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Considering a Supercuts Franchise? Don’t Overlook These 20 Important Franchise Fees

by Franchise Chatter on February 16, 2017

in Franchise Fees, Salon Franchise

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Don't Invest in a Franchise Until You Check Out This List

Supercuts Salon Photo by RetailbyRyan95

This post was updated on August 27, 2017 to reflect information from Supercuts’ 2017 FDD.

If you are considering a Supercuts franchise, don’t get blindsided by these 20 important franchise fees (from the initial franchise fee, to the royalty fee, to 18 other fees found in Items 5 and 6 of Supercuts’ 2017 FDD).

1.  Development Fee:  $29,500 to $49,500

  • Supercuts’ current practice is to sign a Development Agreement with all franchisees for each new franchise acquisition, even if the franchisee expects to develop only one Store.
  • Supercuts currently grants single-Store development rights (the “Single Store Program”) and 3-Store development rights (the ”Fast Start Program”). In each case, you must pay Supercuts a Development Fee when you sign the Development Agreement.
  • If you acquire the right to develop just one Supercuts Store, you will sign the Development Agreement and that Store’s Franchise Agreement at the same time. If you are a “new” franchisee, in the sense that you became a Supercuts franchisee for the first time on or after September 30, 2011 or now are becoming a franchisee for the first time, the Development Fee you must pay for one-Store development under the Single Store Program currently is $29,500.
  • If you acquire 3-Store development rights under the Fast Start Program, you will concurrently sign the Development Agreement and the Franchise Agreement for the first Store to be developed. You sign Supercuts’ then-current standard Franchise Agreement for each subsequent Supercuts Store you open according to the Development Agreement. The Development Fee you must pay for a 3-Store development under the Fast Start Program currently is $49,500.
  • Development Fees are the only initial fees you must pay for the Supercuts development/franchise rights. The Development Fee is full payment for your development/franchise rights, whether for one Store or 3 Stores. If you are such a “new” franchisee, Supercuts does not charge you any initial franchise fees for Stores to be developed under the Development Agreement.

2.  Grand Opening Related Fees:  $2,500

  • New franchisees opening their first Supercuts Store must pay Supercuts a $2,500 Grand Opening Plan Assistance fee. This fee is a one-time investment to develop the Grand Opening Plan for your first Supercuts Store. You will work with a dedicated Grand Opening Plan Director to customize the plan for your specific location and market.
  • This fee is not collected on any subsequent Supercuts stores you open. This payment is not refundable.

3.  Hairstylists Academy:  $1,350 to $1,800

  • All new Supercuts stylists must attend a hairstylists academy training course/certification. The basic fee for each stylist is presently $225 for the 5-day course ($45 per stylist per day).
  • You must pay all related costs, including travel, lodging, meals, and wages associated with your and your employees’ attendance at the training course.
  • Because you are expected to open each Store with 6 to 8 stylists, your total training fee will run from $1,350 to $1,800. This training fee is not refundable.

4.  Sublease:  $2,000 to $6,000 per month

  • You generally must sublease your Store’s location from Supercuts. Monthly rent is estimated to range from $2,000 to $6,000 depending on premises size, condition, and location.
  • You might be required to pay the first month’s rent when the Sublease is signed as “pre-paid rent” (as opposed to after the premises is delivered); a security deposit of approximately one month’s rent also might be required.
  • Except for the security deposit, these payments are not refundable.

5.  Initial Inventory:  $5,000 to $10,000

  • You must purchase an initial inventory of professional hair care products and gift cards for your Supercuts Store. You may purchase all or some of the hair care products from Regis, as described in more detail in Item 8. You must buy the gift cards from Regis.
  • Initial inventory costs for these items range from $5,000 to $10,000; payment is due within 30 days after you receive the invoice. This payment is not refundable.

6.  Store FF&E (Furniture, Fixtures, and Equipment) Coordination Services and Construction Management Services:  $5,000

  • Regis is an approved supplier of certain FF&E coordination services and Store construction management services relating to your Store’s development and build-out. The FF&E coordination services involve Regis ordering on your behalf furniture, fixtures, and equipment for your Store, coordinating delivery, and consulting with you regarding the unloading, initial inspection, and acceptance of all furniture, fixtures, and equipment on the Store’s approved construction documents.
  • If you want to use Regis’s FF&E coordination services, you must sign Regis’s Construction Management Service Agreement. The total cost of this FF&E is estimated to range from $25,000 to $40,000, depending on your store’s size. This payment is not refundable.
  • You must pay Regis $5,000 for the Store construction management services when you sign its Construction Management Services Agreement. This $5,000 fee is in addition to the amounts described in the previous paragraph that you must pay for FF&E, plus shipping and handling. These payments are not refundable.

