wish I was a better dancer. I’m not a very good dancer. I mean, listen, my son has rhythm like you would not believe and I don’t know where he got it from. But I wish his age as a as a soon to be 16 year old teenager. I mean, he’s got good dance moves. I don’t have it. Yeah, that’s a skill set. I wish I had Sure.
Okay, that’s a good one. I don’t think anyone said that before. So I like it. Question too. When is the last time you tried something for the first time? Well,
I can tell you that over the last year and a half during the pandemic. It’s been challenging at best. You know, to keep kids entertained and, you know, busy. Last summer for the first time. We actually went skydiving.
Wow, that is a big one. How was it?
Terrifying and a rush? To the degree that you want to go do it again. That’s how it sir. You’ve heard people mentioned how it makes you feel alive makes you feel like you’re alive. It literally does. I mean, your senses are at such a level that you know, it’s you don’t you don’t find that that feeling in many other places, in my opinion.
Yeah, that’s a good one. I don’t know heights are like the one thing that definitely spooked most. And so that’s a that’s a tough one.
To have someone standing on a building and looking over, my palms will start sweating.
Wow. I’ll see you overcame that. Good for you, man. All right. Last question. What is one thing most people agree with, but you do not
need this came up recently. And I actually it’s funny, you said that we had a graduation party for my daughter this weekend, somebody made the comment that everything happens for a reason. I don’t buy into that myself. I think that you know and my beliefs are that you know our actions determine the reasons things happen, you can plan for things and you know, try to make things work out exactly how you envision them. And when they don’t. A lot of times they actually work out for the better and a common phrase that I use a lot is that it will all work out. It may not work out exactly how you had planned it, but it will work out. So I think one thing I don’t necessarily believe that a lot of people do believe it is that things happen for a reason.
Right answer is a great answer. All right. Thank you for indulging me on those clear the air questions. I know they’re off the wall. I want to move to the next part of the show. And let’s talk about the market in hand in stone. And clearly massage was challenged during the pandemic, how did you all like navigate through? And what did you learn from that? And where are you now?
Yeah, it was a challenge. You know, unlike a lot of retail businesses, and even restaurants, to some degree, we are hands on with our customers, I mean, you don’t get a lot more intimate than, you know, a massage or even a skincare service. So, you know, throughout the early stages of the pandemic, we had to quickly assess what we needed to do to create a sell out to create a safe environment, not only for our service providers, meaning our team, but more importantly, our customers. So we worked with a lot of different companies out there on creating the safety measures necessary. So that when we did reopen, and our customers came back, they felt safe in that environment. And, you know, everything was stunted, you know, obviously, we had to close down for a period of time, and then we slowly reopen based on, you know, that particular state and when they were allowing us to reopen, but once we did, I can tell you that people came back in droves. Think about it, they weren’t able to go on their vacations or their shore house or their, you know, their, you know, house and whatever. So it was a lot of people staying relatively close to where they live, and they wanted to get back to some level of normalcy. So they were still getting their hair done their nails done, you know, trying to go to the gym as often as a cook, getting massages, getting skincare services, and we’ve bounced back very quickly. We are now at a level pre pandemic that is just phenomenal for us, not only from a revenue perspective for our spas, but more importantly, we’re back to selling new franchise agreements, new franchisees coming in developing new locations. Interesting fact in that, you know, we are not doing our national conference, usually we do a national conference each year where we bring all of our franchisees to one central place. And this year, we’re doing smaller market meetings. So we did a couple in Florida. You know, we did one interesting, most recently in Austin, Texas, and up in New York, we’re going to be in Chicago. And one of the thing that came one thing that came out of it, our research is, you know, we are the only massage business that had net positive growth from a new opening perspective. And 2020 We opened 29 locations. You know, our nearest competitor Massage Envy, I believe they they opened seven and close over 30. So they had a negative net growth for 2020. It’s continuing even today, for our growth specifically, I would I would estimate that between now and the end of the year. We’re going to open somewhere between 25 and 30 new locations.
Congratulations. That’s terrific. That is terrific. You mentioned the franchisees in the national conference you have franchise groups are a fascinating cohort of business to me and one of the things I’ve learned along the way is that franchisees are unique in some franchisors have these franchisees that our massive companies have like 200 locations some are very focused on a little bit more of an owner operator where maybe the franchisee has one or two what is the hand in stone breadth of franchisee and what do you guys want the franchisee to be?
