The Real Deal Miami

Suntan chain expands into Sunshine State

By Jennifer LeClaire | December 01, 2008 01:46PM

Sunset Tan, a tanning salon concept out of Southern California that’s gaining momentum from its reality television series E! Entertainment “Sunset Tan,” has announced plans for rapid expansion throughout South Florida.

Though it may seem counterintuitive to trot out a slew of tanning salons in sunny South Florida — especially amid retail woes in the wake of an ailing economy — commercial real estate experts agree now is the right time for this type of concept.

A total of 31 retail buildings with 1.18 million square feet of retail space came online in South Florida in the third quarter, according to CoStar, a provider of commercial real estate data. An additional 4.6 million square feet of retail is still under construction. That could lead to a glut of space if absorption doesn’t pan out the way developers predicted at the time they broke ground.

Sunset Tan could pick up some of the slack.

The franchise aims to establish 35 locations in Broward, Martin, Miami-Dade and West Palm Beach counties over the next five years through an area development agreement with franchising veterans Neil Rodin and Michael Suchlicki.

“This concept gave us a spa-meets-night-club-meets-salon feeling all wrapped into one,” said Rodin, principal of South Florida Tanning Enterprises. “This concept is a great fit for South Florida.”

Rodin has a strong track record in franchising, including working with Pizza Hut and Dunkin Donuts, but is he making a smart move in a down economy? Can Rodin attract franchisees at a price tag ranging from $247,900 to $652,500, with a franchise fee of $40,000, in a tight credit market?

The latter remains to be seen. But Sunset Tan could find favorable rental rates.

Experts said the tanning industry is big business in the Sunshine State, and South Florida retail developers may even welcome the concept. The tanning industry is worth $5 billion a year, according to the American Tanning Institute, and Florida is among the top states in terms of tanning salons per capita.

The local retail markets are already showing weakness in their rental rates, which could help Sunset Tan in its expansion plans.

The South Florida retail market experienced a slight decline in market conditions in the third quarter of 2008, according to CoStar. Quoted rental rates decreased from second-quarter 2008 levels, ending at $23.32 per square foot per year.

“There is a great opportunity for smaller players to get lucrative deals from a rental standpoint,” said Charles Wetzel, COO at Buxton, a national retail real estate consultant based in Fort Worth, Texas. “Most smaller concepts have to take an in-line position in a strip center and pay higher rent. These retailers could get a better position with higher visibility in this market.”

At a time when larger retailers have shelved expansion plans, Sunset Tan may be able to secure more visible space in the absence of competition from bigger rivals. Since national brands won’t settle for poorly positioned spaces, their hesitation creates a vacuum that smaller companies could fill right now, an unlikely proposition in a recovered market.

“We’re seeing a lot of smaller retailers expanding right now to take advantage of the market,” Wetzel said. “This could change the landscape of new strip centers.”

Rodin and Suchlicki are planning the first five units, one each in Aventura, South Beach, West Boca Raton, Fort Lauderdale and West Pembroke Pines. Of that quintet, only the Pines location has a scheduled opening target — February 2009. There are plans in the works for 11 additional units throughout the tri-county region. Sunset Tan, which now operates in California, New York and New Jersey, plans to open 500 stores nationwide in the next five years.