Speaker 1: You're listening to Bloomberg Business Week with Carol Masser and
Speaker 1: Jason Kelly on Bloomberg Radio. So, Carol, we've been spending
Speaker 1: a lot of time trying to figure out how businesses
Speaker 1: get open, you know, especially businesses that social distance isn't
Speaker 1: really baked into the whole thing, right, um, and also
Speaker 1: businesses that have multiple locations and multiple areas. So we're
Speaker 1: really excited to talk to Todd left. He is the
Speaker 1: CEO of handen Stone Massage and Facial Spa joining us
Speaker 1: on the phone. Todd, really nice to have you with
Speaker 1: Carol and myself. Thank you, glad to join you. So
Speaker 1: give us a little bit of size and scope, as
Speaker 1: we say here at Bloomberg about the company, because you've
Speaker 1: got uh four fifty plus units I believe across the region, right,
Speaker 1: So we're this is a national franchise chain of massage
Speaker 1: and facial spas. We have four d locations across uh
Speaker 1: thirty two states in the US and a couple of
Speaker 1: provinces in Canada as well. Okay, So and it's franchise.
Speaker 1: So you know, we've talked to a lot of um company,
Speaker 1: especially within the hospitality industry where there's franchise and how
Speaker 1: they are dealing with the virus and how do they reopen.
Speaker 1: First off, let's ask about the impact. Were you guys,
Speaker 1: I'm assuming, shut down completely, right, So starting as as
Speaker 1: you know most businesses, we started actually voluntarily closing locations,
Speaker 1: you know, probably the first week of March, but quickly
Speaker 1: that accelerated and so by April one, all four d
Speaker 1: and sixty five locations were closed. Um, so we were
Speaker 1: you know, really had had no services being done you
Speaker 1: know after April one, right, okay, and so were you
Speaker 1: guys able to your franchise owners, were you able to
Speaker 1: hold onto workers or did you have to let go
Speaker 1: of those workers now? So we yeah, so you know,
Speaker 1: part of our strategy was really you know, how do
Speaker 1: you preserve, um, the franchise e liquidity. That was that's
Speaker 1: one of the most important things because we want them
Speaker 1: to be around to reopen. And so one of one
Speaker 1: of the things they had to do early on was, um,
Speaker 1: you know, layoff all of the staff except generally managers
Speaker 1: and so uh within a two week period, we uh,
Speaker 1: the system laid off about eleven thousand employees. So it
Speaker 1: was a you know, pretty big hit and um, you know,
Speaker 1: obviously to all those workers you know, very unfortunate as well.
Speaker 1: And so what's the process like of coming back, I
Speaker 1: mean from a safety perspective, from a worker perspective, walk
Speaker 1: us through the process of that. Yeah, so you know
Speaker 1: that was my biggest concern early on. I mean, you
Speaker 1: know when we sat there, you know, kind of mid
Speaker 1: March and late March, you really have to answer first
Speaker 1: the existential question, as you said, Jason, at the outset,
Speaker 1: can you do a hands on business safe UM with
Speaker 1: COVID nineteen, without a vaccine, without a really solid cure.
Speaker 1: And so we didn't wait for you know, kind of
Speaker 1: the government to dictate policy or determine it. We we
Speaker 1: actually went out and engaged our own panel of health
Speaker 1: experts that we had an infectious disease research or several
Speaker 1: medical UH practitioners and then a medical director of a
Speaker 1: massage school UM to really help us design the protocols
Speaker 1: necessary UH to you know, make sure that this process
Speaker 1: could be done safely. And as we did the research
Speaker 1: into this, you know, it actually ended up and everybody
Speaker 1: learned so much over this course at the time that
Speaker 1: that our services actually relatively low risk activity because generally
Speaker 1: the disease was being transmitted through respiratory means, and so
Speaker 1: we're really more skin to skin hands on. Um, it
Speaker 1: didn't impact assume everybody wore you know, had the proper
Speaker 1: you know pp it did not. It wasn't as risky
Speaker 1: as maybe the perception would be as you sit there
Speaker 1: from the outside. So tell us, oh, I'm sorry, please
Speaker 1: please talk finish. But we did we did have to
Speaker 1: develop a lot of new safety protocols and so that
Speaker 1: we use that time wisely, you know, the month we
Speaker 1: were closed to to develop those protocols and then go
Speaker 1: retrain you know, ten thousand staff members on on how
Speaker 1: to do this activity as they reopen. So two questions.
