A popular tanning biz feels the heat

Todd Beckman, president of The Tan Company, has struggled to keep the industry's negative press out of the spotlight, but will his business get burned?

By Jessica Dickler, CNNMoney.com staff writer

NEW YORK (CNNMoney.com) -- Todd Beckman, president and founder of The Tan Company, has constantly fought negative press about the $5 billion industry and now faces a summer slowdown, but he insists his business can survive the intense heat.

Despite Beckman's assertions, for an industry that is highly subjective to fads, seasonality and growing concerns about the dangers of ultraviolet (UV) exposure, the future of indoor tanning is not bright.

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Todd Beckman, president and founder of the Tan Company, has worked hard to combat negative press about tanning.

Beckman, 42, has been touting tans for a long time. He launched what was originally called The St. Louis Tan Company in 1994. After overwhelming customer demand at the time, he opened a superstore later that year with 30 tanning beds.

By 2000, the St. Louis Tan Company had 15 locations. Looking to grow outside his local market, Beckman changed the name to the Tan Company and began franchising in 2001.

In 2006, Dave Lageschulte - who was granted the first Hooters restaurant franchise license and became one of the chain's most successful franchisees - purchased a 50 percent ownership stake in the company.

Now the Tan Co., whose competitors include Planet Beach, Hollywood Tans and Palm Beach Tan, has 72 locations in 12 states and expects to grow to 100 locations by the end of this year. According to the company, salons had average revenues of $550,778 and an average profit of $213,278 in 2006 - making it one of the industry's major players.

Feeling the heat

While the tanning industry earns about $5 billion annually, according to the Indoor Tanning Association, growth has been uneven as the trend shifted away from an over bronzed look in favor of a natural glow.

Beckman hopes that as long as some fashionistas and socialites like Paris Hilton are sporting dark tans, customers will return to the salons. "There's always someone out there in the limelight that's tanning," Beckman said.

And to survive the summer months, when business falls 30 to 40 percent as customers opt to lie by the pool instead, the Tan Co. relies on annual membership fees to boost revenue during the off season.

But the biggest challenge to the business stems from the $35-billion cosmetic industry, which has spared no expense marketing sun screens and self-tanners as healthy alternatives to baking.

"They have a whole lot more money," Beckman says, "We don't have billions to advertise as big as they can."

The effort has paid off too, anti-aging skin-care products have become hugely popular in the U.S., thanks to strong demand among women and Baby Boomers, according to market research firm Mintel International.

To counter the cosmetic industry's push away from tanning salons, Beckman says his only option is to educate his employees about tanning so they can inform their customers about tanning safely and prohibit them from stepping back into a booth if they have been overexposed from a previous tanning session.

But findings from organizations like the Skin Care Foundation that tanning increases the risk of various forms of skin cancer may prove to be insurmountable.

According to the Foundation, not only are people who use tanning beds 2.5 times more likely to develop squamous cell carcinoma and 1.5 times more likely to develop basal cell carcinoma, but exposure to tanning beds before age 35 increases melanoma risk by 75 percent.

According to the FDA, people who choose to tan are greatly increasing their risk of developing skin cancer - and premature aging of the skin will occur in everyone who is repeatedly exposed to the sun over a long time.

And as public health experts and medical professionals continue to warn people about the dangers of UV radiation from the sun, tanning beds and sun lamps, the tanning businesses may end up burned.

Beckman admits that more of his customers are expressing concern about what the tanning beds will do to their skin. But despite the growing awareness, Beckman is confident that his business has a bright future pointing to the popularity of tanning among Baby Boomers, "Baby Boomers are still our biggest customers," he insists.

"They are more conscious of how they look, and you look healthier when you have color." Top of page

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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.