For Hair-Care Franchises, Tough Economy Spells Opportunity

You might think the recession would put a crimp in the growth plans of hair-care franchises. You’d be wrong. Although hair-care operators do face some challenges right now, for smart hair-care companies,

Sport Clips CEO Gordon B. Logan notes that since franchises dominate the “value priced” segment of the hair-care market, this is a great time for them to grab new market share as budget-conscious customers trade down to lower-priced services.

At Great Clips, vice president of franchise development Rob Goggins agrees. “We see this as an opportune time to gain market share from our competitors,” says Goggins. To do that, he says, Great Clips is “[focusing] our brand message to customers currently paying $15 for haircuts.”

Children’s hair salon Snip-Its is also focusing its marketing efforts on new client acquisition. “We have a great database where we can subtract our current customers and target only those households that have kids and are at a certain income level,” explains CEO Jim George.

Targeting select niches is another tactic many franchisors are using to grow. Sport Clips has found success focusing on men and boys, as has Snip-Its by entertaining kids during haircuts. Supercuts, which caters primarily to men, recently launched an upscale barbershop concept called Raze, says Alan Storry, vice president of franchise development. “We see that as a market niche that’s growing,” Storry explains. “Also, we acquired Cool Cuts 4 Kids eight months ago and we’re actively marketing that concept.”

One challenge for hair-care franchisees this year, especially those in smaller systems, will be financing growth. To help with that issue, Sport Clips recently established a relationship with Wells Fargo for financing stores, in addition to its relationships with conventional and SBA lenders.

But franchisees won’t be the only ones with financial challenges. “Independent salons will have a very difficult time with financing, especially start-ups,” predicts Logan. “This will undoubtedly lead to more consolidation in the industry” -- which will benefit hair-care franchisees.

As independents go out of business, many good locations will open up. Great Clips has introduced a lease incentive program that reimburses franchisees who secure a desirable site from an independent competitor. Fantastic Sams has invested in a real estate modeling tool that lets them identify optimal locations for new salons, as well as evaluate current locations, says vice president of franchise sales and development Jeff Sturgis.

Franchisors are also taking a variety of steps to help their franchisees cut costs, increase sales and operate more efficiently. Fantastic Sams is providing extensive training on in-salon product sales to help franchisees drive more revenue from each customer. Sport Clips has implemented a Store Performance Improvement Program to help franchisees boost their sales and profits. Great Clips has built a world-class scheduling component into its proprietary StyleWare Touch point-of-sale system, enabling franchisees to more accurately coordinate their staff schedules with peak customer periods. And Snip-Its keeps a full-time field financial analyst on staff to work exclusively with franchisees, helping them figure out how to operate more efficiently. “We do a financial review with each of our owners and look at how to increase productivity,” explains George.

Overall, hair-care franchisors are confident about the future. “Hair-care franchising [will] stay strong both short term and long term,” contends Sturgis. “We are in a need-based service industry, and as people look to business ownership as an option to employment, many recognize the desirability of opening a business that is less cyclical and less subject to fads.”

For a list of hair-care franchises, visit the Hair Salon section of our AllBusiness.com Franchise Directory.