7.  Royalty Fees:  for new Stores, combined service and merchandise royalty fee is 4% of combined net service revenue and net merchandise revenue from opening date until first-year anniversary. From first-year anniversary until the Franchise Agreement expires or is terminated, royalty fee is 6% of combined net service revenue and net merchandise revenue.

  • Due Date:  Payable monthly on or before 10th day of each month for revenue during preceding calendar month.
  • You must pay all amounts due by electronic transfer.

8.  Advertising Fees:  5% of net monthly service revenue (i.e., excluding merchandise sales) with a potential rebate, if 75% of Stores in specific DMA vote in favor of rebate

  • Due Date:  Same as Royalty fee.

9.  Product and Service Purchases:  varies

  • Due Date:  As incurred.
  • You will buy products and services necessary to operate your Store from Supercuts’ affiliates, designated and approved vendors whose items and services meet Supercuts’ standards and specifications and/or other suppliers to the industry.
  • Prices depend on supplier and item/service involved.

10.  Managers’ Training Course:  a portion of the cost of facilities, materials, and audio-visual equipment for training related to duties. In Supercuts’ most recent fiscal year, the cost ranged from $54 to $290 per attendee.

  • Due Date:  Prior to training.
  • Supercuts may increase this charge as the costs increase.

11.  Anniversary Fee (essentially a “renewal” fee):  1% of total net monthly revenues for 12 full months immediately preceding first 10-year anniversary. For each 10-year anniversary thereafter, 2% of total net monthly revenues for 12 full months immediately preceding such anniversary date.

  • Due Date:  Within 30 days after each 10-year anniversary of opening date.

12.  Transfer Fee:  1 store $2,500; 2 stores $4,500; 3 stores $6,000; 4 stores $7,000; 5 stores $7,500; each store after is $500

  • Due Date:  At least 30 days before transfer’s effective date.
  • In addition to transfer fee, if the prospective franchisee is a new franchisee, he must attend Supercuts’ mandatory training course for initial franchisees.

13.  Lease Defaults:  varies under circumstances and depends on nature of default

  • Due Date:  As incurred.
  • You must reimburse Supercuts if it must cure your lease defaults.

14.  Audits:  all unpaid fees, cost of audit, plus interest at highest allowable rate not to exceed 18% per annum from date due

  • Due Date:  Immediately after receipt of audit report.
  • Audits are conducted at Supercuts’ expense unless an audit discloses an understatement of 2% or more of your gross revenues for any period(s), in which case you must reimburse Supercuts for the audit costs, including the charges of any independent accountant and the travel expenses, room, board, and compensation of Supercuts’ employees or agents.

15.  Late Payments/Interest:  18% per annum minimum, not to exceed highest applicable commercial rate under applicable state and/or federal law

  • Due Date:  As stated in applicable agreement.
  • If any amounts due to Supercuts or its affiliates are not paid when due.

16.  Modernization:  $35,000 adjusted for inflation (not to exceed 2% per year) for capital improvements to modernize and update Store location [Note: $35,000 might not represent the entire costs of a complete remodeling; this covers only updating the decor and partial remodeling.]

  • Due Date:  Every 10 years, Supercuts may require that 25% be spent before end of seventh year.

17.  Gift Card Transactions:  $45 per download software download fee and $15 per terminal annual software maintenance fee (both if you supply your own terminal device); per transaction fees range from $.0225 to $.07; non-sufficient funds recovery fee of $.05 per card

  • Due Date:  As incurred and/or per transaction.

18.  Indemnification: varies under circumstances and depends on nature of claim

  • Due Date:  As incurred.
  • You must reimburse Supercuts and its affiliates if they are held liable for claims from your Store’s operation or incur costs to defend them (when they are not at fault), including any of your attempts to raise money in a public or private stock offering.

19.  Maintenance Cost Reimbursement:  out-of-pocket cost reimbursement

  • Due Date:  As incurred.
  • You must reimburse Supercuts’ costs for correcting your Store’s substandard appearance or condition.

20.  Costs and Attorneys’ Fees:  varies under circumstances and depends on nature of your non-compliance

  • Due Date:  As incurred.
  • Due when Supercuts incurs costs and expenses to enforce Franchise Agreement against you in a legal proceeding and is the prevailing party.

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