FDD Talk 2.0: Average Operating Cash Flow Statement for Great Clips Salons (2012 FDD)

(Ambrosio’s note:  Welcome to FDD Talk 2.0, a more comprehensive version of our flagship content, featuring not only the Item 19 financial performance representations of select franchises, but their estimated initial investment, unit growth, and other key items of their 2012 FDD as well.)

Highlights of Great Clips’ 2012 Franchise Disclosure Document – Part 2

Average Operating Cash Flow Statement

• The following statement consists of the average sales, expenses, and operating cash flow of certain Great Clips units. The statement is based on a sample of 1,294 units that were open two years or longer as of January 1, 2011, and operating as of the date of the 2012 dislosure document.

• The total eligible sample of units opened for two years or longer, as of January 1, 2011, consisted of 2,431 salons. The sample was reduced by eliminating any unit for which Great Clips had insufficient data to be reasonably assured of having accurate and complete expense information (1,137 units).

• The 1,137 units eliminated due to insufficient data were not distributed evenly over the entire database, based on total sales. Of the missing salons, 473 had total sales at or above the median for the total sample and 664 had total sales below the median for the total sample.

• If all 1,137 of these salons had been included in the sample, it would have reduced the median total sales in the sample by 6.2% and the net operating cash flow by a somewhat larger percent.

• The sales and expense data used in the preparation of this statement was taken from actual unit operating statements, provided by the franchisee, for each unit in the sample. The time frame or accounting period of these operating statements was the most current available to Great Clips, but in some cases, did not match the exact time frame from which sales figures were drawn. Therefore, some information was annualized to extract a full year worth of data.

• Many Great Clips franchisees operate more than one salon. The average number of salons per franchisee who has operated Great Clips salons for over 5 years is 5.5

• Newly opened units tend to have average sales and cash flow significantly below the average for the units included in the earnings claim sample below. This is especially true of new units opened by new franchisees in markets that have few existing units.

• Certain markets have substantially higher real estate costs than others and any prospective franchisee is urged to verify this along with all other expense factors in relation to local market conditions.

• Markets with many units and correspondingly larger cooperative advertising budgets tend to have units with higher revenues and cash flows than markets with few existing units.