From the September 2000 issue of Entrepreneur

Before and after. We see the pictures in our dentists' offices, the ads for plastic surgeons and makeovers. And you know what? Those ads work. We all want the magic elixir that reverses the aging process or elevates our self-esteem. So it's no surprise when customers flock to Merle Norman Cosmetics Inc. (MNC) studios for a piece of that.

Before Merle Norman the franchise came Merle Norman the woman-a pioneer who manufactured her own cosmetics and started selling them in a Santa Monica, California, retail store in 1931. Norman became known for her innovative offering: the free makeover.

Since then, the chain has grown to nearly 2000 franchised studios in regional malls and strip centers in every state. (An MNC studio uses between 400 and 600 square feet of mall space, while a strip-mall location uses up to 1,400 square feet.) Although franchisees can sell other approved products and services, I was advised by Jon Miller, who co-owns one of the top 10 highest-grossing stores in the chain ($500,000 in 1999 in Boise, Idaho), that the best stores stick to the basics and offer only Merle Norman products.

I met Miller, his wife, Terri, and a number of other contented franchisees at the MNC franchise convention in May. That's when I realized just how large this organization is. The turnout by MNC franchisees was auspicious, and they packed the main ballroom of a large hotel.

A good franchise convention is a combination pep rally/cocktail mixer/classroom-the MNC convention also had the feel of a franchisor-franchisee mutual-admiration society. Franchisees seem to think MNC has what they want in a large franchise organization: support, innovation, cost economies and leadership.

The franchise-support department offers quick help via toll-free numbers, but franchisee happiness more likely stems from the fact that the franchisor provides services without requiring royalties or initial franchise fees. Furthermore, MNC supplies its franchisees with the makeup used for personal consultations, the hallmark of its system. Franchisees know MNC is being funded by the wholesale cosmetics prices, but that is certainly less painful than writing a royalty check every week.

Last year, the company posted net sales of more than $92 million, with a gross profit of over $52 million-an amount that seems to substantiate the glee of all those involved.

Now for the caveat: Don't confuse this luster with the idea that things will be smooth and easy once you've opened your studio. MNC studios located in malls outperform strip-center studios by a wide margin, but finding a remaining mall location isn't easy. Even if you do find one, an MNC studio relies on repeat business that can take years to build. Your customer base can support you, but you have to endure the start-up phase of a business that can take years to become profitable. Advertising can be more expensive depending on your location. The franchise has 272 studios in Texas and 20 in New York, so gaining product acceptance in New York is probably a more costly proposition. Meanwhile, malls' typical hours of operation can be exhausting, and you can't have a standoffish demeanor in sales.

If you endure, however, your business could support your family for generations, as is the case for Elaine T. Finley, a third-generation operator whose family has provided free makeovers in the same location in Greenville, South Carolina, for 40 years.

MNC estimates the initial cost for its opportunity is $33,419 to $194,807, not including rent. It seeks to expand in the northeastern United States; other areas are also available.


Todd D. Maddocks is a franchise attorney and small-business consultant who is presently the CEO of The Worldlink Group. You can reach him at TMaddocks@aol.com.