In this FDD Talk post, you’ll learn the following:
- Section I – Estimated initial investment (franchise costs) for a Sport Clips franchise, based on Item 7 of the company’s 2022 FDD
- Section II – Initial franchise fee, royalty fee, and marketing fee for a Sport Clips franchise, based on Items 5 and 6 of the company’s 2022 FDD
- Section III – Number of franchised and company-owned Sport Clips outlets at the start of the year and the end of the year for 2019, 2020, and 2021, based on Item 20 of the company’s 2022 FDD
- Section IV – Background information on the Sport Clips franchise opportunity, including relevant news updates
- Section V – Presentation and analysis of Sport Clips’ financial performance representations (average revenues and/or profits), based on Item 19 of the company’s 2022 FDD, including information on the:
- number and percentage of Sport Clips franchise stores that achieved certain levels of 2021 sales (over $600,000; $500,001 to $600,000; $450,001 to $500,000; $400,001 to $450,000; $350,001 to $400,000; $300,001 to $350,000; $250,001 to $300,000; and less than $250,000)
- 2021 average and median sales for the 1,439 Sport Clips franchise stores that were in continual operation during 2019, in continual operation for at least 39 weeks in 2020, and in continual operation for at least 48 weeks in 2021
- 2019, 2020, and 2021 average weekly sales for the Sport Clips franchise stores that were open prior to January 1, 2017, January 1, 2018, and January 1, 2019, respectively
- 2021 average gross sales, variable costs, payroll, occupancy, advertising expenses, miscellaneous expenses, and operating profit for the 67 Sport Clips stores in Central Texas, Southern Nevada, and Oklahoma City, Oklahoma that opened prior to January 1, 2020
- Section VI – Key ratios, comparables, computations, and analyses for the Sport Clips franchise opportunity (exclusive content for Platinum subscribers)
Section I – Sport Clips Franchise Costs
- Sport Clips franchise costs, based on Item 7 of the company’s 2022 FDD:
- Initial Franchise Fee: $30,000 to $69,500
- Travel and Living Expenses While Attending Initial Training: $1,000 to $2,000
- Real Estate: Amount Not Specified
- Opening Inventory: $4,000 to $6,000
- Fixtures and Equipment (Including Computer Equipment): $58,000 to $68,000
- Leasehold Improvements: $90,000 to $150,000
- Supplemental Services Fee: $3,000 to $5,000
- Professional Fees: $1,000 to $5,000
- Permits and Licenses: $1,000 to $3,500
- Lease Deposit: $0 to $10,000
- Signage: $4,000 to $8,000
- Miscellaneous Opening Costs: $3,000 to $5,000
- Insurance: $1,300 to $2,500
- Grand Opening Advertising: $30,000
- Additional Funds – 6 Months: $40,000 to $75,000
- Total: $266,300 to $439,500
Section II – Sport Clips’ Initial Franchise Fee, Royalty Fee, and Marketing Fee
- Sport Clips’ initial franchise fee, royalty fee, and marketing fee, based on Items 5 and 6 of the company’s 2022 FDD:
- Initial Franchise Fee: $30,000 to $69,500
- Royalty: 6% of Net Sales
- Advertising: $300 per week, or 5% of Net Sales, whichever is more
- Local Advertising Coop Fee: up to $300 per week
Section III – Number of Franchised and Company-Owned Sport Clips Outlets
- Outlets at the Start of the Year: 1,703
- Outlets at the End of the Year: 1,750
- Net Change: +47
- Outlets at the Start of the Year: 1,750
- Outlets at the End of the Year: 1,768
- Net Change: +18
- Outlets at the Start of the Year: 1,768
- Outlets at the End of the Year: 1,778
- Net Change: +10
- Outlets at the Start of the Year: 69
- Outlets at the End of the Year: 70
- Net Change: +1
- Outlets at the Start of the Year: 70
- Outlets at the End of the Year: 70
- Net Change: 0
- Outlets at the Start of the Year: 70
- Outlets at the End of the Year: 72
- Net Change: +2
Section IV – Background Information on the Sport Clips Franchise
16 Things You Need to Know About the Sport Clips Franchise
Adds HR Experts to Its Leadership Team
1. In mid-May 2021, Sport Clips announced that it was adding to its leadership team with human resources professionals Allyson Young, SPHR, as chief people officer and Danielle Robinson, SPHR, SHRM-SCP, as Topgrading director.
2. Young has been a friend to Sport Clips through her work with the brand’s first franchisee Ken Schiller, who founded K&N Management, the owner and operator of Austin-area Rudy’s Country Store & BBQ and Mighty Fine Burgers, Fries and Shakes restaurants. She has also worked with Sport Clips on Malcolm Baldrige Framework leadership and training. She will lead a strong human resources team and oversee talent acquisition, management, and engagement.
