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

by Franchise Chatter on August 8, 2016

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

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Great Clips

In this FDD Talk 2016 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 2016 FDD
  • Section III – Presentation and analysis of Great Clips’ financial performance representations, based on Item 19 of the company’s 2016 FDD, including information on the:
  • 2015 average service sales, product sales, labor, occupancy, product costs, continuing franchise fees, advertising, other expenses, and operating cash flow for the 1,598 Great Clips units that were open two years or longer as of January 1, 2015, and operating as of the date of the 2016 Franchise Disclosure Document
  • 2015 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

Great Clips Widens Its Lead Over Other Salon Companies

With more than 3,700 locations in the United States and Canada, Great Clips is putting itself out of reach. It’s the largest hair-care brand in North America, with nearly a 50 percent market share of all franchised hair salon stores, and the gap grows wider each year.

Franchising Opportunities Open in US, Canada

Great Clips is headquartered in Bloomington, Minnesota, a suburb of the Minneapolis/St. Paul metropolitan area. The chain has franchising opportunities available in 26 U.S. states, the District of Columbia, and three Canadian provinces.

Many Great Clips franchisees own multiple units, with the average franchisee owning five to six salons within five years of opening an initial store. More than 1,000 franchisees have opened salons.

Chain is No. 28 on Franchise 500 List

Great Clips ranked No. 28 in the 2016 Franchise 500 by Entrepreneur, up from No. 37 in 2015 and second only to the No. 19 ranking of 2008.

The chain finished 2015 with 3,733 units in the United States and 135 Canadian locations.

Haircut Info Logged for Next Time

Great Clips salons are predominately located in strip malls and are open evenings and weekends. Appointments are not required, and haircuts are affordable.

Through “Clip Notes,” stylists enter information into customers’ profiles, including hairstyle, length, length removed, and other data. When a customer goes to any Great Clips salon, the details from his or her last haircut are available to the current stylist.

The information is also helpful to Great Clips, which can use data in the cloud to track customer habits and trends among customers.

“We keep track of how many times customers come in — who has been in once this year, who’s been in four to six times, who’s been in seven to 10 times or more. Then we figure out how to market to these different buckets of customers,” Great Clips President Steve Hockett told Entrepreneur in January 2016.

“What we found was that franchisees were spending a disproportionate amount of their marketing on people who already come in many times per year,” Hockett said. “We were able to tell them to focus on customers coming in one to three times and help move them along.”

Customers can also take advantage of Online Check In through the service’s mobile app. When you check in ahead of time, there’s a good chance you’ll be next in line when you walk in the door. The Great Clips Online Check In app is available on both iOS and Android devices.

Quirky Commercial Highlights Hair ‘Trauma’

Great Clips put out a quirky commercial in 2016 featuring a ventriloquist’s dummy whose big fluffy red afro matches the ventriloquist’s. In the spot, the dummy (Lenny) goes in search of his missing partner (Benny) and discovers his partner getting a short haircut at Great Clips. After an awkward moment of shock, Lenny falls over in a faint.

First Salon Opened Near University of Minnesota Campus

Steve Lemmon and David Rubenzer opened the first Great Clips salon in 1982 near the campus of the University of Minnesota in Minneapolis. The two brought Ray Barton aboard in 1983, and the company started franchising the same year.

The chain opened its first international location in 1993 in the Canadian province of British Columbia. Great Clips opened its 1,000th salon in 1997, opened its 2,500th in 2006 while also unveiling its new Relax salon design, celebrated its 25th anniversary in 2007, and hit the 3,000-salon mark in 2011.

CEO Olsen Named 2015 Executive of the Year

Barton bought out his partners in 1997 and became the majority shareholder. His sister Rhoda Olsen joined the company part time in 1984 to create training manuals and programs and became full time in 1988 as head of human resources. She took on the role of president of the company in 1998.

Olsen became CEO when Barton stepped down in 2011 after 28 years as CEO. Four years later, the Minneapolis/St. Paul Business Journal named her 2015 Executive of the Year.

Barton currently serves as chairman of the board.

Section II – Estimated Costs

  • Please click here for detailed estimates of Great 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

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