Franchise Costs: Detailed Estimates of Great Clips Franchise Costs (2020 FDD)

Updated June 15, 2020.

Detailed Estimates of Great Clips Franchise Costs Based on Item 7 (Estimated Initial Investment) of Great Clips’ 2020 Franchise Disclosure Document

1.  Initial Franchise Fee:  $20,000 or $35,000 (if you sign a Three Star Agreement, along with three separate Franchise Agreements)

• The Initial Franchise Fee is $20,000 if you are applying for a single Franchise Agreement with no participation in an incentive program.

• If you are participating in the Three Star Program, you will sign the Three Star Program Agreement, along with three separate Franchise Agreements. Instead of paying the $20,000 Initial Franchise Fee under each Franchise Agreement, you will pay Great Clips a non-refundable total fee of $35,000.

• The total estimated initial investment below assumes that you are developing your first franchise under the Three Star Program Agreement. Your estimated initial investment may be less for the second and third franchises you develop under the Three Star Program Agreement, provided you have a fully-executed lease for each of the Three Star franchises within the required 24-month timeframe.

• If you have signed a Master Development Agreement, in addition to the Development Fee, you will pay Great Clips a $6,000 Initial Franchise Fee for each Franchise Agreement you sign in the Exclusive DMA, rather than the $20,000 or $35,000 Initial Franchise Fee described above.

2.  Initial Advertising Contribution to the Market Development Ad Fund (“MDAF”):  $5,000

• If you are participating in the Three Star Program, instead of paying the $5,000 Initial Advertising Contribution to the MDAF under each of the three Franchise Agreements you sign, you will pay Great Clips a non-refundable $5,000 Initial Advertising Contribution to the MDAF at the time you sign the Three Star Program Agreement.

• Great Clips will waive payment of any further Initial Advertising Contribution to the MDAF for the Three Star franchises, provided you have a fully-executed lease for each of these franchises within the required 24-month timeframe.

3.  Travel and Expenses While Training:  $1,500 to $2,500 per participant

4.  Architecture Fees:  $250 to $3,500

• You will pay architecture fees for plans and drawings for your Salon and for the costs of copying and delivering the drawings.

• The amount may be higher if revisions to completed plans are required, or if local building code requires engineered mechanical, electrical, and plumbing drawings.

• This amount may also be higher if your Salon will be located in a building requiring LEED certification (Leadership in Energy and Environmental Design Green Building Rating System).

5.  Leasehold Improvements, including Labor:  $40,000 to $80,000

• A typical Great Clips Salon is approximately 900 to 1,200 square feet. Your Salon will likely be in a shopping center rather than a newly-built, free-standing building.

• In some circumstances, with Great Clips’ consent, it may be possible to convert an existing free-standing building or a pre-existing facility, as long as it conforms to all Great Clips’ System standards. The cost of these kinds of conversions are too individually variable to be realistically predicted and may cost more than a newly-built facility.

• You are responsible for obtaining all necessary permits or licenses necessary for the siting, construction, renovation, or operation of the franchise business.

• The cost of leasehold improvements will vary depending on the condition of the location when it is handed over to you from the landlord. These estimated costs are based upon receiving the location in a standard “vanilla shell” condition.

• Leasehold improvements, fixtures, signage, furnishings, and labor may be financed through lessors or third parties at your discretion. If you finance these items, you will incur financing costs and will be required to sign a letter of guarantee.

6.  Rent and Security Deposits:  $1,000 to $10,000

• Rent is generally non-refundable. Security deposits may be refundable either in full or in part, depending on the terms of your lease or contract.

• You may experience significantly higher costs, including specifically with respect to rent costs, in certain markets (e.g., major metropolitan areas) due to limited real estate availability or other local market trends that tend to drive up costs. These costs vary too widely to estimate.

7.  Fixtures, Signage, and Furnishings, including Salon Technology Hardware:  $35,000 to $50,000

8.  Freight:  $2,000 to $6,000

9.  Sales Tax on Fixtures, Signage, and Furnishings:  $0 to $2,500

10.  Opening Inventory and Supplies:  $4,700 to $6,400

• Some suppliers may offer financing assistance and you may be able to arrange financing for part of your inventory expense.

11.  Grand Opening Advertising:  $20,000 to $25,000

• You are required to spend between $20,000 and $25,000 on your grand opening marketing plan. This amount does not include the cost of your discounted price or additional staffing required to successfully open your Salon.

• Signage restrictions and other local market requirements may increase your costs.

• Additional advertising investments may be required after your grand opening.

12.  Insurance:  $1,600 to $2,500

• These amounts only include your initial premium for the required property and public liability insurance, and are the estimated cost per year per Salon. The cost of other coverages, including your discretionary purchases and workers’ compensation, varies too widely to be easily estimated.

13.  Lease Liability Fee:  $0 to $1,500

• If Great Clips has guaranteed your lease or assigned a lease to you with continuing liability to Great Clips, you must pay a non-refundable lease liability fee of $1,500.

14.  Lease Review Fee:  $850 to $2,500

• If Great Clips assigns a lease to you, the costs for the lease liability fee ($1,500) are included in the lease review fee, with the remainder ($2,500) representing the current cost for Great Clips’ attorney to review the lease.

• If you have an attorney review your lease, typical legal fees will be between $850 and $2,500.

15.  Additional Funds (6-12 Months):  $15,000 to $50,000

• This is an estimate only of the additional operating capital needed to operate your Salon during the initial 6-12 months after you open for business. Great Clips cannot guarantee that you will not have additional expenses starting the business.

• The estimate includes items such as:

• initial payroll and payroll taxes (including payroll to cover the pre-opening training period for some of your Salon staff)
• Continuing Franchise Fees and Advertising Fund Contributions
• professional fees, including accounting fees and computer fees
• additional advertising
• insurance, including health insurance and workers’ compensation
• rent, repairs, and maintenance
• bank charges
• miscellaneous supplies and equipment
• initial Salon staff recruiting expenses
• state taxes and license fees
• depreciation/amortization
• deposits and prepaid expenses (if applicable)
• other miscellaneous items

• The estimate of additional expenses does not include an owner’s salary or draw.

• Additional operating expenses will be incurred in connection with the ongoing operation of your Salon and periodic reinvestment will be necessary following the initial start-up phase for leasehold improvements, equipment, fixtures, and other assets.

16.  Total Estimated Initial Investment:  $146,900 to $282,400

• Great Clips has relied on its experience and data collected from some its franchised Salons to compile these estimates.

• Your cost will depend on a number of factors including local economic and market conditions, the number of employees, and the size of your Salon.

• Great Clips does not offer financing to franchisees either directly or indirectly in connection with their initial investment requirements.

• Your costs may vary if you purchase an existing Salon.