3. Prior to her 23 years with K&N Management, Young worked as a trainer for Outback Steakhouse and training manager for Fox & Hound. She is a recipient of the prestigious Baldrige Foundation Leadership Excellence Award and has trained staff of more than 100 different organizations on the Malcolm Baldrige Framework focusing on performance excellence. She holds a BA in English from Texas A&M University.
4. Robinson joins Sport Clips as Topgrading director where she will be responsible for adapting and implementing the Topgrading selection and coaching system across the company. She will work closely with the franchise’s leadership, talent acquisition, and human resources departments as well as with company-owned stores.
5. Robinson spent 13 years with In-N-Out Burger and later joined K&N Management as its Topgrading director where she focused on recruitment and hiring for almost 14 years and was integral in the company’s receipt of the Malcolm Baldrige National Quality Award. She holds a BA in English from California State Polytechnic University, Pomona.
6. Edward Logan, president and CEO of Sport Clips, said, “As Sport Clips continues to focus on operational excellence and growth, Allyson and Danielle will bring exceptional experience across many facets of human resources impacting a franchise of our size and market position. As a company, we are well-suited to push beyond the challenges of the past year and move forward in serving our clients, franchisees, stylists, and team members as the haircare provider, business opportunity, and employer of choice.”
7. “Allyson and Danielle bring to the system a winning mindset, having driven the successful application process for the national and exclusive Malcolm Baldrige Award, becoming only the second restaurant organization to ever achieve the award. Their strong backgrounds of increasing internal and external engagement with everyone who interacts with the Sport Clips brand will translate well into our franchise business model,” said Logan.
Makes Record-Breaking Donation to ‘Help a Hero’ Scholarships
8. In mid-January 2022, Sport Clips presented a record-breaking $1.55 million check to the Veterans of Foreign Wars of the United States (VFW) Foundation to provide scholarships for service members and veterans. As the nation’s leading provider of men’s and boys’ haircare, the veteran-founded company began work with the VFW in 2013 to offer Help A Hero Scholarships for returning military to prepare for civilian careers that often require additional college, graduate, and technical degrees and training. Since the creation of the program, Sport Clips has donated more than $10 million to the VFW’s Help A Hero Scholarship program.
9. Additionally, the VFW and Sport Clips announced that 146 student veterans will receive scholarships for the Spring 2022 semester, totaling nearly $650,000. This brings the number of scholarship recipients to 2,200 and makes the program one of the largest veteran support programs of its kind.
10. Gordon Logan, Air Force veteran, VFW Life member, and founder and chairman of Sport Clips, said, “Helping ease the financial burden of going back to school is a very real way our Sport Clips team members, clients, and product partners say ‘thank you’ to those who serve in the military and their families. It’s gratifying to see thousands of veterans…single moms, doctoral candidates, seminarians, technicians…going back to school with the help of these scholarships on their way to meaningful civilian careers.”
11. Fritz Mihelcic, VFW national commander, said, “The VFW, along with the veterans, service members and military families we serve cannot express enough our appreciation to the entire Sport Clips team, network and partners for their generous support. Their dedication to America’s student veterans is truly remarkable and serves to make a lifelong, positive impact in the lives of so many.”
12. Some $122,000 of the donation this year was from Sport Clips’ own $2 per haircare service made by the company on Veterans Day while clients, individual supporters, and Sport Clips team members donated the most generous portion of money raised in stores and through virtual walks. Sport Clips partners Direct Beauty Express, John Paul Mitchell Systems, Nioxin, Sexy Hair, Gibs Grooming, and Actiiv also made substantial contributions.
13. Sport Clips was founded in 1993 by Gordon Logan in Austin, Texas. At that time, Logan felt that there was room for more competition in the men’s and boys’ haircut markets. He also wanted to create a place where men could feel comfortable while receiving all the grooming services they needed. Logan put together a group of industry professionals and they developed the idea for Sport Clips. The salon has a sports-themed concept and provides affordable and high quality grooming services.
14. The first Sport Clips was a success and Logan expanded into Houston and Dallas. Logan continued to open new locations in areas where Southwest Airlines flew, to keep travel expenses at a minimum. Franchising officially started in 1995 and initially, growth was slow and steady, taking five years to reach 50 locations. However, by the early 2000s, Sport Clips’ growth picked up and by 2007, there were 500 stores in operation. In 2012, Sport Clips opened its first international location in Canada.
15. Today, there are Sport Clips locations in all 50 U.S. states and several throughout Canada.
Entrepreneur’s Franchise 500
16. Sport Clips ranked No. 24 on Entrepreneur’s 2022 Franchise 500 list.
Section V – Financial Performance Representations (Average Revenues and/or Profits) for the Sport Clips Franchise (Item 19, 2022 FDD)
- During the years 2020 and 2021, the COVID-19 pandemic forced many Sport Clips stores to close for varying periods of time and, upon reopening, curtailed the number of clients that could be accommodated at one time in a Sport Clips store.
