FDD Talk: How Much Does a Supercuts Franchise Make (Average Revenues and/or Profits)?

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

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

• Section II – Estimated initial investment for a Supercuts franchise, based on Item 7 of the company’s 2021 FDD

• Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for a Supercuts franchise, based on Items 5 and 6 of the company’s 2021 FDD

• Section IV – Number of franchised and company-owned Supercuts outlets at the start of the year and the end of the year for 2018, 2019, and 2020, based on Item 20 of the company’s 2021 FDD

• Section V – Presentation and analysis of Supercuts’ financial performance representations, based on Item 19 of the company’s 2021 FDD, including information on the:

• average, median, highest, and lowest gross sales for the fiscal-year period from July 1, 2020, through June 30, 2021, for the 2,229 franchised Supercuts Stores that were open at the beginning and the end of that fiscal-year period (no matter how many days they actually operated during that period) (top 1/3, middle 1/3, bottom 1/3, and all)

• average, median, highest, and lowest gross sales for the fiscal-year period from July 1, 2020, through June 30, 2021, for the 1,745 franchised Supercuts Stores that were open more than 75% of the calendar days during that period (top 1/3, middle 1/3, bottom 1/3, and all)

• average, median, highest, and lowest gross sales for the fiscal-year period from July 1, 2020, through June 30, 2021, for the 421 franchised Supercuts Stores that were open less than 75% of the calendar days during that period (top 1/3, middle 1/3, bottom 1/3, and all)

Section I – Background Information

19 Things You Need to Know About the Supercuts Franchise

Highlights Leasecake as a Preferred Partner

1.  In early September 2021, Leasecake, an Orlando, Florida-based commercial real estate location-management platform, announced that it is now the preferred software for tracking business-critical events at about 400 Supercuts locations in the United States.

2.  With a distributed support staff managing dozens or even hundreds of locations, franchisees are under increasing pressure to implement resources that bring processes online and provide unified information access for all team members. Leasecake provides multi-location tenants with quick access to all location and lease information, notifications for business-critical events, and an easy way to collaborate with colleagues and vendors.

3.  Gary Grace, president of the Supercuts Franchisee Association (SFA), said Leasecake supports that need by ensuring operators never miss a lease renewal and helping them stay on top of the thousands of details, responsibilities, and commitments they juggle every year.

4.  Grace said, “Leasecake is the admin assistant that never sleeps, gets sick, or takes a day off. Before Leasecake, it was so easy for a lease renewal to slip through the cracks or for a franchisee to lose track of important documents. Now they can keep everything in one simple app that team members can access anytime from anywhere.”

5.  Taj Adhav, founder and CEO of Leasecake, said, “The SFA is shaping the future for Supercuts franchisees and providing guidance to help them build an efficient, long-term business. We’re excited to support their needs and offer an innovative solution to the challenges faced by multi-unit operators.”

Parent Company Names David J. Grissen as Chairman of the Board

6.  In mid-November 2021, the Regis Corporation, the parent company of Supercuts, announced that David J. Grissen has been unanimously elected as chairman of the Regis board of directors. Grissen is the former group president of Marriott International, Inc. He served in that role and other leadership roles at Marriott, a complex organization that includes franchised, managed, and owned operations, for over 30 years.

7.  Felipe Athayde, chief executive officer of Regis Corporation, said, “David’s deep franchise expertise and decades of experience running a large-scale, multi-brand system make him the perfect choice for Chairman. Given his recent retirement from Marriott International, we are delighted that he will be able to devote even more of his time to advising Regis and helping the Company grow as a franchise business.”

8.  Grissen added, “I am excited to take on the Chairman role and continue to provide guidance to our fantastic leadership team. With Regis’ transformation to a fully-franchised business complete, I am excited to lead the Board in this next phase.”

9.  Daniel G. Beltzman tendered his resignation from the board effective November 14, 2021. “I want to thank Daniel for his many years of service to the Company and for overseeing the successful transformation of Regis to a fully-franchised company,” Grissen added.

Parent Company Partners with Industry Leaders for Product Distribution as Part of New Merchandising Strategy

10.  In early August 2021, Regis Corporation announced that it is outsourcing product distribution, as part of an asset-light, fully-franchised model, to Beauty Systems Group and SalonCentric, Inc.

11.  “Our new distributors will deliver competitive pricing, promotional benefits, best-in-class educational assets, and ongoing support to our franchisees to help their businesses grow. This is an exciting change for all Regis brands and franchisees as we enter a new chapter for merchandising and adjust our infrastructure to conform to an asset-light, fully-franchised business model,” said Felipe Athayde, chief executive officer of Regis Corporation.

12.  Together, the distributors bring online ordering portals, more than 1,800 store locations, and increased distribution points across the United States and Canada for faster access to products. Regis’ private label brands – designline, Blossom Pure Haircare, and a new men’s line, Prototype – will be distributed exclusively by the partners to Regis franchisees.

13.  Mark Spinks, president of Beauty Systems Group, said, “Beauty Systems Group is excited to partner with Regis and their franchisees as one of their primary distributors. The Regis salon network fits well with our geographic reach across North America and we look forward to serving their franchisees and strengthening our relationship.”

