When Kristen Gale got word at the end of last June that the Toronto-area locations of her beauty bar franchise, The Ten Spot, could finally open after seven solid months of pandemic lockdowns, she tried to book an appointment. To her utter delight, there were no openings. “We’re all booked up for weeks on weeks,” the company’s Toronto-based founder and CEO wrote on her blog at the time. “I even went into the back end of our booking software to scan all of the schedules, and there isn’t an appointment slot in sight. I couldn’t be happier!”
Gale’s glee at her customers’ return was certainly not unique among Canadian business owners who’d been forced to close shop for any amount of time during the pandemic. But the anticipation leading up to The Ten Spot’s reopening was on a decidedly higher level, given that personal care businesses, including salons and tattoo parlours, were shuttered longer than any other sector. Between mid-March 2020 and June 30, 2021, 70% of the company’s beauty bars—namely, those in Ontario—faced two rounds of lockdowns and were closed for upwards of 300 days. And unlike other franchises, like retailers and restaurants, most of its services, including mani-pedis, facials, waxing and laser hair removal, couldn’t pivot to online sales. “Nobody’s doing an at-home brazilly,” notes Gale.
In short, the company had zero revenue for months on end from 23 of its 33 locations. That it managed to survive at all, let alone emerge to earn a record $2 million in monthly sales in July 2021, is nothing short of a small miracle. Thankfully, The Ten Spot had a guardian angel working behind the scenes: chief financial officer Laura Wittholz.
“Flat out we would not have survived the impact of the pandemic without Laura,” says Gale of the chartered professional accountant who has been her trusted adviser for more than 15 years. “She single-handedly slashed all expenses, managed our cashflow to the penny, got every single loan and grant applicable to us and to our franchisees, and stretched every dollar to the absolute brink. She proves that a great finance person is sometimes the only person who can truly save a company when it comes so close to the wire. She is the only reason The Ten Spot is still around today.”
As an accountant with her own advisory firm, Wittholz took Gale on as a small-business client shortly after the entrepreneur opened her first nail bar on Toronto’s trendy Queen Street West in 2006. The busy storefront offered a fun, social alternative to the hushed tones and stuffy decorum prevalent at high-end spas, and its irreverent marketing (the “Have a threesome” promotion gave free manicures to groups of three who booked pedicures together, and the men’s manicure was billed as “the hand job”) helped the enterprise become the OG spot for gal pals to share a cocktail and gossip while getting their nails done. The concept was so successful, Gale quickly opened two more Toronto locations with an expanded slate of services and brought Wittholz in-house as controller in 2011. In 2013, with Wittholz by her side, Gale was confident the business could work as a franchise and promoted the CPA to chief operating officer and CFO. “Laura’s sense of loyalty, duty and pride in the business is very different from what I’ve experienced in other employees,” says Gale. “I’ve never once felt that I was doing this on my own. She feels like a business partner and is committed in that same way. I’m lucky to have her.”
The first two franchises opened within a year, each generating half a million in revenue. By 2019, The Ten Spot had become Canada’s Starbucks of spas, with 33 locations from coast to coast and systemwide sales over $15 million, $2.3 million of which went to head office in royalties and other franchise fees. That same year, BDC selected the company as part of its Growth Driver Program, providing $500,000 in loans and other assistance to help the franchise expand further within Canada and south of the border. After all, franchise businesses are a major part of the Canadian economy, responsible for about 45% of all retail sales—or $100 billion annually—and about 5% of total GDP.
In the five months leading up to the pandemic, The Ten Spot opened five new franchises, including its first in the U.S., and annual revenue for 2020 was expected to reach $20 million. Then the lockdowns hit. “A light switch flips and you have zero revenue across the board,” says Wittholz, who, like many of us, was initially optimistic that emergency measures closing non-essential businesses would be lifted within a few weeks. “I think it was about two weeks in, when we started getting more information about what was happening in Italy and China and analysts started to put out projections, that we realized this was going to go a lot longer.”
At that point, Gale called in a tearful panic, worried the business they’d built together was going to crumble. Wittholz was unflappable, reassuring Gale all was in hand. “You know me,” she told her boss. “I’m super-frugal, and I’ve prepared for this.”
While nobody could have predicted the scale of the pandemic, Wittholz had always been a firm believer in planning for a rainy day, with three to six months of cashflow in reserve at all times. That wasn’t her only prescient decision: She’d also converted the company’s accounting system to an online platform (“I can’t stand paper,” she says), so there were no workflow issues when they had to go remote.
