Great Clips taps into America’s growing frugality about hair care.
Americans like to get haircuts on the cheap these days. That’s why Minneapolis-based Great Clips, which operates 2,800 no-appointment, no-frills salons across North America, has been able to weather the recession fairly well. Part of the personal services sector, which is projected to have the fastest growth rate of any franchise category in 2010, according to the International Franchise Association, sales at Great Clips increased around 5% from 2008 to 2009, says Rob Goggins, vice president of Franchise Development. At $55 billion, the total hair-services market should rise about 2% a year over the next five years, to $60 billion, according to Goggins. Competitors include such franchises as Pro Cuts, Super Clips, and Supercuts.
The Company
Service
Inexpensive haircuts—and that’s about it. There are no manicures, massages, or hair coloring. Even perms are optional. “We’re a safe harbor, not flashy or sexy, but a very solid business model,” says Goggins.
An estimated 10% to 15% of franchisees are immigrants, many from India, Pakistan, and South Korea.
Training
The company’s comprehensive training starts with two-and-a-half days at its Minneapolis headquarters and is followed by two days of online courses. Franchisees learn how to spot key drivers of business, hire managers, and other high-level business lessons. There also are separate programs for salon managers, stylists, and general managers. In addition, franchisees receive ongoing support from corporate headquarters when they have questions or problems regarding any aspect of the business.
Immigrant-friendly Policies
An estimated 10% to 15% of franchisees are immigrants, many from India, Pakistan, and South Korea. There are no specific procedures aimed at immigrants. But, according to Goggins, they’re not necessary. “You are trained to focus on customer service following four management principles and specific processes,” he says. “They should help any franchise owner to be successful.”
What You’ll Need
The startup package includes whatever is required to build a salon, from carpeting to counters and mirrors. A third part provides shampoo and other necessary products.
Startup Costs
At roughly $110,000 to $210,000, buying and starting a franchise is relatively inexpensive. That price includes everything from the franchise fee to paying an attorney. Ongoing, there’s also an annual royalty of 6% of gross sales and a 5% national marketing fee. Funding: The company doesn’t provide help with funding. But it does work with two lenders, which are long-time partners. Most of the time, if Great Clips approves a franchisee, according to Goggins, a lender will okay a loan—including funds for those who may have only brief credit histories in the United States. Click here for more information on funding.
The company encourages franchisees to keep their day jobs initially, because the enterprise can easily be built while working elsewhere.
Return on Investment: Each salon typically makes about $300,000 in revenues and a profit of about $52,000 a year, after being in business for two years; some make $65,000 or more. Most franchisees end up buying more than one franchise. In fact, after year five, the average franchisee owns between five to six locations. The company encourages franchisees to keep their day jobs initially, because the enterprise can easily be built while working elsewhere. As the business grows, franchisees usually hire managers to handle the day-to-day operations of each salon.
Each salon typically makes about $300,000 in revenues and a profit of about $52,000 a year.
Tips for the Immigrant Buyer
”The advice I always give to people, regardless of their nationality, is to make sure they do their homework,” says Goggins. Most important is thoroughly evaluating the franchise disclosure document. You also need to talk to existing franchisees, but with a specific lens—whether your skills and resources fit the profile of the individual who is successful in that system. “Just because a franchise is solid doesn’t mean you’re a good fit,” says Goggins.
