Cutting his way out of trouble

Q: How did you become involved with Cost Cutters?

A: Well, it's a long story. I was born in Brainerd, Minn., really poor. I actually got expelled from high school about a week before graduation for punching a school guard. So I started running around and got in trouble and went to jail for five years. And that's where I learned to cut hair and finished my high school education. When I got out, I went to Minneapolis and Joe Francis (who would later found Cost Cutters in 1982) became my mentor. He got me involved in hair-cutting competitions. This was in the sixties though when the hippie movement was in. I mean nobody was getting hair cuts, and here we were trying to make a living cutting hair. But he was the only one to give me a chance. When you've been in jail, nobody wants to deal with you. I did really well in those competitions, getting first place awards all over the Midwest.

Q: How did you start owning the businesses as opposed to cutting hair?

A: Joe gave me the chance, really. I bought my first franchise (of Francis' earlier company, Barbers' Hairstyling for Men and Women) in 1972 in Rochester, Minn., for only $1,500 -- the building cost was separate -- which he financed. Then in 1977 I moved to Madison because I wanted a bigger market and got involved with John Livesey Sr., who owned WestGate Mall at that time. He built my first Madison store for me, and built the cost into the rent. And then in 1982 when Joe Francis created Cost Cutters ... I was involved in the inception of it as far as the thought-process went. So we started Cost Cutters.

Q: How did you come to own so many franchises?

A: Well, aside from my stores in Wisconsin and Illinois, I bought Joe Francis' 20 Pittsburgh stores from his kids in 1994 after he died and built them up and added some more. I also had stores in Ohio, West Virginia and Indiana. But ... my hips started giving me a lot of trouble so I couldn't travel much, and I wanted to spend more time in Arizona (where he spends most winters now). And when I got that big -- I had almost 100 stores in 2004 -- I'd try to go down to Arizona and relax and I'd come back and it wasn't like tweaking a couple things, it was almost like rebuilding every time, and it would take four or five months to recover. The stores just aren't run the same without you being there to do it. So I decided to get a smaller area. I sold over half of my stores, and now I'm really comfortable. All my franchises are within a two-hour drive.

Q: So, was that scale down a step toward retirement?

A: No. I'm going to open probably six stores a year for the next 10 years. Soon we'll have 100 again, but in a smaller area. Both my kids are working with me now, which I feel really good about. Stacy is in the office here and Steve is out building stores and remodeling them, doing maintenance. That makes all the difference in the world, when you've got a succession plan.

Q: Owning so many franchises, even after selling off so many, what role do you play in running them?

A: Basically, I do site selection and make sure there's enough money available to open stores, but that hasn't really been a problem, we open them pretty much on cash flow.

Q: What do you look for in a new site?

A: The Wal-Marts are kind of a gift. We usually get three or four of those a year. Then we usually go to strip mall centers. I like to have partners who are in the strip centers, like Milio's or Subway, something that's going to bring traffic to you.

Q: Does that mean the Cost Cutters business model is primarily based on walk-ins?

A: Right. We're kind of in the middle of the market. When we're in a recession, people who would usually spend $25 or $30 on a haircut come to us, and when in a really good economy, people who would usually cut their kids' hair at home or cut their own hair come to us. So we're in that little niche, which is a really good place to be.

Q: Do you ever train your hair stylists yourself?

A: No, we've got trainers. We have a 12-week training program for all our new stylists. They need to have a license when we hire them, but it wasn't always that way. We used to have a two-year apprenticeship program, where we would take people right off the street and teach them ourselves how to cut hair. We'd pay them while they were learning and then we would pay for them to go to the MATC barber program one day a week. We're thinking about maybe reinstituting that, because I think there's a huge market in the Latino population. We've been talking about this for nearly nine months and I'm really getting fired up to do it. I think we might soon.

Q: Have you ever had differences of opinion with Cost Cutters headquarters?

