Tanning provides golden opportunity
Big Blue franchisees grow with Palm Beach Tan
By Susanne Ault -- Video Business, 6/16/2006
JUNE 16 | Since Steve Berkman, a former director of eastern U.S. franchise operations for Blockbuster Inc., joined Palm Beach Tan six years ago, he has enticed enough Blockbuster franchisees to join the tanning chain so that independent Blockbuster owners now operate half of Palm Beach Tan’s stores.
Palm Beach is on a quest to build the first national tanning chain and has grown from 22 locations in and around Dallas to 109 outlets in 18 U.S. markets. Approximately 55 Palm Beach outlets are owned by Blockbuster franchisee owners, including Southern Stores, Capital Entertainment and Movie Merchants.
Tanning and video rental have long been combined in independent stores. Video Buyers Group boasts more than 400 video/tanning combo retailers as members and Movie Gallery, the No. 2 chain behind Blockbuster, is dramatically accelerating the number of salons it operates, according to rival retailers.
Blockbuster franchise agreements preclude store owners from operating tanning beds within the same four walls, according to people familiar with the agreements. Nevertheless, owners of both Blockbuster and Palm Beach Tan franchises are able to find operational and market efficiencies between the two businesses, while generally keeping their financial accounting separate.
“It’s a very neat tie,” said Berkman, Palm Beach’s VP of franchising. “I credit Blockbuster for giving me the opportunity to meet these folks. And it’s giving them an opportunity to diversify and strengthen their business through their association with us.”
“When one is down, one is up, and that helps in your head,” said Tim Hicks, chief operating officer at Capital Entertainment and Palm Beach franchisee Atlantic Coast Tan. “But the 17 [Blockbuster outlets] and 11 [Palm Beach] salons each average about the same revenue. That is certainly encouraging, where you can have a business as attractive and profitable as video.”
“There are tremendous economies in leveraging [Blockbuster operations] to our tanning business,” agreed Tom Barzizza, VP of marketing for Southern Stores and VP of operations and marketing for Palm Beach franchisee Tan South. “And sometimes you can cross-promote. We did a big summer sweepstakes once, where we gave away a Mini Cooper. You could register at either at Palm Beach Tan or a Blockbuster. You can also combine radio buys and also do cross-couponing.”
Many of the Blockbuster-Palm Beach franchisees plan to expand their tanning holdings to improve overall revenue. Capital is aiming to open 30 to 40 additional Washington, D.C., area stores at a rate of five or six a year.
Palm Beach’s Tansations, a sister company to Blockbuster franchisee Movie Merchants, is projecting a 10% to 15% spike in 2006 revenue over last year, when it first converted its indie tanning salons to the Palm Beach brand. In 2002, Movie Merchants’ indie video stores converted to Blockbuster franchisees.
“We’re predicting our rentals for 2006 will be flat,” said Trish Greenburg, co-owner for Movie Merchants and Tansations. “Part of the great thing with doing both tanning and video is it is moving our cash flow.”
Palm Beach corporate has tripled its revenues since 2000, said Berkman. The company is striving to become the first nationally branded tanning chain, similar to Blockbuster’s early goals. Mirroring the video chain’s strategy of featuring a wide title selection in a friendly setting, Palm Beach combines a wealth of tanning options with a commitment to customer service.
Tanning customers can opt for basic, economic services or go for upscale, air-conditioned rooms with ambient music playing, for instance.
“This is the same recipe of success that Blockbuster uses,” Berkman said. “Once we enter a market, we want to become the dominant provider of that service. We do want to reach out to other Blockbuster franchises, as they find out the benefits in associating with us.”
