FDD Talk: Drybar Franchise Review (Financial Performance Analysis, Costs, Fees, and More)

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

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

• Section II – Estimated initial investment for a Drybar franchise, based on Item 7 of the company’s 2020 FDD

• Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for a Drybar franchise, based on Items 5 and 6 of the company’s 2020 FDD

• Section IV – Number of franchised and company-owned Drybar outlets at the start of the year and the end of the year for 2017, 2018, and 2019, based on Item 20 of the company’s 2020 FDD

• Section V – Presentation and analysis of Drybar’s financial performance representations, based on Item 19 of the company’s 2020 FDD, including information on the:

• 2019 average gross revenue (services, memberships, and retail products), shop consumables, labor, controllable expenses, non-controllable expenses, and operating profit for the 22 franchised Drybar Shops that have been open for longer than 2 years and are considered standard traditional shops since they have 8 or more chairs

Section I – Background Information

19 Things You Need to Know About the Drybar Franchise

Debuts New Lookbook to Celebrate 10th Anniversary

1.  In January 2020, in celebration of Drybar’s 10-year anniversary in 2020, and in partnership with H&M, Drybar debuted a brand new lookbook. The lookbook has a fresh new vibe and is inclusive, diverse, ageless, and features updates to Drybar’s iconic bar-themed hairstyles, updos, braids, and Shirley Temple children’s hairstyles.

2.  H&M provided the wardrobe and styling for all of the clothing and accessories featured in the lookbook while Alli Webb, founder of Drybar, and the Drybar team led the creative direction of the hair styling on the models and lookbook aesthetic. The format of the lookbook reflects a new elevated design with four distinct covers.

3.  According to Alli Webb, founder of Drybar, “I am so proud of our new Drybar lookbook and H&M has been a wonderful partner. I couldn’t think of a better way to kick off our 10th anniversary than with a new lookbook that celebrates our classic Drybar hairstyles on beautiful women of all ages and ethnicities. It was really important to me that we showcase the versatility of our clientele and how the brand has evolved over the past 10 years. It’s going to be an incredible year for Drybar and I can’t wait for the next 10.”

4.  Clients can view the new Drybar lookbook in all Drybar locations in the United States and Canada, along with an exclusive behind-the-scenes video of the making of the lookbook playing on Drybar’s TVs. Styles from the lookbook are also featured on Drybar.com and both Drybar and H&M highlighted the new lookbook across their digital programming.

5.  Sarah Hoffmann, chief marketing officer of Drybar, added, “With this new lookbook, we are truly customer-centric, reflecting the women we serve across our markets. H&M was the ideal partner for us as their brand values, coupled with their fresh and timeless clothing and accessories are a great fit for Drybar and are a favorite of our customers and stylists.”

6.  “We are excited to be part of Drybar’s new lookbook and 10 year celebration, and extend the collaboration into a deep partnership of our two brands to reach and connect across our community of customers and influencers. It really is the perfect fit for us,” said Mario Moreno, head of marketing for H&M USA.

7.  As part of the partnership, Drybar has teamed up with H&M on their loyalty program, providing exclusive offers and sweepstakes, dry styling pop-ups in select H&M locations, and Drybar product giveaways for members. Drybar was also planning to launch a digital campaign featuring festival inspired hair styles and H&M hair accessories, just in time for spring and festival season. Drybar will be H&M’s hair partner for its key H&M League influencer events.

Appoints New Chief Executive Officer

8.  At the beginning of June 2020, Drybar announced that Liz Williams had been appointed as chief executive officer, effective immediately. Williams brings extensive experience and a proven track record in worldwide brand development, digital marketing, multi-unit operations, and franchising.

9.  Alli Webb, founder of Drybar, said, “I am so thrilled to welcome Liz, our first female CEO, into the Drybar family. After ten fulfilling and successful years in business, she will help usher in a new era for the brand and expand upon our vision both in the U.S. and internationally.”

10.  Michael Landau, chair of Drybar’s board, added, “We are excited to welcome a visionary leader like Liz to the Drybar family at this pivotal moment as we reopen our shops. Liz is a results-oriented leader with a history of partnering with team members and franchisees to deliver amazing consumer experiences and growth.”

11.  Williams joined Drybar from Yum Brands where she most recently served as president of Taco Bell International with responsibility for brand strategy, growth, and performance of the business across 30 countries. In this role, Williams strengthened the business model and accelerated development. Under Williams’ leadership, Taco Bell entered new markets such as Thailand, Australia, and New Zealand and also formed strategic master franchise agreements in Spain, Brazil, and India.

