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FDD Talk 2015: The Great Clips Franchise Opportunity (Financial Performance Analysis, Estimated Costs, and Other Important Stuff You Need to Know)

by Franchise Chatter on April 30, 2015

in FDD Talk 2017: Salon Franchises, FDD Talk 2017: Service Franchises, Franchise Earnings, Salon Franchise

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Great Clips

In this FDD Talk 2015 post, you’ll learn the following:

  • Section I – Background information on the Great Clips franchise opportunity, including relevant news updates
  • Section II – Estimated initial investment for a Great Clips franchise, based on Item 7 of the company’s 2015 FDD
  • Section III – Presentation and analysis of Great Clips’ financial performance representations, based on Item 19 of the company’s 2015 FDD, including information on the:
  • 2014 average service sales, product sales, labor, occupancy, product costs, continuing franchise fees, advertising, other expenses, and operating cash flow for the 1,396 Great Clips units that were open two years or longer as of January 1, 2014, and operating as of the date of the 2015 Franchise Disclosure Document
  • 2014 average sales, labor, occupancy, all other expenses, and cash flow for Great Clips units based on sales range ($0 to $199,000; $200,000 to $249,000; $250,000 to $299,000; $300,000 to $349,000; $350,000 to $399,000; $400,000 to $449,000; $450,000+; all salons in sample)

Section I – Background Information

Between cheap, no-frills haircuts and a culture of kindness, Great Clips became the largest salon chain in the world, with more than 3,700 locations in the U.S. and Canada and sales that surpassed $1 billion in both 2014 and 2013. Thirty-five thousand stylists work at Great Clips salons.

The salons have generally been seen as a good investment because of their low cost and high potential for growth. Great Clips announced in September 2014 that the brand had enjoyed 10 straight years of same-salon sales growth.

Instant Success

Headquartered in Bloomington, Minnesota, Great Clips began in 1982 with a single salon, named Super Clips, near the University of Minnesota. The simple, inexpensive salon experience proved popular, and the salon was immediately successful. Within three months, one location had grown to three.

The first franchised Great Clips salon opened July 16, 1983. The salons grew from 150 in 1988 to 1,000 in 1997 and 3,000 in 2011.

‘Ralphpunzel’ Gets a Haircut

Great Clips drew attention in January 2015 when it launched its “Ralphpunzel” commercial, part of a series of unusual ads to promote its Online Check-In app to its target audience: men ages 18 to 34 (70 percent of Great Clips customers are male). “Ralphpunzel,” who claims he doesn’t have time to get his hair cut, sports a 17-foot head of hair in the ad.

Great Clips is known for its drop-in styling services for people on the go. Customers check in, have a seat, and get their haircuts when their names are called. But if you really want to fly through the line, you can use Online Check-In to sign in online via computer or mobile app to essentially “get in line” before arrival. The app has been installed by more than three million customers and is used by about 20 percent of customers.

Knowing the Customer

Great Clips salons are local salons with local stylists, but their first-come, first-served nature means customers may see multiple stylists rather than developing a relationship with a favorite. They may even frequent multiple salons.

To track customer data across salons, Great Clips introduced ClipNotes in 2014. The global database can save data on visit frequency, haircut preference, and regular salon.

CEO is Exec of the Year

The Minneapolis/St. Paul Business Journal named Great Clips CEO Rhoda Olsen the 2015 Executive of the Year. The 62-year-old Olsen, who has been with the company since 1987, was named president/chief operating officer in 1998 and CEO in 2011.

A culture of kindness is one of the reasons for the brand’s success, according to Olsen, who told the Business Journal that the company statement’s No. 1 value is, “We are kind.”

Great Clips and Charity

That culture of kindness goes along with a charity initiative, Clips of Kindness, that Great Clips launched in 2014 to give free clipper cuts to patients who are being treated for cancer.

In another charitable drive, Great Clips raised $845,000 for Children’s Miracle Network Hospitals during its 2014 Miracle Balloon Campaign. The total was a $105,000 increase from 2013. The funds were generated from paper balloons sold for $1 to $2 each in more than 1,400 Great Clips salons.

Great Clips has a strong focus on philanthropy and volunteerism, both on the corporate level and in the communities of individual salons.

The company contributes millions of dollars every year to charities and causes. Great Deeds, Great Clips’ charitable giving program, focuses on four areas:

  • Community, through which salon owners provide support that helps strengthen their communities;
  • Health, which raises funds to support physical and mental wellness through such programs as the Miracle Balloon Campaign;
  • Support, which helps people facing challenges with programs such as Clips of Kindness; and
  • Appreciation, which rewards charities in communities.

Section II – Estimated Costs

  • Please click here for detailed estimates of Great Clips franchise costs, based on Item 7 of the company’s 2015 FDD (updated).

Section III – Financial Performance Representations (Item 19, 2015 FDD) and Analysis

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