WEBVTT - Massage Services During the Pandemic 0:00:00.600 --> 0:00:04.200 You're listening to Bloomberg Business Week with Carol Masser and 0:00:04.280 --> 0:00:08.600 Jason Kelly on Bloomberg Radio. So, Carol, we've been spending 0:00:08.600 --> 0:00:11.440 a lot of time trying to figure out how businesses 0:00:11.640 --> 0:00:17.440 get open, you know, especially businesses that social distance isn't 0:00:17.600 --> 0:00:22.840 really baked into the whole thing, right, um, and also 0:00:22.880 --> 0:00:26.279 businesses that have multiple locations and multiple areas. So we're 0:00:26.280 --> 0:00:28.200 really excited to talk to Todd left. He is the 0:00:28.240 --> 0:00:31.400 CEO of handen Stone Massage and Facial Spa joining us 0:00:31.520 --> 0:00:33.560 on the phone. Todd, really nice to have you with 0:00:33.600 --> 0:00:37.640 Carol and myself. Thank you, glad to join you. So 0:00:38.040 --> 0:00:40.239 give us a little bit of size and scope, as 0:00:40.280 --> 0:00:43.840 we say here at Bloomberg about the company, because you've 0:00:43.840 --> 0:00:50.040 got uh four fifty plus units I believe across the region, right, 0:00:50.159 --> 0:00:54.680 So we're this is a national franchise chain of massage 0:00:54.680 --> 0:01:00.480 and facial spas. We have four d locations across uh 0:01:00.520 --> 0:01:03.280 thirty two states in the US and a couple of 0:01:03.320 --> 0:01:07.720 provinces in Canada as well. Okay, So and it's franchise. 0:01:07.840 --> 0:01:10.199 So you know, we've talked to a lot of um company, 0:01:10.240 --> 0:01:14.160 especially within the hospitality industry where there's franchise and how 0:01:14.240 --> 0:01:17.880 they are dealing with the virus and how do they reopen. 0:01:18.160 --> 0:01:20.960 First off, let's ask about the impact. Were you guys, 0:01:21.080 --> 0:01:25.520 I'm assuming, shut down completely, right, So starting as as 0:01:25.800 --> 0:01:30.640 you know most businesses, we started actually voluntarily closing locations, 0:01:30.840 --> 0:01:34.920 you know, probably the first week of March, but quickly 0:01:34.959 --> 0:01:38.520 that accelerated and so by April one, all four d 0:01:38.640 --> 0:01:41.640 and sixty five locations were closed. Um, so we were 0:01:41.880 --> 0:01:46.240 you know, really had had no services being done you 0:01:46.240 --> 0:01:50.200 know after April one, right, okay, and so were you 0:01:50.200 --> 0:01:52.520 guys able to your franchise owners, were you able to 0:01:52.560 --> 0:01:54.240 hold onto workers or did you have to let go 0:01:54.360 --> 0:01:57.920 of those workers now? So we yeah, so you know, 0:01:58.000 --> 0:02:00.680 part of our strategy was really you know, how do 0:02:00.720 --> 0:02:04.560 you preserve, um, the franchise e liquidity. That was that's 0:02:04.560 --> 0:02:07.080 one of the most important things because we want them 0:02:07.120 --> 0:02:10.560 to be around to reopen. And so one of one 0:02:10.600 --> 0:02:13.000 of the things they had to do early on was, um, 0:02:13.040 --> 0:02:16.359 you know, layoff all of the staff except generally managers 0:02:16.360 --> 0:02:19.799 and so uh within a two week period, we uh, 0:02:20.000 --> 0:02:24.520 the system laid off about eleven thousand employees. So it 0:02:24.639 --> 0:02:27.040 was a you know, pretty big hit and um, you know, 0:02:27.080 --> 0:02:30.560 obviously to all those workers you know, very unfortunate as well. 0:02:31.600 --> 0:02:35.840 And so what's the process like of coming back, I 0:02:35.840 --> 0:02:39.640 mean from a safety