12.  Prior to that role, Williams was the global CFO for Taco Bell, leading finance, strategy, information technology, and eCommerce, where she was responsible for all financial elements of the $11B business. While at Taco Bell, Williams delivered eight years of industry leading sales, profit, unit, and brand growth. She also spent a year at Yum leading corporate strategy for the office of the CEO.

13.  Before joining Yum, Williams spent six years with The Boston Consulting Group as a principal in the consumer and retail practices in U.S. and Asian markets. Prior to that, she spent seven years at Dell Computer in various finance, brand marketing, and corporate sales positions.

14.  Williams serves as a board member for Stitch Fix, a leading online personal styling service. Williams received her undergraduate degree from the University of Texas Business Honors Program and her MBA from the Kellogg School of Management at Northwestern University.

15.  Williams said, “Drybar has created a category and cult brand with passionate and loyal consumers; I am very excited and honored to be joining the Drybar family at such a pivotal time in the company’s history. I look forward to guiding the organization as we reopen our shops safely for our customers and team members while also leading Drybar through the next phase of growth. I plan to partner with all of our stakeholders to enhance our customer experiences while continuing a culture of innovation as we expand across the U.S. and the world.”

Company History

16.  Drybar was founded in 2010 by Alli Webb, her husband Cameron Webb, and her brother Michael Landau in Brentwood, California. Two years before opening the first Drybar, Alli Webb had started a side business out of her home called Straight At Home, providing hair services to people right in their homes. Around this time, Webb realized that there was a need in her local market solely for hair blowouts and came up with the Drybar concept.

17.  The first Drybar was an instant success and the following year, Webb raised $2.5 million through the help of friends and family to grow her new business. Then in 2012, Webb brought in more investors and added members to the company’s board. Drybar also started franchising that same year. By 2018, Drybar had grown to 100 locations around the United States.

18.  In addition to its blowout and hair styling services, Drybar launched its own line of products in 2013. Drybar products are sold in the company’s salons as well as other beauty retailers. Today, there are Drybar salons all across the U.S. and Canada.

Entrepreneur’s Franchise 500

19.  Drybar ranked No. 94 on Entrepreneur’s 2020 Franchise 500 list.

Section II – Estimated Costs

• Please click here for detailed estimates of Drybar franchise costs, based on Item 7 of the company’s 2020 FDD.

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

• Please click here for detailed information on Drybar’s initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2020 FDD.

Section IV – Number of Franchised and Company-Owned Outlets

Franchised

2017

• Outlets at the Start of the Year:  15
• Outlets at the End of the Year:  23
• Net Change:  +8

2018

• Outlets at the Start of the Year:  23
• Outlets at the End of the Year:  35
• Net Change:  +12

2019

• Outlets at the Start of the Year:  35
• Outlets at the End of the Year:  49
• Net Change:  +14

Company-Owned

2017

• Outlets at the Start of the Year:  35
• Outlets at the End of the Year:  49
• Net Change:  +14

2018

• Outlets at the Start of the Year:  53
• Outlets at the End of the Year:  66
• Net Change:  +13

2019

• Outlets at the Start of the Year:  66
• Outlets at the End of the Year:  81
• Net Change:  +15

Section V – Financial Performance Representations (Item 19, 2020 FDD) and Analysis

Unaudited Average Gross Revenue and Selected Costs and Expenses for 22 Mature Franchised Drybar Shops for Calendar Year 2019

• The table below reflects the average Gross Revenue and selected costs and expenses for 22 franchised Shops for the calendar year of 2019. Each Shop included has been open for longer than 2 years and is considered a standard traditional shop since it has 8 or more chairs.

• The table includes information on 3 Shops in Arizona, 3 Shops in California, 2 Shops in Colorado, 2 Shops in Florida, 2 Shops in Georgia, 1 Shop in Kentucky, 1 Shop in Louisiana, 1 Shop in New York, 1 Shop in Pennsylvania, 1 Shop in South Carolina, and 5 Shops in Texas. It excludes 1 non-traditional Shop that opened in 2015, 12 Shops that opened in 2018, 14 Shops that opened in 2019, and a single formerly franchised Shop in San Francisco, California that was repurchased by the franchisor’s affiliate in 2013.

• Each Shop included in the table offered similar products and services as would generally be offered by a typical Drybar Shop described in the disclosure document during the last fiscal year.

• Drybar obtained this information from its franchisees’ annual income statements provided to it under the Franchise Agreement, but it has not audited them.

Services