NEW YORK — Bruno Mascolo, chairman and chief executive officer of Toni&Guy USA, attempted to enter the U.S. professional hair care arena two times before he finally found success with one Dallas-based salon in 1985. With help from two of his brothers, Guy and Anthony; his wife, Kyara, and a supportive executive team, Toni&Guy USA has grown into a $270 million business, consisting of 50 Toni&Guy salons across the country, six training academies and very successful hair care (Bed Head and Cat Walk), cosmetics (Bed Head), skin care (Unleashed) and styling tools (Hardcore) lines. Here, Mascolo discusses the company’s growth plan, his greatest concern in the salon arena and what it would take for him to sell the company.
WWD: Toni&Guy consists of three main divisions, salons, academies and products. Where is each division headed in 2006?
Bruno Mascolo: We are changing our business design. In 2006 we want to put our energy into expanding academies and opening new company-owned and franchised salons. The academies will be instrumental in staffing the salons. We are getting together a franchise package for the academies, and we may be acquiring some. Salon expansion in 2007 will be between 15 and 25 new salons. Some of our salons are company-owned and others are owned by the stylists, making them partners.
The first academy opened in Dallas in 1990. We have six at the moment, one in New York, one in Los Angeles, two in Phoenix, one in Colorado Springs, Colo., and one in Erie, Pa. It is a more difficult business to operate because of government regulations. We are accountable to three government agencies: the Department of Education, the Texas Department of Licensing and Regulation and our accrediting agency, ACCSCT. Complying with government standards can be quite difficult, as we must maintain specific standards for each agency. As we are accountable to these agencies, we are privy to inspections, reviews and audits. Understanding the regulations, standards and requirements is difficult to keep up with because they are changing all the time.
WWD: Growing by almost 25 salons a year is a change for you, no?
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B.M.: About four years ago, we grew aggressively, opening 10 to 12 salons a year. We pulled back to make sure our infrastructure was at scale with the growth of the overall company to maintain the quality of our hairdressing. Now, each salon generates more than $1 million per year on average. Some 15 percent of that is from product. The retail area is very important.
WWD: And what about products?
B.M.: When we first started making products it was almost like a need. We were doing shows for different manufacturers and couldn’t get results from their products so it became a necessity to cocktail products. Eventually, we created our own. We didn’t have much money and went to a house that customized product and we told them we would pay them after we sold the products. That was TIGI Linea Classic. It was very basic, not sexy. We sold it to salons by educating stylists. Kyara came on board and helped create the TIGI makeup line, which looked cooler than our wet line. So she changed TIGI Linea Classic and created Bed Head in 1997. Bed Head Stick, a stick that created the grunge look from Seattle, was sent to celebrities and it was put on the map. Bed Head is a funky, cool line. Cat Walk, another hair care line, is more sophisticated. The newest hair care line is S-Factor, which targets the young, thinking adult. The quality of the product is phenomenal. We did not spare any money in formulas. This year we launched body care, a collection that started out as a promotion in 2004 and was very successful. Brushes, irons and different types of blow-dryers were also launched. We are in about 30 percent of the market.
Product has tremendous opportunities because TIGI is global. We can expand into different lines. The percentage of total company sales based upon projected 2005 revenue within each division is 73 percent from products, 26 percent from salons and 1 percent from academies. [Getting into professional hair] color is a consideration.
WWD: Why were you unsuccessful the first several times you tried to conquer America?
B.M.: I was raised in London, but when I came here on a Sebastian tour I fell in love with America. We had a shop in London, so I saved up money to start a business here. I saved $40,000 and, unfortunately, met the wrong people who advised me on the wrong things. The money was wasted away. Then I saved more money and came back again a lot wiser. Then I met even more clever people and lost money, too. The third time my brothers weren’t prepared to support me, so I sold my house and car and came back and by using my own money made a commitment not to be humiliated again. The first two times I came here I wanted to open schools in Los Angeles. The third time I had no choice but to open a salon because that was what I knew how to do.
WWD: Toni&Guy is a family business. Who owns what?
B.M.: First, Toni&Guy is named after Toni Mascolo and Guy Mascolo, the two eldest Mascolo brothers who started the company. Me, Guy and Anthony own TIGI Global, which is all of the products, internationally, as well as Toni&Guy salons and academies in the U.S., Canada and South America. Toni, who lives in London, owns Toni&Guy academies and salons and the Toni&Guy brand in the rest of the world. Global sales of Toni&Guy are about $400 million.
We separated in 2002. We had been together for four years. Toni’s children had grown up and he wanted to bring his kids into the business. A family business is great but we wanted to maintain our family relationship.
WWD: Is there pressure being one of the only privately owned hair care companies left?
B.M.: We have been copied because of our innovation, which is really flattering. But being independent, you are in control of your destiny. I don’t have to do something just to make numbers. It allows us to be who we are and we can move a lot quicker than others. If there was a way to combine the big business end with entrepreneurial spirit, that would be ideal. Then you could touch the hairdressers and build a business. One of the things that separates us from others is how we structure ourselves internally. We once had a marketing and sales director. I changed that and made the job two separate jobs. Marketing was being influenced by the marketing-sales director who would see ideas in the marketplace, which basically if it’s already in the marketplace it is not innovative. We look to department stores and makeup stores and even wine bottles for different ideas. That’s a reason I think we have been able to maintain our innovation.
WWD: What do you think are the ramifications of Wella’s decision to sell direct to salons?
B.M.: I think it will be damaging to the distribution channel. The fear will be that L’Oréal will do it next. I am very loyal to distributors. I am a family of the salon world. I don’t want to criticize, but that is not something I am interested in. We’ve had distributors help us to get us where we are now. There is always a way to redesign a business. You don’t just have to cut them out. The dynamic of manufacturers buying smaller guys has happened. It has happened with distributors, too. Next, you’ll find distributors buying manufacturers. Like BSG, which is owned by Alberto-Culver, just bought Nexxus.
WWD: What is your biggest concern in the professional hair care industry?
B.M.: I think the biggest concern is diversion of product. You work hard to establish the business, then the salons divert it and it creates a negative in the industry. T&G is very strict and works very hard and manages, hires investigators, codes products, etc., to control it.
WWD: Rumors are that Toni&Guy is for sale.
B.M.: We talked to an investment group. We get people that approach us on a regular basis. If the right person comes around with a strategic partnership where we maintain the creativity and also have more funds, there is always something that is there.
WWD: Would you want to stay on board if the company is sold?
B.M.: Oh yeah. I love it.