perspective, from a worker perspective, walk 0:02:39.800 --> 0:02:43.800 us through the process of that. Yeah, so you know 0:02:44.240 --> 0:02:47.400 that was my biggest concern early on. I mean, you 0:02:47.400 --> 0:02:50.240 know when we sat there, you know, kind of mid 0:02:50.280 --> 0:02:53.480 March and late March, you really have to answer first 0:02:53.520 --> 0:02:56.840 the existential question, as you said, Jason, at the outset, 0:02:57.440 --> 0:03:01.120 can you do a hands on business safe UM with 0:03:01.240 --> 0:03:05.200 COVID nineteen, without a vaccine, without a really solid cure. 0:03:06.040 --> 0:03:09.000 And so we didn't wait for you know, kind of 0:03:09.040 --> 0:03:11.960 the government to dictate policy or determine it. We we 0:03:12.040 --> 0:03:15.240 actually went out and engaged our own panel of health 0:03:15.320 --> 0:03:19.120 experts that we had an infectious disease research or several 0:03:19.160 --> 0:03:23.480 medical UH practitioners and then a medical director of a 0:03:23.520 --> 0:03:27.720 massage school UM to really help us design the protocols 0:03:27.840 --> 0:03:31.840 necessary UH to you know, make sure that this process 0:03:31.840 --> 0:03:35.760 could be done safely. And as we did the research 0:03:35.800 --> 0:03:39.160 into this, you know, it actually ended up and everybody 0:03:39.240 --> 0:03:42.040 learned so much over this course at the time that 0:03:42.040 --> 0:03:48.040 that our services actually relatively low risk activity because generally 0:03:48.840 --> 0:03:53.720 the disease was being transmitted through respiratory means, and so 0:03:54.240 --> 0:03:58.280 we're really more skin to skin hands on. Um, it 0:03:58.320 --> 0:04:02.760 didn't impact assume everybody wore you know, had the proper 0:04:03.000 --> 0:04:06.200 you know pp it did not. It wasn't as risky 0:04:06.240 --> 0:04:09.440 as maybe the perception would be as you sit there 0:04:09.480 --> 0:04:13.320 from the outside. So tell us, oh, I'm sorry, please 0:04:13.400 --> 0:04:16.320 please talk finish. But we did we did have to 0:04:16.400 --> 0:04:20.839 develop a lot of new safety protocols and so that 0:04:21.080 --> 0:04:23.520 we use that time wisely, you know, the month we 0:04:23.520 --> 0:04:26.640 were closed to to develop those protocols and then go 0:04:26.800 --> 0:04:31.680 retrain you know, ten thousand staff members on on how 0:04:31.720 --> 0:04:35.320 to do this activity as they reopen. So two questions. 0:04:35.320 --> 0:04:38.839 I'm curious about what those safety protocols exactly. Will it 0:04:38.880 --> 0:04:40.839 be like if I go in for a massage. Is 0:04:40.839 --> 0:04:43.159 it somebody that's kind of suited up in a mask 0:04:43.279 --> 0:04:46.880 and they've got you know, um, gloves on or something 0:04:46.920 --> 0:04:48.320 you know, some you know. I'm just curious how it 0:04:48.320 --> 0:04:50.240 works out. And I am curious how many of your 0:04:50.240 --> 0:04:52.480 workers are you ultimately going to be able to bring back. 0:04:53.960 --> 0:04:57.200 So as to the first question, there are a number 0:04:57.200 --> 0:05:00.720 of safety changes and you would see a different process 0:05:00.800 --> 0:05:02.760 than if you had went in, you know, prior to 0:05:02.800 --> 0:05:06.360 March first, we do require that all of the staff 0:05:06.400 --> 0:05:10.640 members wear masks. Astheticians who these are the folks who 0:05:10.680 --> 0:05:14.160 do the facial services, have to wear both masks and 0:05:14.360 --> 0:05:20.320 face shields during