- During 2021, the Delta and Omicron variants affected operations during the second half of the year, including shortages of employees due to absences for COVID-19 exposure or sickness.
- There is no way to predict the duration of the current COVID-19 pandemic or the effects it will have on any particular Sport Clips store. You should consult with your local and state health agencies and obtain guidance on the likely effect of this pandemic on personal care salons, such as a Sport Clips store.
Part 1 – Statement of Gross Sales – Year 2021 Gross Sales as Reported to the Company (1,439 Franchised Stores in Continual Operation During 2019, in Continual Operation for at Least 39 Weeks in 2020, and in Continual Operation for at Least 48 Weeks in 2021)
- At the end of calendar year 2021, there were 1,778 franchised Sport Clips stores.
- The Statements of Gross Sales below do not include 4 stores in Rochester, New York, which are not typical Sport Clips stores and operate under a special limited services license agreement that is not offered to new franchisees. Sport Clips knows that the gross sales of the stores in Rochester, New York are, on average, less than other stores in the Sport Clips System.
- The Statements of Gross Sales below also do not include 162 stores that were not open at least 39 weeks during the year 2020 or 118 stores that were not open at least 48 weeks during the year 2021 because of lockdown orders arising from the COVID-19 pandemic.
- The Statements of Gross Sales below also do not include 70 company-owned stores located in Central Texas, Southern Nevada, Oklahoma, and Arkansas, or 7 stores in Tennessee owned by a Sport Clips affiliate in partnership with a franchisee.
- All stores included in the Statements of Gross Sales did not receive any services that were not generally available to other Sport Clips stores, and each store offered similar products and services as would generally be offered by a typical Sport Clips store.
- Number of Stores: 89
- Percentage of Stores: 6%
- Cumulative Percentage of Stores at Each Level or Higher: 6%
$500,001 to $600,000
- Number of Stores: 141
- Percentage of Stores: 10%
- Cumulative Percentage of Stores at Each Level or Higher: 16%
$450,001 to $500,000
- Number of Stores: 129
- Percentage of Stores: 9%
- Cumulative Percentage of Stores at Each Level or Higher: 25%
$400,001 to $450,000
- Number of Stores: 179
- Percentage of Stores: 12%
- Cumulative Percentage of Stores at Each Level or Higher: 37%
$350,001 to $400,000
- Number of Stores: 238
- Percentage of Stores: 17%
- Cumulative Percentage of Stores at Each Level or Higher: 54%
$300,001 to $350,000
- Number of Stores: 249
- Percentage of Stores: 17%
- Cumulative Percentage of Stores at Each Level or Higher: 71%
$250,001 to $300,000
- Number of Stores: 202
- Percentage of Stores: 14%
- Cumulative Percentage of Stores at Each Level or Higher: 85%
Less Than $250,000
- Number of Stores: 212
- Percentage of Stores: 15%
- Cumulative Percentage of Stores at Each Level or Higher: 100%
- Number of Stores: 1,439
- Percentage of Stores: 100%
- These 1,439 stores had average sales of $379,054 for the entire year of 2021. 653 stores had sales above this average, and 786 stores had sales lower than the average. The median sales for these 1,439 stores were $364,030 for the entire year of 2021.
Part 2 – Average Weekly Franchised Store Sales by Month for the Calendar Years 2019, 2020, and 2021 as Reported to the Company
- The tables below do not include 4 stores in Rochester, New York, which are not typical Sport Clips stores and operate under a special limited services license agreement that is not offered to new franchisees. Sport Clips knows that the gross sales of the stores in Rochester, New York are, on average, less than other stores in the Sport Clips System.
- The Statements of Gross Sales below do not include 70 company-owned stores located in Central Texas, Southern Nevada, Oklahoma, and Arkansas, or 7 stores in Tennessee owned by a limited liability company in which Sport Clips is a member.