14.  Bertrand Fontaine, president of SalonCentric, added, “SalonCentric is delighted to welcome Regis to the SalonCentric family. Our knowledgeable and passionate teams will provide Regis franchisees with industry-leading educational and digital support, as well as guidance in growing their salon businesses. We look forward to offering innovative solutions, product knowledge and quality customer care to our new partner.”

Company History

15.  Supercuts was founded in 1975 by Geoffrey M. Rappaport and Frank E. Emmett in the San Francisco Bay Area of California. Rappaport and Emmett, who were entrepreneurs, developed a standardized system for cutting hair that could be replicated at any location. Additionally, the hair-cutting technique only took 20 minutes and could be easily replicated by any hair stylist. This allowed Supercuts to offer customers quick, easy, and affordable haircuts.

16.  Rappaport and Emmett also decided to offer basic services – like shampoo, blow-dry, and styling – a-la-carte with transparent pricing so that customers could get exactly what they wanted when they visited Supercuts.

17.  The Supercuts concept was a success and Rappaport and Emmett began franchising in 1978. Over the next decade, Supercuts continued to grow around the United States and it became the second-largest hair salon chain in the country. In 1987, Supercuts was acquired by Knightsbridge Partners, a group of Chicago-based venture capitalists.

18.  Supercuts’ growth and success hit a snag in the 1990s when the brand struggled after expanding too rapidly. In 1996, the Regis Corporation – the largest operator of hair salons in the world – purchased Supercuts. Under the leadership of the Regis Corporation, Supercuts made changes that helped stabilize the company. Today, Supercuts has locations all around the U.S.

Entrepreneur’s Franchise 500

19.  Supercuts ranked No. 15 on Entrepreneur’s 2021 Franchise 500 list.

Section II – Estimated Costs

• Detailed estimates of Supercuts franchise costs, based on Item 7 of the company’s 2021 FDD.

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

• Detailed information on Supercuts’ initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2021 FDD.

Section IV – Number of Franchised and Company-Owned Outlets

Franchised

2018

• Outlets at the Start of the Year:  1,714
• Outlets at the End of the Year:  2,318
• Net Change:  +604

2019

• Outlets at the Start of the Year:  2,318
• Outlets at the End of the Year:  2,449
• Net Change:  +131

2020

• Outlets at the Start of the Year:  2,449
• Outlets at the End of the Year:  2,376
• Net Change:  -73

Company-Owned

2018

• Outlets at the Start of the Year:  891
• Outlets at the End of the Year:  374
• Net Change:  -517

2019

• Outlets at the Start of the Year:  374
• Outlets at the End of the Year:  199
• Net Change:  -175

2020

• Outlets at the Start of the Year:  199
• Outlets at the End of the Year:  34
• Net Change:  -165

Section V – Financial Performance Representations (Item 19, 2021 FDD) and Analysis

• This Item 19 discloses the following historical financial performance information for franchised Supercuts Stores:

• average, median, and high/low Store gross sales information for the fiscal-year period from July 1, 2020, through June 30, 2021, for franchised Supercuts Stores that were open at the beginning and the end of that fiscal-year period (no matter how many days they actually operated during that period);

• average, median, and high/low Store gross sales information for the fiscal-year period from July 1, 2020, through June 30, 2021, for franchised Supercuts Stores that were open more than 75% of the calendar days during that period; and

• average, median, and high/low Store gross sales information for the fiscal-year period from July 1, 2020, through June 30, 2021, for franchised Supercuts Stores that were open less than 75% of the calendar days during that period.

• The products and services offered by each franchised Store covered in this financial performance representation are essentially the same, and the franchised Stores whose gross sales numbers appear in this financial performance representation are substantially similar to the franchises that Supercuts currently offers in all states.

• These Stores receive substantially the same services from Supercuts. However, Supercuts does not provide services to franchisees that a Store’s owner normally provides, such as financing, accounting, legal, personnel, construction, and management services.

• This financial performance representation does not reflect the cost of sales, operating expenses, or other costs or expenses that must be deducted from gross revenue or gross sales figures to obtain your net income or profit.

• On March 11, 2020, the World Health Organization declared COVID-19 a global pandemic and recommended containment and mitigation measures worldwide. The COVID-19 pandemic and associated government orders forced substantially all franchised and company-owned Stores to close temporarily or to operate on a significantly-limited basis from March 1, 2020, through June 30, 2020.

• While substantially all of Supercuts’ franchised and company-owned Stores reopened in July 2020, most remained subject to temporary closures, limited numbers of customers allowed in a Store at one time, and limited operating hours.

• For purposes of this financial performance representation, “gross sales” is defined as total gross revenue (net of customer discounts) derived from operating a Supercuts Store (including merchandise and services sales), whether from cash or credit sales, and without regard to the payment source or collection costs, but excluding taxes added to the sales price and collected from customers and less bona fide refunds.

