Fast-growing tanning chain hot on Indianapolis market

Fast-growing tanning chain hot on Indianapolis market

Kentucky-based company aims for 25 salons in area

At a time of retrenchment for most retailers, Elizabethtown, Ky.-based Sun Tan City is enjoying a growth spurt that has brought it to the Indianapolis market in a big way.

Since November 2008, it has opened eight salons in central Indiana and might have 25 in the area within two years, CEO Rick Kueber said.

Torrid growth is nothing new for the privately held company. Kueber said this was a natural market to blanket because of its proximity to Sun Tan City’s Louisville-area headquarters.

“We’re at 94 [units nationwide],” Kueber said. “A year ago, we were at 68 salons. The year before that, we were at 49 and the year before that we were 29. We’re growing quite rapidly. In five years, we would love to cross the 500-store mark, which we think is a very attainable goal.”

Kueber, 37, sees opportunity in part because his chain operates in a field with few large-scale, well-organized rivals.
Danielle Maheux, editor of the trade publication Looking Fit, said that while there are about 20,000 tanning salons of various sizes in the United States, the majority are smallish “mom and pop” affairs.

If Sun Tan City reaches its goal of 500 outlets, it would be a behemoth of unprecedented size.

“They’re definitely one of the big players in the industry,” Maheux said. “I wouldn’t say it’s totally out of the realm of what other salons are doing, but it’s certainly atypical.”

The fragmented salon market isn’t too different from the 1980s video rental industry before Blockbuster came along-an analogy that resonates with Kueber, who at age 22 founded a regional video store chain called Video Vault. Before selling his interest in the late 1990s, he and his brother, David, experimented with putting a couple of tanning beds in the backs of their stores.

Their good performance got them to thinking.

“One day, my brother and I and our partners sat down and said, ‘What happens if we put 20 or 30 of these beds into a salon and create a salon environment?'” Kueber recalled. “We did that 10 years ago. It took us several years to find a model that worked and suited our needs.”

The winning store design is reminiscent of a day spa. The chain, founded in 1999, offers locations with 17 to 30 tanning beds, plus spray-on tan booths.

Each location requires an investment of approximately half a million dollars-or $40 million chainwide so far. Franchising would seem like an excellent way to grow the business even faster, but the firm hasn’t done much yet. Only 12 of its 94 units are franchisee-owned. The rest, including all those in the Indianapolis area, are company shops.

Setting up a Sun Tan City may be pricey, but it isn’t as pricey as it might have been before the recession hit. Especially when it comes to choice retail spots.

“Sun Tan City has gone after many of the grade A locations,” said Bill French,
senior vice president and retail specialist for commercial real estate services firm Colliers Turley Martin Tucker. “They’ve been able to lock up some really good locations that otherwise might not have been available.”

French, who places Sun Tan City on a short list of retailers currently expanding, believes the nature of the company’s product could give it an advantage in a down market.

“They are a service business, not just selling a commodity,” he said. “Service
businesses appear to be performing better than some of the general retailers. With times being difficult, people aren’t
inclined to travel as much. But you might still want to have a tan. A trip to Sun Tan City or someone of that nature is a much less expensive way to get it done.”

For his part, Kueber doesn’t reject the notion that his salons (where a month of tanning can be had for as little as $18.88) offer an affordable luxury during tough times. Anything that helps put more bodies in the beds (the company expects to provide more than 5 million tans in 2009) is welcome.

“We have positioned ourselves to become the Blockbuster Video of tanning,” Kueber said. “That is certainly our ultimate goal.”

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