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FDD Talk 2017: What You Need to Know About the Great Clips Franchise Opportunity (Financial Performance Analysis, Costs and Fees)

by Franchise Chatter on May 16, 2017

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

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In this FDD Talk 2017 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 2017 FDD
  • Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for a Great Clips franchise, based on Items 5 and 6 of the company’s 2017 FDD
  • Section IV – Presentation and analysis of Great Clips’ financial performance representations, based on Item 19 of the company’s 2017 FDD, including information on the:
  • 2016 average service sales, product sales, labor, occupancy, product costs, continuing franchise fees, advertising, other expenses, and operating cash flow for the 1,646 Great Clips units that were open two years or longer as of January 1, 2016, and operating as of the date of the 2017 Franchise Disclosure Document
  • 2016 average sales, labor, occupancy, all other expenses, and cash flow for Great Clips units based on sales range (<$250,000; $250,000 to $299,000; $300,000 to $349,000; $350,000 to $399,000; $400,000 to $449,000; $450,000 to $499,000; $500,000+; and all salons in sample)

Section I – Background Information

13 Things You Need to Know About the Great Clips Franchise

Executive Leadership Transition

1.  In early January, Great Clips announced that CEO Rhoda Olsen will step down from her position and transition to Vice Chairwoman of the company at the end of the year. Current President Steve Hockett will be promoted to CEO, while Chief Operating Officer Rob Goggins will be promoted to President.

2.  Olsen has served as an executive of Great Clips since 1987, was named President in 1998, and transitioned to CEO in 2011. Olsen says that this leadership transition will allow her to devote more time to volunteer and mentor activities, including her role as president of the International SalonSpa Business Network (ISBN) and her work with Phakamani Foundation.

Salons Raise $640,000 to Benefit Local Children’s Hospitals

3.  In early March, Great Clips announced that the company had raised over $640,000 through its 2016 Miracle Balloon campaign to benefit the Children’s Miracle Network Hospitals. The funds raised will help the millions of children who are treated at 170 not-for-profit Children’s Miracle Network Hospitals each year.

4.  Every October, Great Clips sells Miracle Balloons, and participating salons host bake sales and cut-a-thons. Many stylists also donate their time by visiting member hospitals to cut children’s hair.

Partnering with PodcastOne on In-Salon Entertainment

5.  Late last year, Great Clips announced that it had partnered with PodcastOne, the largest advertiser-supported podcast network, to launch a new marketing campaign.

6.  At the start of December, Great Clips franchises featured PodcastOne programs and talent, in-store and online, along with special PodcastOne Premium network offers for customers. Through the special offers, customers had the opportunity to receive 2 free months of PodcastOne’s Premium network.

7.  As part of the partnership, PodcastOne’s top shows, such as Adam Corolla, Steve Austin, and TheChive, along with network online and mobile activations, featured Great Clips advertisements.

Opened 4,000th Location

8.  Last August, Great Clips announced that it had opened its 4,000th franchise in Flat Rock, Michigan, just south of Detroit. The 4,000th location was opened by multi-unit franchisees Brian and Christie Czopek.

9.  According to CEO Rhoda Olsen, Great Clips attributes its success to the “dedicated corporate staff and enthusiastic franchise owners and their talented stylists who work day in and day out to make [Great Clips] the greatest haircare brand in the world.”

Company History

10.  The first Great Clips salon was opened in 1982 by David Rubenzer and Steve Lemmon near the University of Minnesota campus. The goal of the salon was to offer high-quality, low-priced haircuts to men, women, and children with no appointments.

11.  Lemmon and Rubenzer’s salon concept immediately took off and the duo opened three additional salons within the next three months. In early 1983, a third partner, Ray Barton joined the company and franchising officially began later that summer.

12.  By the end of the 90s, Great Clips had over 1,000 locations. Today, there are over 4,000 locations in the U.S. and Canada.

Entrepreneur’s Franchise 500

13.  Great Clips has ranked on Entrepreneur’s annual Franchise 500 list every year in the last decade. The company’s highest rank was No. 19 in 2008, while its lowest rank was No. 100 in 2010.

Section II – Estimated Costs

  • Please click here for detailed estimates of Great Clips franchise costs, based on Item 7 of the company’s 2017 FDD (updated).

Section III – Initial Franchise Fee, Royalty Fee, Marketing Fee, and Other Fees

  • Please click here for detailed information on Great Clips’ initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2017 FDD.

Section IV – Financial Performance Representations (Item 19, 2017 FDD) and Analysis

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