40% of our owners are multi unit operators so they have more than one. We like that model. You know certainly they have to be qualified from an operational and financial perspective. But in our opinion, it shows the health and more important to us the confidence that a franchisee an existing owner has in the brand if they’re reinvesting into the company to open new locations. That’s a great indicator. In our opinion. Certainly the prospects that are thinking about developing a location if the existing ownership group is continuing to reinvest in open locations. You know, we have some rather we got a couple of large franchisees out there we have one group here in New Jersey that owns 10 locations. We have another group that is continuing to grow both organically and from an acquisition perspective that has I believe in 25 locations that’s our largest franchisee and then we have some that are between that Three and five unit number. So yeah, I mean, you know, it’s kind of on a case by case basis, you know, you would love nothing more than an experienced operator, maybe in another concept that come in, take down, you know, an entire market, St. Louis, for example, Missouri, I’ll have somebody come and open up 10 locations for us. You know, what we don’t want to have happen is we don’t want to sell a, a 10 unit development agreement that somebody that is going to tie up those markets, you know, for an extended period of time. So our development schedules are pretty aggressive. And we, we certainly stay on top of it and ensure that they meet that goal. And if they don’t, then we start to transition to maybe, you know, releasing some of those opportunities to other operators that may want to come in and open up their got it
makes sense. One of the things that makes Hannon stone unique from other massage businesses is the membership, which I think is unique. Because most appointment based businesses only are able to generate revenue from it, there’s a max, but when you have a membership based business, you’ve created a scale and a business that didn’t have scale before. And so how important is the membership base business for you guys? To me, it seems like it’s important. And it’s a way to scale massage that I think is really interesting. And you see it on the tech side, right? SAS businesses subscription as a service is like the biggest thing, you guys have done this physically in a sector that historically hasn’t done it in massage? And can you tell me about that a little bit?
Yeah, I mean, it’s pretty simple. It is the lifeblood of our business. I mean, without it, you know, and there has to be a value there as well, right? I mean, you can’t just have a membership model and collect the monthly membership fees. You know, if you have a high attrition, which we don’t, our attrition level is very low. And it’s because it’s not only a perceived value, but is a true value, I mean, when you can get the level of service at a very competitive price, where traditionally, this type of service was, you know, over $100. And that’s probably on the lower end was probably closer to 150. If you want the some of these larger, you know, day spas and resorts to get these types of services. But when you can get this level of service, you know, at a extremely competitive price in a convenient location and the types of shopping centers that we do best in, you know, your attrition rate. And its is very low. So that membership model and the fact that our owners can depend on that recurring revenue, and start to project out and build out their pro forma throughout the course of 12 and 24 months. I think, you know, I think without it, we wouldn’t be where we are now.
Really fascinating, really, really, really interesting. So, and thank you for that insight. I think it’s a really competitive advantage. And I don’t think it’s easy to build on that. And, you know, on the tech side, it feels like everyone’s trying to do it, but on a physical brick and mortar business. Not a lot of people are accomplishing that, not just in massage. So I think it’s really great. One last thing on this part of the show, it’s a touchy subject for everybody. But I’m wondering, I haven’t asked anyone in your field. So I’m wondering how it is. Everyone’s talking about the unemployment and how hard it is to hire. How’s it been for massage therapists? What’s that world like in the hiring world? I know, it’s a tough topic for everybody right now. And everyone’s working on incentives. You know, I had heard there was a McDonald’s franchisee in Florida, southern Florida. It was $50 just to fill out the application. How’s that been for you all?
Yeah, it’s a it’s a challenge across the board. If you’re out and about and you’re, you know, shopping at a retail store. If you’re going to a restaurant, if you’re going to a service based business like ours. You can expect maybe some interruptions because of the war, the workforce just not being there. 100% like we were pre pandemic, we also have our challenges with getting the massage therapist back in the spas. One slight advantage that we may have over some of our competitors is the fact that we’ve done such a tremendous job on increasing the skincare side of our business such as you know, facial services and skincare and so forth. And estheticians which are those service providers seem to be more readily available has really helped keep our business moving in the right direction. When I started, I would say skincare services made up 10 to 12% of our annual revenue. Now it’s closer to 4040 plus percentage of our revenue. And we’d love to see that a 5050. You know, mix kind of across the board, and I think we’re doing a pretty good job of that.
Got it? Well, thanks for that insight. I’m hopeful that the employment starts to work itself out, and businesses can start to stop being stressed by this hiring craze. But we will see, the next part is the story and you have a story about a location in Dallas, Texas, West Village. Take us there, Chris.
Yes, a unique circumstance. And then we had a franchisee that that wanted to develop a specific part of Dallas. You know, they call this you know, kind of West Village, part of Dallas. And it’s a very upscale upscale high end area. And the commercial real estate in that area is, you know, not only expensive, but also very challenging to get into, and we were probably rejected, and I’m not even so sure if rejected is the right description, we submitted multiple letters of intent to a property owner in the West Village. With zero response, our broker had even done deals with this particular landlord previously, and still couldn’t get a response. So I got on a plane I went down, we were able to get a face to face meeting with one of the primary partners of this ownership group. And we did a 45 minute presentation on who we are, what we do, how we differentiate ourselves to our competitors, we show them our design, stain your standards, pictures of other locations, and what they ultimately look like. We do a lot of research GIS research on our core consumer of who they are, how much money they spend, and really just did a full court press on why and and stone would be a great fit a great tenant for that property. And, you know, we weren’t able to seal the deal during that meeting. But over the course of the next several weeks to a month, we were able to convince them to have Hannon stone be part of their center. We got opened in that in that property probably about four years ago, and it’s one of one of our top performing spas and the entire business.
