Expansion takes on many forms among hot tub dealers
By Sarah Protzman Howlett
For many hot tub retailers, growth is the best evidence that business is good, that the bottom line is healthy and that customers are happy. Most seem to desire expansion, yet it looks different for everybody: adding a location, remodeling to enlarge a showroom, acquiring an existing store. Here, retailers share the thought processes, research tactics and cautionary tales that ultimately led to expanding operations.
Scarborough, Maine, and Rye, New Hampshire
Leadership at Mainely Tubs had a second location on the brain for a few years before going for it. Though the first location in Scarborough, Maine, had done well, the company being 100% employee-owned brought an additional responsibility not to rush.
“For us, making good decisions affects people’s retirement,” says Scott Bell, CFO and marketing director, of the company’s structure. To that end, “We took our store and drew a circle 25 miles around, and did the same for each city we might want to go to. When we did that, we realized one city was very similar to the market we’ve had success in currently.”
That city was Rye, New Hampshire — a community of affluent second homeowners similar to the makeup of Mainely Tubs’ flagship store. They did a breakeven analysis, ran projected costs and projected first-year revenues and advertising costs. They looked at rents, the employment market, the labor pool and eventually converted an 11,000-square-foot motorcycle/ATV dealership in Rye into a hot tub showroom, complete with office and warehouse space.
Despite a thorough effort, some aspects of expansion still brought frustration — like the tedious and lengthy permit process. “We didn’t have an exterior sign for several months when we opened, nor store-mounted logos and signage,” Bell says of the glacial pace. “We ended up having to put a banner and zip tie it over the existing Honda sign that was out there.”
Diana Locke, general manager and COO, advises any dealer looking at expansion to examine cash flow. “If you don’t have cash flow, you have to have the ability to fund this project — and you need considerable infrastructure in place,” she says. “We can service all our new territory with our existing resources but we’ve had to add personnel. We have centralized a lot of our staff.”
The company had a tough time deciding whether to keep or change its name, given that it would now have a location outside Maine. “But we spent 40 years building name recognition,” Scott says, “so we kept it.”
HOTSPRING SPAS & POOLS
La Crosse, Wisconsin
Some hot tub retailers are expanding in square footage but still sticking to a one-store model. Just a five-minute drive from its existing 10,000-square-foot store in La Crosse, Wisconsin, HotSpring Spas & Pools is building a larger, freestanding store to be completed this fall. The company broke ground in April and is excited to have more outdoor-display space, and even possibly install a pool on the grounds.
HotSpring chose to expand, owner Melissa Hutzenbuehler says, in order to harness a feeling to which many can relate: the joy of ownership versus renting. “If I think of what we’ve paid in rent, we’d own our new building already,” she says. “Right now we are over by a mall; retail rent is really high. We can build this building for the same we’re renting for. Our monthly payment will be about the same.”
HotSpring has been renting its current space since 2003, originally sharing the building with another tenant who moved out — but Hutzenbuehler says the company is ready to design things its way. The new building location was a factor, Hutzenbuehler says. “You can see it off the popular interstate that runs through our town and it’s by a big grocery store,” she explains. “It took a lot of patience and saving money until we could find the perfect spot to move to.”
She says the new store will also have better flow. Because of the layout of the formerly two-tenant building, “If you’re on the hot tub side, you can’t see the other side where we have our chemicals,” she says. “Our new space will be open, more efficient.”
Like any new building project, the cost for HotSpring’s vision added up quickly, and it scaled back from its originally desired 15,000 square feet. “We wanted the customer to still be wowed by the inside,” she says. “[In hindsight], I probably would have visited more stores before meeting with the architect so I could have had more visions about what we want to do.”
Hutzenbuehler says she has updated the company’s POS in the last couple of years and continue to employ a great IT person, so she doesn’t anticipate hiring any more people for the new, larger location and plans to be there “forever.”
SPA & SAUNA CO.
Reno, Nevada, and Bay Area of California
When a hot tub retailer adds to its roster, it’s usually one store at a time; for Scott Clark, owner of Spa & Sauna Co., it was twins. The almost 30-year-old company had three stores in the Reno, Nevada, area, but over the last year had been quietly working on acquiring two outposts in the Bay Area of California. Clark didn’t imagine his next store — or stores — would be a four-hour drive from his other three, but a casual chat changed all that.
“We’d known this dealer for a long time, and they were looking for an exit strategy,” Clark says. “Over a conversation about another subject, it just kinda came up. They had a 43-year customer base, so most of 2018 was spent working through the details to try to pull it all together and make it happen. We thought we could tap into untapped potential.”
While Clark stresses the acquisition still feels brand new, in these early days he has focused on marketing and growth in the San Jose and Santa Cruz stores, which are 2,200 and 4,200 square feet, respectively. The three Reno-area stores vary from 2,500 to 6,500 square feet of selling/retail space.
“The previous owners hadn’t experienced recovery post-recession,” he says. “Whereas [with the Reno stores], we have an aggressive marketing department and processes in place for customer retention.”