Speaker 1: I'm curious about what those safety protocols exactly. Will it
Speaker 1: be like if I go in for a massage. Is
Speaker 1: it somebody that's kind of suited up in a mask
Speaker 1: and they've got you know, um, gloves on or something
Speaker 1: you know, some you know. I'm just curious how it
Speaker 1: works out. And I am curious how many of your
Speaker 1: workers are you ultimately going to be able to bring back.
Speaker 1: So as to the first question, there are a number
Speaker 1: of safety changes and you would see a different process
Speaker 1: than if you had went in, you know, prior to
Speaker 1: March first, we do require that all of the staff
Speaker 1: members wear masks. Astheticians who these are the folks who
Speaker 1: do the facial services, have to wear both masks and
Speaker 1: face shields during the service UH customers. We are UH
Speaker 1: certainly in most states, and we've worked with states in
Speaker 1: developing these guidelines. In most states, customers are also required
Speaker 1: to wear masks while they're getting the massage. If it's
Speaker 1: not a state where it's required, then we we have
Speaker 1: a high recommend and we allow the local jurisdiction to
Speaker 1: set that up. We now disinfect the entire room after
Speaker 1: each service, so in between any service, the room is disinfected. UM.
Speaker 1: We were fortunate that we had sinks in all of
Speaker 1: our treatment rooms and so we require handwashing by the
Speaker 1: massage therapists prior to the service. Some states they require
Speaker 1: the customer to hand wash prior to getting the service.
Speaker 1: And then a lot of things in the in just
Speaker 1: the transactional nature of it. UM going to a contact
Speaker 1: light transaction, we really closed down a lot of the
Speaker 1: lobbies and we ask customers to wait in the car
Speaker 1: and we text them so they can walk right into
Speaker 1: the treatment room instead of sitting in a in a lobby,
Speaker 1: so you would notice a number of changes to the
Speaker 1: you know, how you get the service if you came
Speaker 1: in today. Let's get back to our conversation with Todd left.
Speaker 1: He is the CEO of handed Stone Massage and Facial
Speaker 1: Spa national chain units across the country, and so Todd,
Speaker 1: I guess one of the things that strikes me is
Speaker 1: all the stuff you're talking about cost money. So what
Speaker 1: are the things you have to do operationally to ensure
Speaker 1: for yourself, for your franchise ese that this businesses is
Speaker 1: able to continue in this sort of new normal that
Speaker 1: we're going to be in for some time. Right, Well,
Speaker 1: I think that in the short term we do see
Speaker 1: an increase in you know, our operational costs to meet
Speaker 1: these new safety protocols and guidelines. But UM, on the
Speaker 1: the other side of it, obviously, UM demand has has
Speaker 1: come back very strong. We are a membership base as well,
Speaker 1: although we have you know, we also served non members
Speaker 1: and guests, so a lot of our members over our
Speaker 1: member base stayed with us and continued to actively pay
Speaker 1: their membership fees during the time that we were closed.
Speaker 1: Because those packages do roll over and they can get
Speaker 1: those services. So, you know, from a cash flow perspective,
Speaker 1: our franchisees survived, you know, and did fairly well during
Speaker 1: the shutdown, UM, but we are going to have to
Speaker 1: absorb some of these costs and I think ultimately, UM,
Speaker 1: some of that will get passed onto the consumer. So wow,
Speaker 1: that's pretty impressive. That's of your member base. Membership base
Speaker 1: stayed with you. That that really gave you to some
Speaker 1: extent of a fairly predictable revenue stream right in a
Speaker 1: in a period of high uncertainty. Exactly if you think
Speaker 1: about the underlying unit with you know, UM there they
Speaker 1: get about fifty of their total revenue from their membership
Speaker 1: based and that stayed on. But they also were not
Speaker 1: paying out their staff. On the the expense side, UM,
Speaker 1: a lot of them got rent deferrals and and quite
Speaker 1: frankly in our in our mind, UM, the p p
Speaker 1: P program was a great success for our franchisees. We
Speaker 1: had probably close to two hundred of the franchisees were
Speaker 1: able to secure PPP funds and so that helped carry
Speaker 1: them through this time period as well. So from a
Speaker 1: ash flow perspective, UM, I think they will emerge from
Speaker 1: this you know, as they reopened in fairly, fairly good condition.
