Cole tries to keep his business a cut above

Cole's Salon founder and owner Doug Cole often speaks of delivering a unique "Cole's experience" to each customer at his five south metro salons.

That means providing individualized hair, skin, nail and spa services in an upscale, creative environment, with state-of-the-art equipment and high-end, branded products.

Cole, who celebrated the salon group's 30th anniversary in October, also goes out of his way to make sure employees -- all 330 of them -- enjoy a unique experience.

The prime example is that his workers own 40 percent of the company through an employee stock ownership plan (ESOP). Such a plan is all-but-unheard-of nationally among multi-unit retailers, where notoriously high turnover would complicate such an undertaking.

Cole's also provides an employee mentoring program, in-store libraries and classes, benefits including 401(k)s and large, comfortable break rooms. The group has one salon each in Burnsville, Apple Valley and Savage, and two in Eagan.

Cole encourages employees to "better their best" and follow his example to seek to be "on the improve," by spending at least one hour a day learning. Each receives a "Golden Nugget" notebook to record inspiring ideas and thoughts; some have jotted down more than 1,000 so far this year.

"You do better because you don't want to let anybody down," Cole said of the ESOP's effects. "Everybody's in it together. So everyone needs to be all-in every day."

And employees, bucking the industry trend of relentless movement among salons, have spent an average of eight years with the company.

That loyalty has helped the company grow. Revenue has more than quadrupled since Cole established the ESOP in 1994, rising from more than $5 million that year to nearly $23 million last year, he said.

Employees have shared in that growth. The value of their stake has climbed from $1 million when the ESOP started to $4.1 million today. Thirty longtime employees each have $50,000 to $150,000 in the ESOP.

Proudly displaying "official owner" plaques at their stations, employees are fully vested in the ESOP after three years with the company.

But the company is facing its first down year after 29 years of steadily rising revenue, said Tim Cole, Doug Cole's son and a part owner and one of two vice presidents of operation, along with longtime employee Trish Storhoff.

Plans to open another salon will wait until the economy recovers, he said.

The downturn has provided an opportunity to improve coaching skills of 80 leading employees who serve as mentors.

The company also stepped up marketing, and developed a new website. While some customers are waiting longer between hair appointments, Storhoff said, the downturn has brought a surge in demand for spa services.

Still, Cole's Salon appears to be faring better than others in the industry.

Salon owners have reported transaction volume down 15 to 20 percent recently, according to Marty Flaherty, senior vice president of global sales and operations at Bumble and bumble, the high-end hair product company based in New York City.

Bumble and bumble brings in 60 to 100 salon owners a month to view a video of Doug Cole sharing his business insights. Early next year, the hair product firm will bring 60 salon owners to the Twin Cities for a two-hour presentation by Cole and the company's vice presidents.

"He's one of the best entrepreneurs I know anywhere," Flaherty said.

He learned to learn

ESOPs are more common in manufacturing and more traditional small businesses, said Dennis Monroe, chairman and senior partner of the Minneapolis law firm of Krass Monroe, who handled the Cole's Salon ESOP and is a member of the company's board.

"This was just the next step in that culture, which has been very successful in being able to grow the company, both the top line and the bottom line," Monroe said. "I've never seen a culture that has this kind of employee loyalty."

He went to barber school instead. At age 18, he began cutting children's hair at Dayton's in Southdale. Later he opened his own shop, the Children's Barber, at Southdale in 1972.

Three years later, he nearly closed out of frustration. Barber school mentor Jerry Reints talked him out of it. Reints, a Cole's Salon employee the past 20 years, also gave Cole some books on tape that helped him embrace learning and inspired a new habit, at age 26, of spending an hour a day educating himself.

Cole succeeded in increasing his business, and in 1979, opened his first Cole's Salon, then the area's largest.

"From Day One, I wanted to make sure nobody made the mistake that I made of being afraid to learn," Cole said. "Here's somebody who was going to close their salon with one employee, then putting in the biggest salon in Minneapolis. That's the power of learning."