FDD Talk 2016: The Sport Clips Franchise Opportunity (Financial Performance Analysis, Estimated Costs, and Other Important Stuff You Need to Know)

In this FDD Talk 2016 post, you’ll learn the following:

• Section I – Background information on the Sport Clips franchise opportunity, including relevant news updates

• Section II – Estimated initial investment for a Sport Clips franchise, based on Item 7 of the company’s 2016 FDD

• Section III – Presentation and analysis of Sport Clips’ financial performance representations, based on Item 19 of the company’s 2016 FDD, including information on the:

• 2015 average gross sales for the 983 Sport Clips franchise stores and company-owned stores that were in continual operation for the entire calendar years 2013, 2014, and 2015

• 2015 average gross sales for the 1,140 Sport Clips franchise stores and company-owned stores that were in continual operation for the entire calendar years 2014 and 2015

• average same-store sales growth over the last 5 years measured by average weekly revenues for all stores open for at least 13 months at the end of the indicated year (2011 to 2015)

• 2015 average gross sales, variable costs, payroll, occupancy, advertising expenses, miscellaneous expenses, and operating profit for the 19 Sport Clips stores in Austin, Texas owned and operated by the company for all of 2015

• 2015 average gross sales, variable costs, payroll, occupancy, advertising expenses, miscellaneous expenses, and operating profit for the 12 Sport Clips stores in Las Vegas, Nevada owned and operated by the company for all of 2015

Section I – Background Information

It’s a well known fact that guys don’t like getting their hair cut at women’s beauty salons. It just doesn’t feel right. But they also want more than what you get at your standard barbershop. Gordon Logan figured this out early on, back in the 1990s, and decided to make a guy’s haircut everything it should be – a sportstastic experience!

Sports bars are hugely popular, and applying the concept to a hair cutter just made sense. The first location opened in 1993 and by 1995 franchising of the concept got underway. Sport Clips, with its headquarters in Georgetown, TX, continues to grow and now has a total of 1,517 locations, 32 of which are company-owned and 26 of which are located outside the U.S.

This is a good industry for franchisees because the demand for haircuts is inelastic – guys need to get their hair cut whether the economy is up or down. Here’s how Sport Clips keeps the scissors sharp in the competitive hair-cutting industry:

The Lineup

The shops feature all kinds of cool sports stuff, and the menu of services carries the sports theme.

The basic option is called the Varsity Cut. The MVP, however, goes well beyond that, adding in a steamed towel wrap, a massaging shampoo (tea tree with leave-in conditioner), and a relaxing shoulder and neck massage (not available in all states). Without the massage, it’s called the Triple Play.

You can also order up extra innings for your MVP to extend how long it lasts by two or three times (starting from a base of 20 minutes).

Additional services include complimentary neck trims between visits as well as beard detailing.

Promotion Expertise

This is one chain that knows how to run great promotions. During the month of July, customers can double the MVP experience for the price of a single MVP with its Instant Replay promotion. And the Sport Clips commercials are great as well.

The Racing Connection

Sport Clips is entering its eighth year of sponsoring NASCAR drivers. This year the chain is sticking with Joe Gibbs Racing drivers Carl Edwards and Denny Hamlin.

In addition, the chain sponsors motorcycle racing as well, specifically the GRMX Professional Motocross Racing Team, which was founded in 2008 by Cory Gibbs, who is the son of Joe Gibbs, a former NFL head coach who made it into the NFL Hall of Fame.

Tackling Turnover

The bane of any franchisee is frequent turnover in staff. Sport Clips has developed an extensive culture of retention to make sure its best employees stick around for the whole game.

Scot Johnson, the chain’s VP of Human Resources, focuses on five essentials: Hiring the right managers, emphasizing positive feedback, celebrating success often, making the routine fun, and measuring employee progress. After all, what gets measured gets improved. He understands that creating the right company culture is the key to retaining staff.

Section II – Estimated Costs

• Please click here for detailed estimates of Sport Clips franchise costs, based on Item 7 of the company’s 2016 FDD (updated).

Section III – Financial Performance Representations (Item 19, 2016 FDD) and Analysis