Dennis and Ann Ratner had been married two years when a night out for dinner changed their lives.
It was 1974. The couple were working for Dennis's father, Louis, as stylists in his Washington D.C., chain of hair salons. Neither can remember the name of the restaurant now, but Ann recalls it was fancy—the kind that had cloth napkins. Over dinner that night, they came up with a new salon concept. When it came time to write out the details of the brand-new business they had brainstormed, Ann remembers, she had to smooth out one of the paper cocktail napkins to write on.
“I can still remember the moment to this day,” she says. “We talked. I wrote.”
With a napkin-sketch business plan and a $5,000 investment, the couple founded Hair Cuttery, a salon offering value-priced haircuts and blow-drying for the whole family with no appointment necessary. The first debuted in Springfield, Va. In the first year they opened three shops; in 1988, they opened their 250th, and by 1991, there were more than 350. Today, consolidated under an umbrella entity known as the Ratner Companies, there are more than 1,000 storefronts, housing six different brands and 12,000 employees. In 2007, according to industry estimates, the company's revenues were $204 million.
Dennis and Ann, both 64, each hold executive positions in the company, though they are now divorced. Until his death in 2004, Louis continued to be one of Dennis's closest advisers as the business grew.
Today, the Ratners run the largest privately held chain of hair salons in the country. Dennis is the CEO; Ann, a native of the U.K., is president of upscale brands. Dennis and Ann's daughter Kelly, 32, manages Ratner Companies real estate; another daughter, Lauren, 29, has been a stylist and salon manager and plans to return to the company after getting her MBA from Babson College. Nephew Gary 44, is the head of new business development. Dennis's brother Warren, 65, is semi-retired but is still involved in strategic decision making. The Ratners decline to say how ownership of the company is divided. But they say they are committed to continuing to see it grow.
One of their secrets: Ratner is able to hear outside advice at critical moments, whether the recommendations come from motivational seminars, longtime consultants or strategically hired non-family executives. “Leaders have to take the initiative and recognize when they don't have the expertise,” Dennis says. “For a family company, that can be the hardest thing for a family to do. It goes against the grain.”
Dennis and Ann separated around 1978; their divorce became final in 1986. They decline to discuss the reason for the split; they prefer to speak about their continuing business relationship. “I knew together we had a magic formula,” says Dennis.
“At the time, my lawyer said to me, ‘Just take your money and run,'” Ann says, “but I knew that was not the answer. Dennis and I both have a passion for this business, and we have that passion for the business to this day.”
Their post-marital relationship saw the company boom. In 1978, the company introduced a new retail brand, Bubbles. In 1982, the firm began selling its own styling products. In 2001, another new salon brand, Cielo, launched.
As the company expanded, younger relatives—a group Dennis calls “G3”—began to join in. Gary, who had worked after school and weekends sweeping salon floors, became a licensed stylist and joined the company after high school. Kelly and Lauren also worked in the family business in high school and opted to join as adults.
Not every growth tactic played out as planned. The company tested the concept of franchising its salons, but the firm has since returned to a company-owned policy, and 99% of stores are company-owned. And not every regional expansion has blossomed. A move into the Minneapolis area proved challenging. In March 2008, the company sold 129 Hair Cuttery salons in that region to rival Regis for an undisclosed sum. Ratner continues to maintain a presence in New England, Philadelphia, Delaware, the District of Columbia, Florida and Chicago.
Wise counsel
As the G3 group began to join up, Dennis began his concentrated efforts to seek outside advice. Among his first forays stemmed from a visit to the University of Virginia's Darden School of Business and his participation in a seminar on change leadership in the late '90s. He was so impressed with the discussion on creating a leadership culture and managing change that he invited instructors to create a program specifically for Ratner. Though it took two years to fulfill this vision, the results reverberated throughout the company. The firm's name was changed from Hair Cuttery to Ratner Companies to encompass all brands, and mission statements and company values were adopted.
And if you're ever looking for the company's corporate headquarters, don't ask for the corporate headquarters. Ratner changed the name to “resource center” to better convey to staffers across the company the role company leaders wanted to play.
Dennis took his quest for advice a step further in 2000 when he met Timothy Habbershon, who, among other professional activities, is a coach for senior executives and teams. Dennis convinced Habbershon to coach the Ratner Companies. “At first he didn't want to,” said Dennis. “He said he wasn't sure I was coachable.”
Facilitating regular family retreats is one of Habbershon's duties. At these gatherings the Ratners come together to deal with issues big and small, from growth strategies and brand development to a family member's birthday celebration. Ann says Habbershon's presence is invaluable. “Having a mediator is a great asset,” she says. “We don't do a family retreat unless he is there. He is the voice of reason for us.”
Ratner family members recall many significant moments from family retreats-—such as the time G3 made it known they'd prefer their spouses not be involved in the business. “It's complicated enough working with siblings and parents,” says Kelly.
In 2007, Dennis Ratner took another step to ensure his company got the best advice the outside world had to offer: He recruited Susan Gustafson to come on board as president.
Gustafson, who was working for the Pampered Chef, says she was not particularly interested in the job when Dennis called her. “I said no, but I'd be happy to have coffee with him, as a courtesy,” she recalls. “A year later, I was hired.”
Family business advisers say adding a non-family manager to the mix is often the key to sustaining the growth begun by the company founders. “Rarely, if ever, does one find a successful family business that is managed exclusively by family members,” says Henry Welt, founder of H. Welt & Company, a New York City-based strategy advisory firm. “Non-family professional managers have either contributed to building the business or are required to maintain or grow the business that the family has founded.”
Gustafson certainly knows that territory. She has made a career as the non-family member of family companies. In addition to Pampered Chef (family-owned until its acquisition by Berkshire Hathaway), she worked at Cap Toys before it was purchased by Hasbro. At Ratner, Susan was brought in to be the day-to-day operations manager—a foil for Dennis, who relishes his role as a rainmaker and motivator. One of her greatest challenges, she says, is improving the company's retention of stylists—high turnover is a plague throughout the industry.
Among the elements that grew out of these efforts was the company motto: “Where it's all about the people.” This plays out in the benefits Ratner offers its employees, including a health plan, a 401(k) that matches employee contributions up to $1,000, profit sharing, paid vacations, $2,000 in adoption assistance and $4,000 to pay for college or styling credentials. Incentives are also part of the package: The company sends workers offering the best customer service to Cancún each year. Every Monday, resource center workers arrive to a free breakfast. In 2003, Washingtonian magazine named Ratner one of the 50 best places to work.
Beyond the tangible benefits, Dennis devotes much of his time to motivation—not just of resource center employees, but also of the vast network of stylists who work behind the chairs at his companies. Gustafson accompanied Dennis as he traveled to some of what Ratner calls “wow” events, the company version of a pep rally. “There are several of them in a week, hundreds of people attend and Dennis goes to every single event,” she says. “This is a sit-down dinner, awards and recognitions, by region. He is there—he is the face of the brand and the one who delivers the message to everyone about how valued they are to the company. He ends every presentation with ‘I love you all.' And he means it.”
For Dennis, the time with stylists in the field is not just about management or even leadership: it's about building the company for the future. “We are all about the people,” he says. “We yell that. We promote that. It's on our website, it's in our mission statement, it's in everything we do.
“It's our goal to have a company of happy people. We built a strategy around that.” And a family business ready for a third generation.
Ellen Neuborne is a business writer based in New York City.