the service UH customers. We are UH 0:05:20.560 --> 0:05:23.880 certainly in most states, and we've worked with states in 0:05:23.960 --> 0:05:28.240 developing these guidelines. In most states, customers are also required 0:05:28.240 --> 0:05:31.640 to wear masks while they're getting the massage. If it's 0:05:31.720 --> 0:05:34.240 not a state where it's required, then we we have 0:05:34.279 --> 0:05:37.560 a high recommend and we allow the local jurisdiction to 0:05:37.600 --> 0:05:42.320 set that up. We now disinfect the entire room after 0:05:42.400 --> 0:05:47.880 each service, so in between any service, the room is disinfected. UM. 0:05:47.920 --> 0:05:50.919 We were fortunate that we had sinks in all of 0:05:50.960 --> 0:05:57.000 our treatment rooms and so we require handwashing by the 0:05:57.040 --> 0:06:00.679 massage therapists prior to the service. Some states they require 0:06:00.720 --> 0:06:04.560 the customer to hand wash prior to getting the service. 0:06:05.120 --> 0:06:07.080 And then a lot of things in the in just 0:06:07.240 --> 0:06:11.160 the transactional nature of it. UM going to a contact 0:06:11.240 --> 0:06:14.880 light transaction, we really closed down a lot of the 0:06:14.920 --> 0:06:17.920 lobbies and we ask customers to wait in the car 0:06:18.440 --> 0:06:20.920 and we text them so they can walk right into 0:06:20.960 --> 0:06:23.880 the treatment room instead of sitting in a in a lobby, 0:06:23.960 --> 0:06:26.919 so you would notice a number of changes to the 0:06:27.640 --> 0:06:30.400 you know, how you get the service if you came 0:06:30.440 --> 0:06:32.880 in today. Let's get back to our conversation with Todd left. 0:06:32.920 --> 0:06:35.880 He is the CEO of handed Stone Massage and Facial 0:06:36.000 --> 0:06:42.200 Spa national chain units across the country, and so Todd, 0:06:43.120 --> 0:06:46.720 I guess one of the things that strikes me is 0:06:47.200 --> 0:06:51.400 all the stuff you're talking about cost money. So what 0:06:51.480 --> 0:06:55.640 are the things you have to do operationally to ensure 0:06:56.000 --> 0:07:00.120 for yourself, for your franchise ese that this businesses is 0:07:00.160 --> 0:07:03.880 able to continue in this sort of new normal that 0:07:03.880 --> 0:07:07.080 we're going to be in for some time. Right, Well, 0:07:07.080 --> 0:07:11.600 I think that in the short term we do see 0:07:11.600 --> 0:07:15.120 an increase in you know, our operational costs to meet 0:07:15.160 --> 0:07:19.600 these new safety protocols and guidelines. But UM, on the 0:07:19.600 --> 0:07:23.240 the other side of it, obviously, UM demand has has 0:07:23.280 --> 0:07:28.080 come back very strong. We are a membership base as well, 0:07:28.120 --> 0:07:30.680 although we have you know, we also served non members 0:07:30.720 --> 0:07:35.080 and guests, so a lot of our members over our 0:07:35.160 --> 0:07:39.320 member base stayed with us and continued to actively pay 0:07:39.360 --> 0:07:44.000 their membership fees during the time that we were closed. 