Well, that is a really great story. It’s excellent. And there’s a lot of takeaways from that so one as the franchisor that you guys would get on a plane and go meet with the landlord and help the franchisee I think that’s the and do a presentation for a landlord for one location. That is a testament to the support that I think you were talking about earlier. And in the show that is pretty incredible for you know, a one store operator, imagine those franchisors that maybe or 1000s of locations that might have hit home because that’s definitely a level of commitment that’s impressive for sure and to aspire to to be able to help the franchisees in that matter.
Appreciate it, yeah, matter of fact, they’ve kind of handed that business off to, to their son, and his wife, and they’ve, you know, they’ve continued to do a very good job there.
And that’s a good testament to the company. And I think the second thing is, when the broker couldn’t get a hold of the landlord, is that when you stepped in, and you got to hold the home?
Absolutely, yep. So the broker would copy me on the correspondence with the landlord’s representative. And, you know, with maybe three or four emails that went out with no response. I called and left a voicemail for that person and let them know that I would be following up with with an email, which I did and included some information about hand in stone, who we are and what we do. And this was early on, we didn’t have a huge presence in Dallas at the time, so they didn’t know us from a granite countertop business. So I think that at least helped, you know, crack the door open a little bit and, you know, allow us to set up a time and go down and do it face to face.
Did they ever tell you what their concerns were?
Well, I think the first concern in that specific instance was the fact that we were you know, we were a franchise group and they liked more of the local, you know, Mom and Pop type businesses, even though they wanted them to be higher end. That was probably their first concern. But
they wanted a local feel local. How did you get them over that? Again, I
think just through the presentation and educating them a little bit more on the fact that this was, you know, we are not we’re a national organization, but it’s going to be a local operator that was from other businesses within the area, and had, more importantly, a strong tie, you know, to the local community. Got it?
And do you think without going down there and doing this presentation, that deal happens?
Of course not, it doesn’t happen. Doesn’t happen? No, we’re, we’re somewhere else not as successful if, if we don’t go down and have that meeting, I mean, it’s a good story, and one that we’ve told before and more importantly, one that that franchisee has, you know, told the other franchisees and more importantly, prospects?
Yeah, for sure. I imagine, at any point where you guys thinking, you know, what, let’s try and find another piece of real estate, this is this landlord doesn’t want us then let’s go somewhere else.
You know, good question. Because we always have backups, the deals fall apart for various reasons. And, you know, this, although was our number one targeted property, we had, you know, number two and three lined up and in negotiations, as a matter of fact, we were probably close to finalizing an LOI and getting the lease on another property when we were able to get that meeting. You know, and that’s, that’s part of the coaching and counseling you provide the franchisees is not to get emotionally connected to a specific property until it’s done because, again, for various reasons, deals can fall apart.
Totally. Yeah, we’ve all seen that. Great story. Thank you for the lessons. I think there’s a lot of takeaways that a lot of people can gain from that. So really appreciate it. The persistence and perseverance are short. Okay. Last part of the show. I got three final questions for you. You ready, Chris? I’m ready. All right. Question one. What’s the last item? Over $20? You purchased in store?
Last item was a crock pot.
Have you tried the Instant Pot?
No, I haven’t tried one of those have to try it. When I told you my daughter had her graduation party for high school this weekend at our house and we were gonna cook meatballs and a crock pot and have all of that and the crock pot wasn’t working so glad to quickly run the Target and buy a new crock pot. That’s why it was that’s the reason for the new
instant pipe. You got to check it out. Unbelievable. Anyway, okay. Question two. What extinct retailer Do you wish would come back from the dead?
Probably for in the static reasons, although based on a Netflix documentary, I know there’s still one but
blockbuster. Yes. Documentary
documentary. Geno’s burgers, I’m not sure if you’re familiar with from familiar with them. It was another one growing up that my father really liked. That was another one. So probably those two.
I don’t know that one. But what was the name again?
Geno’s G I N O. S Geno’s burgers. It was it was a hamburger chain.
Okay. Last question. Let’s pretend you and I were shopping at Target. And I lost you. What aisle would I find you in?
I love sports. It would probably be in the sports aisle at some point maybe looking at some golf equipment or something or either that or the food. The food section. So
I just started getting into golf and taking lessons. I played 45 holes this weekend. So yes, a lot. It was a lot over in big cedar in the Ozarks. Pretty good resort. Pretty cool. My brothers and I anyway, Chris, this was terrific. Thank you so much for this. Really appreciate it. Anything else you want to tell the audience or that we can talk about?
No, I think we’ve pretty well covered it. I appreciate you spending the time and you know, hopefully we can do more deals in the
future. You betcha. Thank you so much, Chris. Really appreciate it. Take care. Take care. Bye bye. Thank you for listening to retail retold. If you want to share a story about a retail real estate deal that you were a part of on our show. Please reach out to us at retail retold at DLC mgmt.com This show highlights the stories behind the deals from all perspectives. So it doesn’t matter if you are a retailer, broker, entrepreneur, architect or an attorney. Also, don’t forget to subscribe to retail retold so you don’t miss out on next Thursday’s episode