Part 1 – Gross Sales of Franchised Supercuts Stores

• The financial performance representations in this Part 1 disclose the actual historical average, median, and high/low Store gross sales during the 12-month period ending June 30, 2021, for 2,229 franchised Supercuts Stores operating throughout the United States.

• The Stores whose gross sales were included in order to calculate the average, median, and high/low range were open as of July 1, 2020, the beginning of the fiscal-year period for which the numbers were calculated (meaning that the Stores were open for at least 1 full year as of June 30, 2021, the end of the 12-month period for which the numbers were calculated).

• These 2,229 franchised Supercuts Stores are included no matter how many days during the 12-month period they actually operated. They are included as long as (i) they did not, to Supercuts’ knowledge, permanently close during the 12-month period, and (ii) they had more than $0 in reported gross sales during the 12-month period.

Top 1/3 (742 Stores)

• Average Gross Sales:  $297,415
• Number and Percentage Exceeding Average:  275/37.06%
• Median Gross Sales:  $277,141
• Highest Gross Sales:  $675,988
• Lowest Gross Sales:  $225,044

Middle 1/3 (744 Stores)

• Average Gross Sales:  $186,961
• Number and Percentage Exceeding Average:  378/50.81%
• Median Gross Sales:  $187,720
• Highest Gross Sales:  $224,706
• Lowest Gross Sales:  $151,876

Bottom 1/3 (743 Stores)

• Average Gross Sales:  $113,598
• Number and Percentage Exceeding Average:  442/59.49%
• Median Gross Sales:  $120,593
• Highest Gross Sales:  $151,856
• Lowest Gross Sales:  $1,923

All (2,229 Stores)

• Average Gross Sales:  $199,275
• Number and Percentage Exceeding Average:  982/44.06%
• Median Gross Sales:  $187,715
• Highest Gross Sales:  $675,988
• Lowest Gross Sales:  $1,923

Part 2 – Gross Sales of Franchised Supercuts Stores Open More Than 75% of Calendar Days

• In addition to the annual gross sales information presented above for the 12-month period ending June 30, 2021, this subsection sets forth the actual historical average, median, and high/low annual gross sales for the 1,745 franchised Supercuts Stores operating throughout the United States that were open more than 75% of the calendar days during the 12-month period ending June 30, 2021.

• Supercuts chose to present Stores open more or less than 75% of calendar days in the 12-month period ending June 30, 2021 because given the COVID-19 operating environment in that 12-month period, Supercuts believes Stores open more than 75% of calendar days operate more normally than Stores open less than 75% of calendar days.

• Supercuts determined whether Stores were open more or less than 75% of calendar days based on Stores’ daily gross sales reports during the 12-month period ending June 30, 2021.

Top 1/3 (581 Stores)

• Average Gross Sales:  $309,133
• Number and Percentage Exceeding Average:  225/38.73%
• Median Gross Sales:  $289,839
• Highest Gross Sales:  $675,988
• Lowest Gross Sales:  $236,288

Middle 1/3 (582 Stores)

• Average Gross Sales:  $196,626
• Number and Percentage Exceeding Average:  282/48.45%
• Median Gross Sales:  $195,696
• Highest Gross Sales:  $236,222
• Lowest Gross Sales:  $160,874

Bottom 1/3 (582 Stores)

• Average Gross Sales:  $124,742
• Number and Percentage Exceeding Average:  333/57.22%
• Median Gross Sales:  $130,009
• Highest Gross Sales:  $160,635
• Lowest Gross Sales:  $40,834

All (1,745 Stores)

• Average Gross Sales:  $210,110
• Number and Percentage Exceeding Average:  762/43.67%
• Median Gross Sales:  $195,694
• Highest Gross Sales:  $675,988
• Lowest Gross Sales:  $40,834

Part 3 – Gross Sales of Franchised Supercuts Stores Open Less Than 75% of Calendar Days

• This subsection sets forth the actual historical average, median, and high/low annual gross sales for the 421 franchised Supercuts Stores operating throughout the United States that were open less than 75% of the calendar days during the 12-month period ending June 30, 2021.

Top 1/3 (140 Stores)

• Average Gross Sales:  $242,727
• Number and Percentage Exceeding Average:  62/44.29%
• Median Gross Sales:  $231,790
• Highest Gross Sales:  $397,706
• Lowest Gross Sales:  $182,481

Middle 1/3 (140 Stores)

• Average Gross Sales:  $146,780
• Number and Percentage Exceeding Average:  67/47.86%
• Median Gross Sales:  $146,102
• Highest Gross Sales:  $182,229
• Lowest Gross Sales:  $116,370

Bottom 1/3 (141 Stores)

• Average Gross Sales:  $73,034
• Number and Percentage Exceeding Average:  80/56.74%
• Median Gross Sales:  $79,446
• Highest Gross Sales:  $116,035
• Lowest Gross Sales:  $1,923

All (421 Stores)

• Average Gross Sales:  $153,988
• Number and Percentage Exceeding Average:  189/44.89%
• Median Gross Sales:  $145,924
• Highest Gross Sales:  $397,706
• Lowest Gross Sales:  $1,923

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