0:07:44.760 --> 0:07:47.320 Because those packages do roll over and they can get 0:07:47.360 --> 0:07:50.480 those services. So, you know, from a cash flow perspective, 0:07:50.720 --> 0:07:55.400 our franchisees survived, you know, and did fairly well during 0:07:55.480 --> 0:07:58.880 the shutdown, UM, but we are going to have to 0:07:58.880 --> 0:08:02.240 absorb some of these costs and I think ultimately, UM, 0:08:02.280 --> 0:08:05.960 some of that will get passed onto the consumer. So wow, 0:08:06.000 --> 0:08:10.520 that's pretty impressive. That's of your member base. Membership base 0:08:10.600 --> 0:08:13.280 stayed with you. That that really gave you to some 0:08:13.400 --> 0:08:18.280 extent of a fairly predictable revenue stream right in a 0:08:18.480 --> 0:08:22.680 in a period of high uncertainty. Exactly if you think 0:08:22.720 --> 0:08:27.080 about the underlying unit with you know, UM there they 0:08:27.120 --> 0:08:30.720 get about fifty of their total revenue from their membership 0:08:30.800 --> 0:08:36.120 based and that stayed on. But they also were not 0:08:36.160 --> 0:08:40.120 paying out their staff. On the the expense side, UM, 0:08:40.160 --> 0:08:43.079 a lot of them got rent deferrals and and quite 0:08:43.080 --> 0:08:46.079 frankly in our in our mind, UM, the p p 0:08:46.120 --> 0:08:50.000 P program was a great success for our franchisees. We 0:08:50.040 --> 0:08:53.760 had probably close to two hundred of the franchisees were 0:08:53.800 --> 0:08:57.520 able to secure PPP funds and so that helped carry 0:08:57.679 --> 0:08:59.839 them through this time period as well. So from a 0:09:00.000 --> 0:09:03.640 ash flow perspective, UM, I think they will emerge from 0:09:03.679 --> 0:09:07.679 this you know, as they reopened in fairly, fairly good condition. 0:09:08.240 --> 0:09:11.640 That's interesting that that's a that's a big endorsement for 0:09:11.640 --> 0:09:14.880 the PPP because we've heard very um, I wouldn't say, 0:09:15.000 --> 0:09:17.400 I wouldn't say mixed, but I would say uneven in 0:09:17.520 --> 0:09:21.480 terms of being And was that something that you worked 0:09:21.480 --> 0:09:24.520 on with franchise to to essentially enable them? Did you 0:09:24.559 --> 0:09:29.280 give them effectively a playbook to to do it? Yeah, exactly, 0:09:29.320 --> 0:09:31.400 And that was one of our So one of our 0:09:31.440 --> 0:09:34.720 three core objectives was during the pandemic was you know, 0:09:34.800 --> 0:09:38.360 to preserve the franchise e liquidity. So we suspended certain 0:09:38.400 --> 0:09:42.200 payments as the franchise or we helped them arrange the 0:09:42.240 --> 0:09:45.840 p p P loans and rent deferrals from landlords and 0:09:45.880 --> 0:09:49.000 then kind of walk them through the the process of 0:09:49.080 --> 0:09:52.400 you know, laying off employees but still complying with Cares 0:09:52.440 --> 0:09:56.880 Act regulation and so um. You know this. I think 0:09:56.920 --> 0:10:00.680 the recent extension was critical, um on the p PP 0:10:00.880 --> 0:10:04.640 side for our locations because many of them, you know, 0:10:04.679 --> 0:10:08.000 are just reopening. In fact, um, it's it's interesting that 0:10:08.400 --> 0:10:12.959 today New Jersey, we just reopened fifty eight locations today 0:10:12.960 --> 0:10:14.839 in New Jersey. This is the first day we could 0:10:14.880 --> 0:10:17.680 be open in New Jersey. Interesting, and do you have 0:10:17.720 --> 0:10:20.600 any sense of I know it's early days, but any 0:10:20.640 --> 0:10:23.920 sense of like the flows so far from from customers 0:10:24.120 --> 0:10:28.720 in terms of normal capacity versus now. Yeah, so we're 0:10:28.720 --> 0:10:32.600 obviously tracking that on that almost an hourly Pratt. And 0:10:32.960 --> 0:10:37.440 and so are of the those locations reopened. The average 0:10:37.520 --> 0:10:40.440 days of reopening is about twenty eight days, and we're 0:10:40.520 --> 0:10:47.760 back to uh, just about eight of our comparable store sales, 0:10:47.920 --> 0:10:53.559 so eight