A: I've always had the largest franchise in Cost Cutters, so I don't have a lot of problems. You know, when I first started out I had no money and wasn't much of a business person. So I got heavily into debt with Joe Francis. I needed products, so I'd go and buy products, and my bill was just getting higher and higher, and -- this was 1984, 1985 when I was going through a divorce too -- I wound up owing him $85,000, which was so huge to me then. But I worked and wound up paying off my debts. It ended up just being an incredible relationship. Before he died of cancer he told me that he was so proud of me because of where I'd come from and where I'd gotten to. He was a great man.

Q: What is your relationship with the franchiser today?

A: It's still really good. We have a great relationship. They do anything for us. Regis Corporation bought out Cost Cutters. They also own Super Cuts and the Regis salons and Master Cuts. ... I've never had any problems with them. They've been absolutely fair. Even though they own all these other salons, they don't bully the market and just take the best locations -- which they could, probably -- we've never had a problem.

Q: Do you ever worry about growing too fast?

A: Well, the only problem with growing too fast is the hiring and training processes and making sure you keep your standards up. And I actually feel that was part of my problem when I started spending my winters in Arizona seven or eight years ago. You know, the bigger you get, the more organized you have to be, or you'll get weaker. And I wasn't. I just wasn't doing things the way that a Wal-Mart or a Regis would do them. Big corporations are really tough to deal with because they want everything done their way and it's not open for discussion. And that's the way business has got to be run when you get big. You gotta have things run by the numbers, and I really wasn't doing that. So, I ended up selling over half my stores and now I feel like I have my arms around the problem.

Q: As you continue to expand now, do you think that experience of being overwhelmed will help you?

A: Oh, absolutely. I can make just as much money now with half as many stores. We've got a training program that is absolutely great. It was a really good deal to downsize and reorganize. And now I'm ready to grow.

Q: How do you deal with local competition when you move into a new market?

A: Well, we're pretty well established. Most of the time builders like Livesey will come to me, so I don't really worry about other hair cutters. It doesn't really make a difference, what they do. It's what you do with your own business, that's what makes you. You can't worry about competitors, they'll drive you crazy. We have a full-time recruiter because we've got five stores on the board for this year and more in the works. I'd like to limit it to about six stores a year though, that's one every other month. It's so easy for us now because we've opened so many stores, but, geez, that's really something. I mean, when you open one store it's something, but opening one every other month ... But, once you get a system down and your own trainers and store openers, it takes the stress out of it.

Q: How long did it take you to solidify that system?

A: We've been able to open stores really well for a while. It's the follow-through with the operations and the training, that's the part that really got hard. We've only had that system in place for a year, with some new people that I hired about year and a half ago. We've put structures into place to make sure nothing falls through the cracks. But, as far as opening stores goes: I can find locations really well and get the stores open. My weak part has been operations and follow-through on the details.

Q: Have you ever had a store where everything went wrong?

A: I've had a couple like that. I opened a store down on Monroe Street in a hippie neighborhood that had the best demographics. I kept that store open for five years, but I never made money there. If a person did that and only had one store, they'd be done. But, because I had ten or twelve other stores at that time, I was able to carry it and follow through with my obligations to pay the rent and the stylists. But we never made money, not even one month. The problem really was that there was no parking down in that area. We needed exposure and parking.

Bill Kaminski
Owner of 45 Cost Cutter salons (and counting) in the Midwest.
Age: 63
Hometown: Madison
Family: Divorced with two grown children and one grandchild.
Education: High school, barber school and miscellaneous nondegree classes at Madison Area Technical College.
Background: Kaminski helped found the Cost Cutters salon model with Joe Francis in the early 80s, and was one of its first franchisees. Since then he has always been one of the largest franchisees in Cost Cutters (now owned by the Regis Corp.), owning almost 100 salons at his peak. He now owns 45 in the Midwest and plans to build six more a year for the next 10 years.