Modernizing the Bay Area stores’ basic, decade-old website and linking it from the Spa & Sauna Co.’s main site almost instantly generated more leads, Clark says, and helped earn buy-in from the sales teams. Further, absolutely
no one lost their jobs in the ownership transition.
“In acquiring two fully functional, fully staffed stores at once, we are just trying not to scare or disrupt their business,” he says. “I was not interested in starting over when we’re 200 miles away, and their core employees have been there 15 to 25 years. You want to think about how this is impacting their lives.”
The stores are also working to integrate software systems, and Clark has been encouraging the newly acquired stores to adopt the original three stores’ policies, such as keeping a Job Diary to detail each position’s daily tasks. He says flexibility and patience are key for him bringing two new stores into the fold at once.
“Evaluating and reassuring,” he says. “That’s basically what I do all day.”
MIRAGE POOL ‘N’ SPA
Founded in 2004, Kennewick, Washington–based Mirage Pool ‘n’ Spa was happily a one-location outfit for more than a decade. It grew out of its 3,000-square-foot space, purchasing the back half of the building seven years ago to double in size. In 2017, however, a second type of expansion took shape: an entirely new, yet much smaller second store.
Co-owner Lacy Simmonds says the main reason it opened a second shop was to pick up another brand of spas and maintain brand exclusivity on the sales floor. “In past experience, one ended up getting butchered to sell the other,” she says. “When Jacuzzi bought Dimension One, we thought they’d maybe be a good second brand to bring in — but we didn’t want to do it on one floor. That spurred getting serious about opening a second store.”
Location scouting was the first big task. Prices per square foot near its existing store were much higher than across town, where there was an up-and-coming feel but still a lot of pools. Mirage’s team ended up securing a new build — its attractive floor-to-ceiling windows being a major draw of the 1,800-square-foot space — for much less money. “It’s so small that it needed to be bright and open, not cluttered,” Simmonds says. “There’s only one aisle, but it maximizes the number of spas on the floor.”
Scheduling hiccups like needing to change a door size and delays impeded the move-in process, but “looking back, I still think it was the best decision,” she says, adding that Mirage wants to add a third store eventually. For now, separating the brands has given the staff opportunity for greater success.
“We set ourselves up to be our own competitors,” she says, “but in a good way. Customers in our area now have more options to find something that fits them the best — without us telling them what that is.”
Simmonds has been surprised by the development of two very different personalities across the two stores: “It’s the same management, and even the same paint colors,” she says. “I have no idea why that is.” Right now, she’s juggling staffing issues — the second store is much quieter than the flagship, she says, so finding the right personality fit is key — and wrestling somewhat with the business’s identity as its reach expands.
“We’re still trying to balance staying a family-owned pool business while becoming bigger and more efficient,” she says. “That’s been a fine line to walk.”
Retailers aren’t the only ones expanding: OEMs are growing too.
- Latest facility expansion and completion date: New warehouse location for distribution and shipping center opened on March 1, 2019
- Square footage of latest expansion: 34,000 square feet, with three times the loading docks and ramps from previous location
“Moving into a completely blank canvas, we are able to more resourcefully arrange our distributions and shipping and reallocate valuable warehouse space in our current manufacturing facility,” says Laura Murphy, marketing manager for Artesian. “This enhancement increases our organization’s efficiency across all departments.”
Fort Wayne, Indiana
- Latest facility expansion and completion date: New corporate offices and swim spa manufacturing facility in new building; corporate offices opened in November 2018 and new swim spa factory in May 2019
- Square footage of latest expansion: 166,000 square feet
- Total square footage of manufacturer’s facilities to date: 460,000 square feet
“It is the perfect answer for us in the short term and long term,” says Terry Valmassoi, president of Master Spas. “It adds 55% more space for us. It’s right next door and adjacent to one of our buildings. All four of our buildings are on one block. The constraints we’ve had are all going to be lifted. Sometimes it’s good to be patient — I think it was maybe God saying wait for the right thing.”
- Latest facility expansion and completion date: Clearwater Spas has leased space in the still-to-be-built Gayteway Business Park in Arlington, Washington
- Square footage of latest expansion: 50,000 square feet; 4,000 office space, 46,000 high-bay manufacturing space
“This opportunity to design a manufacturing facility will increase productivity and support growth into new product offerings for our company going forward,” says Brent Conver, CEO at Clearwater Spas.
- Latest facility expansion and completion date: Building of new corporate headquarters in Herriman, Utah, with anticipated move-in date of January 2020
- Square footage of latest expansion: 267,000 square feet
- Total square footage of manufacturer’s facilities to date: 82,000 square feet
“This is a major step forward for the company,” says Jerry Pasley, CEO of Bullfrog Spas. “Keeping all teams within the organization in one location is key to optimizing business processes, productivity, and overall employee satisfaction.”
- Latest facility expansion and completion date: Secondary building and manufacturing site for sewing, completed on March 1, 2019
- Square footage of latest expansion: 30,000 square feet
- Total square footage of manufacturer’s facilities to date: 130,000 square feet
“[This expansion] allows for greater capacity and redundancy,” says Jerry Greer, CEO of Core. “In case one site goes down, we have a backup site.”