zero, so they're about negative on a comparable 0:10:53.600 --> 0:10:57.040 basis right now and having only been opened, you know, 0:10:57.200 --> 0:11:00.240 on average twenty eight days. So we see this is 0:11:00.320 --> 0:11:03.680 a a real endorsement by the consumer that they are 0:11:03.760 --> 0:11:07.440 coming back. And and in some of those locations. One 0:11:07.440 --> 0:11:09.680 of the challenges here is that the states have been 0:11:09.840 --> 0:11:13.120 very unequal in um, you know how this is applied, 0:11:13.240 --> 0:11:16.360 so in some states we're not allowed to perform facials yet. 0:11:16.520 --> 0:11:21.280 And even still, um, we're back at you know, of 0:11:21.400 --> 0:11:24.920 the pro So that's remarkable. I mean, we're most of 0:11:24.920 --> 0:11:27.200 your locations and forgive me for not knowing that going 0:11:27.240 --> 0:11:31.720 in here. Um, yeah, I mean we're you know, thirty 0:11:31.720 --> 0:11:34.120 two states. We are very heavy in the Northeast, which 0:11:34.200 --> 0:11:38.400 is was not it's not a positive during this time 0:11:38.440 --> 0:11:41.840 because UM, but Florida is our number one state and 0:11:41.920 --> 0:11:45.800 so we have over sixty locations in Florida. UM. Texas 0:11:45.920 --> 0:11:48.600 is a is a very large UM you know market 0:11:49.160 --> 0:11:53.800 UM Illinois, UM, and then you know, uh, lesser in California, 0:11:53.840 --> 0:11:56.000 but we do have a presence in California as well. 0:11:56.080 --> 0:11:59.840 So are you right across? Yeah? Are you worried about 0:11:59.840 --> 0:12:02.000 the numbers that you're seeing in Texas right now? And 0:12:02.040 --> 0:12:04.600 what what impact are you seeing all those locations at 0:12:04.600 --> 0:12:08.160 Florida as well? Yeah, yeah, we are. We are concerned 0:12:08.160 --> 0:12:10.720 about that, and I think from our perspective, we have 0:12:10.840 --> 0:12:13.880 to do what we can do to control our business 0:12:13.920 --> 0:12:17.000 and make sure it's the safe as possible. UM. But 0:12:17.800 --> 0:12:22.240 we are very strong endorsers of customers wearing masks, and 0:12:22.280 --> 0:12:25.600 I think, UM, you know, that's that's something we're insisting 0:12:25.679 --> 0:12:29.800 upon and helps reduce the risk down. UM. But I 0:12:30.640 --> 0:12:34.480 think what we're hearing is that if there are UM 0:12:34.520 --> 0:12:37.880 at least by local authorities, if there are outbreaks, is 0:12:37.920 --> 0:12:40.280 going to be dealt with on a much more targeted 0:12:40.320 --> 0:12:46.520 basis and locally suggest exactly, and I think we could 0:12:46.600 --> 0:12:50.760 sustain that. Our big fear would be you know broader, 0:12:51.080 --> 0:12:55.840 you know, statewideowns. Yeah, all right, well this was really interesting. 0:12:55.880 --> 0:12:58.800 Thank you for being so candid and thoughtful. We really appreciate. 0:12:58.840 --> 0:13:01.680 Todd laugh is the CEO of handed Stone Massage and 0:13:01.720 --> 0:13:04.520 Facial Spot. It's a chain. They've got four, six or 0:13:04.559 --> 0:13:08.120 five units across the country back in business in many ways, 0:13:08.200 --> 0:13:11.600 only down twenty percent, which I have to I find 0:13:12.000 --> 0:13:18.080 really pleasantly surprising. Carol, Right there, comparable stores, comparable stores, sales, 0:13:18.160 --> 0:13:22.280 sales are back. That's pretty remarkable. Um, so interesting. Alright, 0:13:22.440 --> 0:13:24.560 um yeah, I felt like the details on that was 0:13:24.640 --> 0:13:25.559 just fascinating.