Still, she immediately curbed as many expenses as possible for both head office and the company’s franchise partners, without whom the brand couldn’t survive. “The thing we struggled with at head office was that the franchises needed more support than ever, but we had to balance their needs with what we could provide,” she says.
To start, they made the tough decision to furlough the eight corporate staff, with Gale taking on the marketing role while Wittholz handled operations, as they’d done in the early days. Then she contacted each of their vendors to see if they’d waive fees or defer payments for the franchises. It worked. Their insurance provider agreed to waive premiums across the board during closures, and their online booking software and point-of-sale system providers also waived fees. She got the leases and warranties for the laser-hair removal machines deferred. “And, of course, we deferred royalties for the franchise partners,” says Wittholz.
When it came to rent—not a huge amount for HQ, given its small second-storey office, but the main expense for franchisees with large storefronts—Wittholz templated a letter they could use to contact their landlords requesting relief. It was hit and miss; after all, landlords are in business to make money, too. “We didn’t get a cent off rent,” says Carolyne Beausoleil, co-owner of two franchises in Ottawa, which have monthly costs of $8,000 each in rent alone. “But we did get some support from the government on certain months, and Laura kept us updated with the ever-changing information from CRA to keep the cash flowing.”
Indeed, Wittholz created a Google doc guiding franchisees on how to apply for government subsidies and other assistance they (and their laid-off staff) were eligible for. It was also a central space where they could communicate their concerns, so Wittholz could then find solutions and present them at virtual town hall meetings, which they held daily at first, then weekly or twice a month. “We did not sleep at all back then,” recalls Wittholz, who even helped new franchisees source materials for their store builds when supply-chain bottlenecks threw a wrench in their plans. “I ended up taking over construction management because of the furloughs, and Ikea was out of stock on everything.”
Finally, they started getting the green light to open their beauty bars in various regions, including the B.C. locations, in May 2020. Ontario, however, was a holdout—despite allowing some non-essential retail to open in May, personal care services were closed until July. Even then, snack and beverage services weren’t allowed, nor were some other offerings, such as facials, that required removing masks.
But they made it through more than three months of lockdowns and were ready to put the chaos behind them. Unfortunately, the worst was yet to come.
In November 2020, less than five months after reopening, rising case counts and hospital admissions led to another lockdown in southwestern Ontario, with the rest of the province following about six weeks later. “That second wave was emotionally much harder,” says Wittholz, in part because it was an Ontario-only problem; most of the franchises in other locations remained open. “We were exhausted and super-stressed from the first wave, and we were locked in—you couldn’t even see family over Christmas.”
Without the festive season’s boost in sales, The Ten Spot finished the year with a mere $9 million in revenue—55% less than the pre-pandemic projection. January 2021 was a low point. With just $150,000 in sales that month and no end to the pandemic in sight, Wittholz was worried for the business and her emotional health. “I remember thinking, Is this going to go on forever? I had to set a specific schedule for my health and well-being,” she says. “I made sure to work out at home, eat healthy and read books that kept me motivated.”
But Wittholz had another ace up her sleeve—the BDC loan. “We’d drawn about half of it pre-pandemic for the U.S. launch,” she says. “When COVID hit, I thought, Do we really want to put the business in more debt? If we draw it, how do we repay it? So I held off.” That fiscal prudence gave the company the runway to staff up head office during the 2021 closures so it could hit the ground running as soon as the lockdowns were lifted. “It turned from a growth initiative into a recovery initiative,” says Wittholz. “But BDC stuck with their mandate to support small business.”
That spectacular summer of sales—when bookings were so solid Gale couldn’t get an appointment at any of her own beauty bars—along with the extension of government subsidies, has left the company poised to resume its high-growth trajectory. With 44 franchises currently in operation and nine more opening this year, systemwide sales projections for 2022 are back up to $20 million. Plus, Wittholz feels prepared to tackle whatever the future holds. “I got really good at what I was doing during the second wave. We minimized every cost we could, and I learned to do financial statements and cashflow and budgets in a different way, with 12-month rolling best-, medium- and wort-case forecasts,” she says. “When Omicron came, we were terrified it would be another seven-month closure. But I went right back into scenario-planning and knew we had the bandwidth to survive.”
Gale agrees. “We’re in a really great place—better than if we hadn’t been forced to look at the business differently, see what’s really key and trim the fat,” she says. “We built up this incredible team, and real estate’s better. We found the silver lining. We’re going to take the world by storm—at least the beauty world.”
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