When executives at B&H Education Inc. in Beverly Hills first bought Marinello Schools of Beauty in 2004, people told them they had a diamond in the rough.
Then, the 100-year-old chain of beauty schools had only 13 campuses in two states. Now, almost eight years later, the company is expanding rapidly, making itself over to become the leading cosmetology chain in the United States.
The Whittier-based chain, which trains its students to work with hair, nails and makeup, made two key acquisitions this year to grow the brand nationally: It bought one small five-school chain in Kansas and a larger 10-school chain on the East Coast.
For Michael Flecker, chief financial officer at Marinello and a founding investor for B&H, the acquisitions were a natural next step for growth.
“The time had come for our company to expand our brand nationally,” he said in a statement. “So when the right opportunity became available, we pursued it.”
Marinello has made six acquisitions in the last three years, adding 23 schools to its portfolio. Meanwhile, the company opened dozens more campuses. Now, with 64 campuses in eight states, the company is the third largest beauty school chain in the nation. The two largest, Empire Education Group in Pottsville, Pa., and Regency Beauty Institute in Minneapolis, have 110 and 88 schools, respectively.
Marinello has been able to expand its reach so quickly these last few years because both the beauty industry and trade schools have been growing. Market research firm IbisWorld in Santa Monica reported in March that trade schools experienced strong revenue growth – 4.1 percent in the last five years. Furthermore, the Bureau of Labor Statistics projects almost 16 percent employment growth for cosmetologists through 2020. In that period, more than 98,000 jobs will need to be filled.
Jim Cox, executive director for the American Association of Cosmetology Schools in Scottsdale, Ariz., said beauty schools have always held their own during recessions.
“Even when times are tough, people like to maintain their image and look and feel good,” Cox said. “The beauty industry has historically done well, no matter what the economy.”
Getting started
The first Marinello school was opened in 1905 in La Crosse, Wis., by Ruth Maurer. She named the school after Giovanni Marinello, a 16th century Italian physician and gynecologist reputed to be the founder of modern cosmetology. The chain came to Los Angeles in 1963 when Santa Monica-based Scope Industries bought it, and the company changed hands one more time when B&H bought it in 2004.
The company made four acquisitions in 2009, buying schools in Northern California, Utah, Arizona and Oregon. In February, Marinello acquired five schools from B Street Design in Kansas, and in January, it acquired 10 schools from Brio Academy in Connecticut and Massachusetts.
Archana Kaushal, executive director of marketing for Marinello, said that now, with schools on the East Coast and in the Midwest, the company is poised for even more growth.
“Now it’s kind of limitless,” Kaushal said. “We’re looking at the whole nation to see where there are opportunities to expand.”
She said the company considers market size, real estate and demographics before buying, as well as income and education levels.
Kevin Culbert, a senior analyst at IbisWorld, said one of the reasons trade schools have been successful is because they target middle- and low-income people for whom traditional four-year universities aren’t an option.
“They basically market themselves to people who may not have as much an opportunity for upward mobility otherwise,” Culbert said.
Scottsdale, Ariz.-based American Association of Cosmetology Schools estimates that there are between 1,800 and 2,000 private cosmetology schools in the United States. Of those, 1,200 are AACS members, which together enroll up to 120,000 students a year.
Cox said more remote rural schools may charge as little as $10,000, but more prestigious urban schools, such as Santa Monica’s Sassoon Academy, charge as much as $20,000. Marinello’s cosmetology program in a California school comes in at the high end at about $20,000.
Some criticism
As a for-profit educator, the company is in a growing sector that has come under political heat in recent years. Critics say the schools are cashing in on cheap federal student loan money to boost bottom lines without regard for students’ ability to pay or future earning potential.
Regulators took action last summer, forbidding predatory recruitment and introducing debt repayment and student debt-to-income ratio requirements.
But Cox said beauty schools don’t abuse federal student loans. The schools under fire by the U.S. Department of Education are mostly owned by large publicly traded companies that enroll hundreds of thousands of students, many of them online. Beauty schools, which average 100 enrolled students at a time, are different.
“We’re vocational schools that have been training people for careers for decades, he said. “Even though we have to comply with a lot of the same rules and regulations that these other for-profit schools do, we don’t feel that many of them should apply to us.”