Speaker 1: That's interesting that that's a that's a big endorsement for
Speaker 1: the PPP because we've heard very um, I wouldn't say,
Speaker 1: I wouldn't say mixed, but I would say uneven in
Speaker 1: terms of being And was that something that you worked
Speaker 1: on with franchise to to essentially enable them? Did you
Speaker 1: give them effectively a playbook to to do it? Yeah, exactly,
Speaker 1: And that was one of our So one of our
Speaker 1: three core objectives was during the pandemic was you know,
Speaker 1: to preserve the franchise e liquidity. So we suspended certain
Speaker 1: payments as the franchise or we helped them arrange the
Speaker 1: p p P loans and rent deferrals from landlords and
Speaker 1: then kind of walk them through the the process of
Speaker 1: you know, laying off employees but still complying with Cares
Speaker 1: Act regulation and so um. You know this. I think
Speaker 1: the recent extension was critical, um on the p PP
Speaker 1: side for our locations because many of them, you know,
Speaker 1: are just reopening. In fact, um, it's it's interesting that
Speaker 1: today New Jersey, we just reopened fifty eight locations today
Speaker 1: in New Jersey. This is the first day we could
Speaker 1: be open in New Jersey. Interesting, and do you have
Speaker 1: any sense of I know it's early days, but any
Speaker 1: sense of like the flows so far from from customers
Speaker 1: in terms of normal capacity versus now. Yeah, so we're
Speaker 1: obviously tracking that on that almost an hourly Pratt. And
Speaker 1: and so are of the those locations reopened. The average
Speaker 1: days of reopening is about twenty eight days, and we're
Speaker 1: back to uh, just about eight of our comparable store sales,
Speaker 1: so eight zero, so they're about negative on a comparable
Speaker 1: basis right now and having only been opened, you know,
Speaker 1: on average twenty eight days. So we see this is
Speaker 1: a a real endorsement by the consumer that they are
Speaker 1: coming back. And and in some of those locations. One
Speaker 1: of the challenges here is that the states have been
Speaker 1: very unequal in um, you know how this is applied,
Speaker 1: so in some states we're not allowed to perform facials yet.
Speaker 1: And even still, um, we're back at you know, of
Speaker 1: the pro So that's remarkable. I mean, we're most of
Speaker 1: your locations and forgive me for not knowing that going
Speaker 1: in here. Um, yeah, I mean we're you know, thirty
Speaker 1: two states. We are very heavy in the Northeast, which
Speaker 1: is was not it's not a positive during this time
Speaker 1: because UM, but Florida is our number one state and
Speaker 1: so we have over sixty locations in Florida. UM. Texas
Speaker 1: is a is a very large UM you know market
Speaker 1: UM Illinois, UM, and then you know, uh, lesser in California,
Speaker 1: but we do have a presence in California as well.
Speaker 1: So are you right across? Yeah? Are you worried about
Speaker 1: the numbers that you're seeing in Texas right now? And
Speaker 1: what what impact are you seeing all those locations at
Speaker 1: Florida as well? Yeah, yeah, we are. We are concerned
Speaker 1: about that, and I think from our perspective, we have
Speaker 1: to do what we can do to control our business
Speaker 1: and make sure it's the safe as possible. UM. But
Speaker 1: we are very strong endorsers of customers wearing masks, and
Speaker 1: I think, UM, you know, that's that's something we're insisting
Speaker 1: upon and helps reduce the risk down. UM. But I
Speaker 1: think what we're hearing is that if there are UM
Speaker 1: at least by local authorities, if there are outbreaks, is
Speaker 1: going to be dealt with on a much more targeted
Speaker 1: basis and locally suggest exactly, and I think we could
Speaker 1: sustain that. Our big fear would be you know broader,
Speaker 1: you know, statewideowns. Yeah, all right, well this was really interesting.
Speaker 1: Thank you for being so candid and thoughtful. We really appreciate.
Speaker 1: Todd laugh is the CEO of handed Stone Massage and
Speaker 1: Facial Spot. It's a chain. They've got four, six or
Speaker 1: five units across the country back in business in many ways,
Speaker 1: only down twenty percent, which I have to I find
Speaker 1: really pleasantly surprising. Carol, Right there, comparable stores, comparable stores, sales,
Speaker 1: sales are back. That's pretty remarkable. Um, so interesting. Alright,
Speaker 1: um yeah, I felt like the details on that was
Speaker 1: just fascinating.