2019 Average Weekly Sales by Month (Stores Open Prior to January 1, 2017)
- January (1,443 stores): $7,744
- February (1,442 stores): $8,012
- March (1,442 stores): $8,371
- April (1,443 stores): $8,228
- May (1,444 stores): $8,357
- June (1,446 stores): $8,288
- July (1,446 stores): $8,180
- August (1,446 stores): $8,877
- September (1,446 stores): $8,173
- October (1,446 stores): $8,108
- November (1,445 stores): $8,008
- December (1,445 stores): $8,230
- 2019 Average Weekly Sales (1,446 stores): $8,219
2020 Average Weekly Sales by Month (Stores Open Prior to January 1, 2018)
- January (1,564 stores): $8,078
- February (1,562 stores): $8,327
- March (1,562 stores): $6,698
- April (30 stores): $1,975
- May (897 stores): $7,066
- June (1,525 stores): $6,007
- July (1,540 stores): $5,194
- August (1,443 stores): $6,062
- September (1,541 stores): $6,025
- October (1,544 stores): $6,080
- November (1,546 stores): $5,798
- December (1,546 stores): $5,757
- 2020 Average Weekly Sales (1,564 stores): $6,396
2021 Average Weekly Sales by Month (Stores Open Prior to January 1, 2019)
- January (1,599 stores): $6,362
- February (1,614 stores): $6,076
- March (1,616 stores): $7,117
- April (1,614 stores): $6,895
- May (1,609 stores): $7,321
- June (1,609 stores): $7,424
- July (1,606 stores): $7,331
- August (1,610 stores): $7,714
- September (1,606 stores): $7,156
- October (1,604 stores): $7,202
- November (1,605 stores): $7,140
- December (1,603 stores): $7,103
- 2021 Average Weekly Sales (1,622 stores): $7,083
Part 3 – Expense Reports for Company-Owned Stores During 2021
- Sport Clips owned and operated 67 stores in Central Texas, Southern Nevada, Oklahoma, and Arkansas markets during 2021 that opened prior to January 1, 2020. Sport Clips is not offering franchises in these markets.
- This report excludes 5 stores the Company owns and operates that did not open until after January 1, 2020.
- The managers of the Company-owned stores included in the Expense Reports did not receive any services that were not generally available to all Sport Clips stores.
- Each store offered similar products and services as would generally be offered by a typical Sport Clips store, except for limited tests of procedures, products, and/or services that may or may not be eventually incorporated into the system, depending on the success of the tests.
- The Expense Reports below show the average expenses at each sales level and those expenses as a percentage of total revenue.
Sales Less Than $400,000
- Number of Stores: 22
- Gross Sales: $341,121 (100%)
- Variable Costs: $25,166 (7%)
- Payroll: $144,741 (42%)
- Occupancy: $65,856 (19%)
- Advertising: $18,857 (6%)
- Miscellaneous: $10,896 (3%)
- Operating Profit: $75,605 (23%)
Sales $400,001 to $500,000
- Number of Stores: 23
- Gross Sales: $450,216 (100%)
- Variable Costs: $32,655 (7%)
- Payroll: $188,674 (42%)
- Occupancy: $64,303 (14%)
- Advertising: $24,404 (5%)
- Miscellaneous: $11,365 (3%)
- Operating Profit: $128,816 (29%)
Sales $500,001 to $600,000
- Number of Stores: 15
- Gross Sales: $552,734 (100%)
- Variable Costs: $37,760 (7%)
- Payroll: $232,596 (42%)
- Occupancy: $63,012 (11%)
- Advertising: $28,123 (5%)
- Miscellaneous: $11,633 (2%)
- Operating Profit: $179,611 (33%)
Sales Greater Than $600,000
- Number of Stores: 7
- Gross Sales: $742,843 (100%)
- Variable Costs: $45,754 (6%)
- Payroll: $321,220 (43%)
- Occupancy: $66,415 (9%)
- Advertising: $31,786 (4%)
- Miscellaneous: $13,033 (2%)
- Operating Profit: $264,635 (36%)
Average of All Stores
- Number of Stores: 67
- Gross Sales: $467,919 (100%)
- Variable Costs: $32,708 (7%)
- Payroll: $197,930 (43%)
- Occupancy: $64,745 (14%)
- Advertising: $24,186 (5%)
- Miscellaneous: $11,445 (2%)
- Operating Profit: $136,906 (29%)
- This financial information is historical only and shows the performance of stores owned by the Company during a time period affected by the COVID-19 pandemic. Sport Clips cannot predict the effect the COVID-19 pandemic will have on any Sport Clips store in the future.
- Variable Costs include operating supplies, cost of goods sold, bank service charges, credit card discounts, and advertising to recruit Stylists.
- Payroll includes direct payroll, including payroll for an on-site full-time manager, payroll taxes, and fringe benefits, except 401K and medical insurance costs.
- Occupancy includes rent, pass-through expenses from the landlord, utilities, phone charges, and repairs and maintenance.
- Advertising includes the weekly payments to the Ad Fund plus other advertising and marketing expenses for the store.
- Miscellaneous expense includes magazine subscriptions, store insurance, contributions to the Technology Fund, the Recruitment Fund, the Sport Clips Wayne McGlone Memorial Relief Fund, and overages and/or shortages from the cash drawer.
- Operating Profit does not include an amount paid for royalties or weekly training fees. The numbers in the expense reports are unaudited, but Sport Clips believes that these numbers are substantially correct.